Company No H. MIZUHO CORPORATE BANK (MALAYSIA) BERHAD Incorporated in Malaysia

Transcription

1 Company No H MIZUHO CORPORATE BANK (MALAYSIA) BERHAD FINANCIAL STATEMENTS

2 FINANCIAL STATEMENTS CONTENTS PAGE DIRECTORS' REPORT 1-17 STATEMENT OF FINANCIAL POSITION 18 STATEMENT OF COMPREHENSIVE INCOME 19 STATEMENT OF CHANGES IN EQUITY 20 STATEMENT OF CASH FLOWS 21 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTES TO FINANCIAL STATEMENTS STATEMENT BY DIRECTORS 68 STATUTORY DECLARATION 68 INDEPENDENT AUDITORS' REPORT 69-70

3 DIRECTORS' REPORT The Directors are pleased to submit their report to the member together with the audited financial statements of the Bank for the financial period ended 31 March PRINCIPAL ACTIVITIES The principal activities of Mizuho Corporate Bank (Malaysia) Berhad ("MCBM" or "the Bank") are banking and related financial services. There have been no significant changes in the nature of principal activities during the financial period. FINANCIAL RESULTS RM'000 Loss for the financial period (3,915) DIVIDENDS No dividend has been paid, declared or proposed since the date of incorporation. The Directors do not recommend the payment of any dividend for the financial period ended 31 March RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the financial period other than those disclosed in the financial statements. 1

4 DIRECTORS' REPORT DIRECTORS The names of the Directors of the Bank in office since the date of incorporation and as at the date of this report are as follows: Mr. Hiroshi Suehiro (appointed on 9 February 2012) Mr. Keizo Ohashi (appointed on 1 March 2011 and resigned on 9 February 2012) Mr. Akira Sugano (appointed on 1 March 2011) Mr. Hiroyuki Yoshinari (appointed on 1 March 2011) Dato Seri Talaat Bin Husain (appointed on 1 March 2011) Mr. Mohd Mokhtar Bin Ghazali (appointed on 1 March 2011) Mr. Kyoichi Nagata (first director and resigned on 3 March 2011) Mr. Yasuo Fukai (first director and resigned on 3 March 2011) DIRECTORS' BENEFITS During and at the end of the financial period, no arrangements subsisted to which the Bank is a party, being arrangements with the object or objects of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in, or debentures of, the Bank or any other body corporate. Since the date of incorporation, no Director of the Bank has received or become entitled to receive any benefit (other than the directors' remuneration as disclosed in Note 20 to the financial statements) by reason of a contract made by the Bank or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. DIRECTORS' INTERESTS According to the Register of Directors' shareholdings, the Directors in office at the end of the financial period did not have any interest in shares and share options of the Bank and its related corporations during the financial period. BAD AND DOUBTFUL DEBTS Before the financial statements of the Bank were made out, the Directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that there is no known bad debts and that adequate allowance had been made for doubtful debts. At the date of this report, the Directors are not aware of any circumstances which would render it necessary to write off any amount as bad debts or render the amount of the allowance for doubtful debts in the financial statements of the Bank inadequate to any substantial extent. 2

5 DIRECTORS' REPORT CURRENT ASSETS Before the financial statements of the Bank were made out, the Directors took reasonable steps to ascertain that any current assets, which were unlikely to be realised in the ordinary course of business, their value as shown in the accounting records of the Bank, had been written down to an amount 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 attributed to current assets in the financial statements of the Bank misleading. VALUATION METHODS At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities in the Bank's financial statements misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist: (a) (b) any charge on the assets of the Bank which has arisen since the end of the financial period which secures the liability of any other person; or any contingent liability in respect of the Bank which has arisen since the end of the financial period other than in the ordinary course of banking business. CHANGE OF CIRCUMSTANCES At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Bank which would render any amount stated in the financial statements misleading. ISSUE OF SHARES Details of the increase in issued and paid-up ordinary share capital is disclosed in Note 13 to the financial statements. 3

6 DIRECTORS' REPORT ITEMS OF UNUSUAL NATURE The results of the Bank's operations during the financial period were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the financial period and the date of this report any item, transaction or event of a material and unusual nature likely, to affect substantially the results of the Bank's operations for the current financial period in which this report is made. BUSINESS OVERVIEW AND OUTLOOK FOR THE NEXT FINANCIAL YEAR Overview of the financial period ended 31 March 2012 Mizuho Financial Group has maintained a banking presence in Malaysia for nearly 30 years, ever since the establishment of its representative office in Kuala Lumpur in During this last 30 years, Mizuho successfully expanded its business operations in the Malaysian offshore banking market. Mizuho extended this successful banking chapter in Malaysia by obtaining its Malaysian commercial banking license in The Board of Directors is pleased to announce our first financial report for the period ended 31 March 2012 for Mizuho Corporate Bank (Malaysia) Berhad. Our business strategy during the current financial period was to build a solid business platform by offering an extensive range of financial products with value added solutions to a segmented group of corporates, sovereigns and financial institutions. The Bank commenced its banking operations on 5 September 2011 and recorded a net loss amounting to RM3.9m for the financial period ended 31 March Operating loss stood at RM1.4m which can be attributed to substantial expenditure on initial set up costs. Gross loans outstanding has grown to RM91m within 7 months. The Board is confident that the Bank will be able to further increase its high priority corporate client portfolio asset base, which includes both local, multinational and government sector entities, within a couple of years. Business outlook for the next financial year Moving into financial year 2013, the Board remains optimistic on the Malaysian economy. The country s economy is expected to grow between 4% - 5% in 2012 where it will continue to depend on domestic demand to drive GDP growth against the backdrop of bleak economic conditions overseas. Malaysia s strong fundamentals, pragmatic economic policies and the Economic Transformation Programme (ETP) will enhance domestic sources for growth. Looking forward, recent global data suggests that external factors like the events surrounding the European economies have heightened risk aversion. However, strong policy implementation by the Government of Malaysia and positive consumer data will alleviate these pressures and we envisage that growth will continue across the board. In such market conditions, Mizuho Corporate Bank (Malaysia) Berhad will continue to strive to meet customer needs by providing financially engineered products in conventional banking as well as Islamic finance for both Japanese Corporates and Malaysian Corporates. We also aim to strategically position ourselves to offer a full lineup of responsive and timely financial services. We will leverage on our network of group companies - Mizuho Corporate Bank, Mizuho Bank, Mizuho Securities, and Mizuho Trust & Banking - bringing cuttingedge financial technology and know-how, as well as Mizuho's research and advisory capabilities, in order to offer a complete range of high quality financial products and services. 4

7 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE BOARD'S DUTIES AND RESPNSIBILITIES The Board of Directors ("the Board") is led by the Chairman, Mr. Hiroshi Suehiro, who is a Non-Independent Non-Executive Director. The roles of the Chairman and CEO are separated to ensure a balance of power and authority, such that no one individual has unfettered powers of decisions. There are matters specifically reserved for the Board s decision to ensure that the direction and control of the Bank are firmly in hand. The day-to-day conduct of the Bank s business is delegated to the Managing Director/CEO and the full-time employees of the Bank subject to the authority limit given. The Terms of Reference of the Board include the following: (1) (2) (3) The review and approval of management's proposal on strategies, business plan and significant policies and monitor of management s performance in the implementation process; Establishment of comprehensive risk management policies, processes and infrastructure to manage the various types of risks; and Ensuring the operations of the Bank are carried out prudently and within the framework of relevant laws, rulings and regulations. The Board also assumes various functions and responsibilities that are required of them by Bank Negara Malaysia ("BNM"), as specified in guidelines and directives issued by BNM from time to time. BOARD COMPOSITION The Board of the Bank consists of five (5) members, of whom one (1) is the Managing Director/Chief Executive Officer ("CEO"), two (2) are Independent Non-Executive Directors and two (2) are Non- Independent Non-Executive Directors. The Board consists of individuals of caliber, with credibility, integrity and the necessary skills, experiences as well as qualifications to supervise the management of the business and affairs of the Bank. The Board, as a whole, provides a mixture of core competencies including banking, finance, accounting, economics and business management for effective functioning and discharging of the responsibilities of the Board. The presence of the two (2) Independent Non-Executive Directors provides the necessary checks and balances in the functioning of the Board and facilitates the Board in exercising objective judgement in decision making. A brief profile of each Director is presented on page 6 of this Directors' Report. 5

8 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) PROFILE OF DIRECTORS Mr. Hiroshi Suehiro Chairman, Non-Independent Non-Executive Director Mr. Hiroshi Suehiro, aged 52, was appointed the Chairman of the Bank on 9 February He holds a Bachelor of Laws degree from the University of Tokyo, Japan. Mr. Akira Sugano Non-Independent Non-Executive Director Mr. Akira Sugano, aged 53, was appointed as a Director of the Bank on 1 March He holds a Bachelor of Arts in Economics from Universtiy of Tokyo, Japan and a Masters degree in Business Administration from Massachusetts Institute of Technology, USA. Mr. Hiroyuki Yoshinari Managing Director/Chief Executive Officer Mr. Hiroyuki Yoshinari, aged 52, was appointed as Managing Director and CEO of the Bank on 1 March He holds a Bachelor of Liberal Arts (Natural Sciences Division) from International Christian University, Japan. Dato Seri Talaat Bin Husain Independent Non-Executive Director Dato' Seri Talaat Bin Husain, aged 61, was appointed as a Director of the Bank on 1 March He holds a Bachelor of Social and Political Science from University Sains Malaysia and a Masters degree in Professional Studies (International Planning) from Cornell University New York, USA. Mr. Mohd Mokhtar Bin Ghazali Independent Non-Executive Director Mr. Mohd Mokhtar Bin Ghazali, aged 69, was appointed as a Director of the Bank on 1 March He is the Chairman of the Risk Management Committee and Audit Committee. He holds a Bachelor of Economics from University Malaya, Malaysia. 6

9 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) FREQUENCY AND CONDUCT OF BOARD MEETINGS The Board meets on a scheduled basis, at least once in every two (2) months, to review the management reports and to deliberate on various matters which require its guidance and approval. During the financial period, the Board held nine (9) meetings and the attendance at the Board meetings are as follows: Nomination Committee Members Mr. Hiroshi Suehiro Non-Independent Non-Executive Director (appointed on 9 February 2012) Mr. Hiroyuki Yoshinari Managing Director/Chief Executive Officer Mr. Akira Sugano Non-Independent Non-Executive Director Dato Seri Talaat Bin Husain Independent Non-Executive Director Mr. Mohd Mokhtar Bin Ghazali Independent Non-Executive Director Mr. Keizo Ohashi Non-Independent Non-Executive Director (resgined on 9 February 2012) Mr. Yasuo Fukai Non-Independent Executive Director (resigned on 3 March 2011) Mr. Keizo Ohashi Non-Independent Non-Executive Director (resigned on 3 March 2011) Number of Meetings Held Attended DIRECTORS' TRAINING All the Directors received continuous trainings to keep abreast with latest developments in the banking and related sectors. During the financial period, the seminars and courses attended by the Directors are, inter-alia, on areas relating to banking and related topics, Financial Institutions Directors' Education Programme, Risk Management, Economic, Corporate Governance, etc. 7

10 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD PERFORMANCE The Board has established a performance evaluation mechanism to assess the effectiveness of the Board, Board Committees and each Director s contribution annually. The Nomination Committee is responsible to undertake the performance evaluation every year and submit the result to the Board for deliberation. The Board, Board Committees and individual Directors performances are evaluated against identified key areas and key performance indicators ("KPIs") that are based on regulatory requirements and best practices. The key areas and KPIs include but are not limited to the Board and Board Committees structure, responsibilities, meeting operations, input in policy development, participation in decision making and attendance. BOARD COMMITTEES The Board has established the Nomination Committee, Remuneration Committee, Risk Management Committee and Audit Committee to assist the Board in the execution of its duties and responsibilities. Each Board Committee operates within its own terms of reference approved by the Board, which clearly define its duties and responsibilities. The composition of the Board Committees are as follows: Name of Directors Mr. Hiroshi Suehiro (Non-Independent Non-Executive Director) Mr. Akira Sugano (Non-Independent Non-Executive Director) Mr. Hiroyuki Yoshinari (Managing Director/CEO) Dato Seri Talaat Bin Husain (Independent Non-Executive Director) Mr. Mohd Mokhtar Bin Ghazali (Independent Non-Executive Director) Nomination Committee Remuneration Committee Risk Management Committee M M M Audit Committee M M M M M CH M CH CH M CH Note: CH - Chairman M - Member 8

11 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committees are responsible to provide a formal and transparent procedure for the appointment of Directors and CEO as well as the assessment of the effectiveness of individual directors, board as a whole and the performance of the CEO and key senior management officers. The Remuneration Committee also reviews and endorses, where appropriate, the remuneration of the CEO and key senior management officers as recommended by the Bank's regional management. The Nomination and Remuneration Committees meet at least annually. During the financial period ended 31 March 2012, the Nomination Committee met three (3) times and the Remuneration Committee met once (1). The attendance at the Nomination and Remuneration Committee are as follows: Nomination Committee Members Dato Seri Talaat Bin Husain Chairman Mr. Mohd Mokhtar Bin Ghazali Member Mr. Hiroyuki Yoshinari Member Mr. Akira Sugano Member Mr. Hiroshi Suehiro Member (appointed on 9 February 2012) Mr. Keizo Ohashi Member (resigned on 9 February 2012) Number of Meetings Held Attended Remuneration Committee Members Dato Seri Talaat Bin Husain Chairman Mr. Akira Sugano Member Mr. Hiroshi Suehiro Member (appointed on 9 February 2012) Mr. Keizo Ohashi Member (resigned on 9 February 2012) Number of Meetings Held Attended

12 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) AUDIT COMMITTEE The Bank's Audit Committee comprised of two (2) Independent Non-Executive Directors and one (1) Non- Independent Non-Executive Director. The Audit Committee meets every quarter. The attendance at the Audit Committee meetings held during the financial period are as follows: Audit Committee Members Mr. Mohd Mokhtar Bin Ghazali Chairman Dato Seri Talaat Bin Husain Member Mr. Akira Sugano Member Number of Meetings Held Attended Accountability and Audit In addition to the duties and responsibilities set out under its terms of reference, the Audit Committee assists the Board by providing an objective non-executive review of the effectiveness and efficiency of the internal control, risk management and governance processes of MCBM. The Chief Internal Auditor attends every Audit Committee meeting. The minutes of the Audit Committee meetings are tabled to the Board for information and for action by the Board where appropriate. The activities carried out by the Audit Committee during the period are set out in the Audit Committee Report on pages 11 to 13 of this Directors' Report. 10

13 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) AUDIT COMMITTEE (CONT'D) Relationship with External Auditors It is the policy of the Audit Committee to meet with the external auditors at least twice a year to discuss their audit plan, audit findings and MCBM s financial statements. These meetings are held without the presence of the Executive Directors and the Management. The Audit Committee also meets with the external auditors whenever it deems necessary. In addition, the external auditors are invited to attend the annual general meeting of the Bank and are available to answer shareholder's questions. The Audit Committee is responsible for approving audit, audit-related and non-audit services provided by the external auditors. These audit-related and non-audit services comprise regulatory reviews and reporting, interim reviews, accounting trainings, tax advisory and compliance services. Terms of engagement for these services are reviewed by the Audit Committee and approved by the Board. The Audit Committee approves all non-audit services on a case-to-case basis. In approving such cases, the Audit Committee ensures that the independence and objectivity of the external auditors are not compromised. The Audit Committee has considered the provision of non-audit services by the external auditors during the period and concluded that the provision of these services did not compromise the external auditors independence and objectivity as the amount of the fees paid for these services was not significant when compared to the total fees paid to the external auditors. Risk Governance The Audit Committee, supported by the Internal Audit Division, provides an independent assessment of the adequacy and reliability of the risk management processes and system of internal controls, and compliance with risk policies and regulatory requirements. Summary of Activities During the period, the Committee carried out the following activities: Financial Reporting Reviewed the quarterly unaudited financial results of MCBM before recommending the same for approval by the Board of Directors. Reviewed the final audited financial results of MCBM before recommending the same for approval by the Board of Directors. 11

14 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) AUDIT COMMITTEE (CONT'D) Internal Audit Reviewed the Internal Audit Charter in relation to the new Guidelines on Internal Audit Function of Licensed Institutions issued by BNM to ensure its adequacy of scope and compliance with the Guidelines. Reviewed the annual audit plan to ensure adequate scope and comprehensive coverage over the activities of MCBM and ensured that all high risk areas are audited annually. Reviewed the effectiveness of the audit process, resource requirements for the period and assessed the performance of Internal Audit Division. Reviewed, commented and approved the audit reports presented to the Committee. External Audit Reviewed with the external auditors: their audit plan, audit strategy and scope of work for the period. the results of their annual audit, auditors' report and management letter together with Management s response to their findings. Assessed the independence and objectivity of the external auditors during the period and prior to the appointment of the external auditors for non-audit services. Related Party Transactions Reviewed the related party transactions entered into by MCBM. 12

15 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) AUDIT COMMITTEE (CONT'D) Internal Audit Function The Committee is supported by the Internal Audit Division in the discharge of its duties and responsibilities. Internal Audit Division provides independent and objective assessment on the adequacy and effectiveness of the risk management, internal control and governance processes. The internal audit function reviews the effectiveness of the internal control structures over MCBM s activities focusing on high risk areas as determined using a risk-based approach. All high risk activities in each auditable area are audited annually. The internal audits cover the review of the adequacy of risk management, operational controls, compliance with established procedures, guidelines and statutory requirements, quality of assets, management efficiency and level of customer services, amongst others. These audits are to ensure that the established controls are appropriate, effectively applied and achieve acceptable risk exposures consistent with MCBM s risk management policy. In performing such reviews, recommendations for improvement and enhancements to the existing system of internal controls and work processes are made. Internal Audit Division also audits the information systems and data communications network of MCBM. Internal Audit Division provides consulting or advisory functions in the evaluation of risk exposures of new systems, business products and services to assess the controls that should be in place to mitigate the risks identified prior to implementation. When providing such consulting or advisory functions, Internal Audit Division is not involved in the system selection or implementation process in order to maintain its objectivity and independence. Internal Audit Division works collaboratively with Risk Management Division to review and assess the risk governance framework and the risk management processes of MCBM in respect of their adequacy and effectiveness. 13

16 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) BOARD RISK MANAGEMENT COMMITTEE The Board, through the Board Risk Management Committee ("BRMC"), maintains overall responsibility for risk oversight within MCBM. The responsibilities of the Board in providing oversight for the risk management processes include ensuring that: all risk policies set by the Board are effectively implemented by the Three Lines of Defence; procedures exist for the approval of any activity that introduces new risks or significantly increases the existing risk profile of MCBM; information on MCBM s risk exposures are regularly and promptly reported to the Board and other appropriate parties; significant risk management policies and risk exposures are regularly discussed/reviewed, with special emphasis placed on those that define MCBM s risk tolerance; and effective internal control procedures are implemented and competent audit personnel are available to review the effectiveness of risk management procedures/controls and the reliability of information submitted. The establishment of BRMC is approved by the Board. The objectives are to oversee senior management s activities in managing credit, market, liquidity, operational and other risks and to ensure that the risk management processes are in place and function effectively. The Chairman of BRMC is Mr. Mohd Mokhtar Bin Ghazali and its members are Mr. Hiroshi Suehiro and Mr. Akira Sugano. The Committee meets at least once every quarter, or more often as the Chairman of the Committee considers necessary or appropriate and the Committee held three (3) meetings during the period. 14

17 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) BOARD RISK MANAGEMENT COMMITTEE (CONT'D) The details of attendance of each member at BRMC Meetings held during the financial period ended 31 March 2012 are as follows: Board Risk Management Committee Members Mr. Mohd Mokhtar Bin Ghazali Chairman Mr. Hiroshi Suehiro Member (appointed on 9 February 2012) Mr. Akira Sugano Member Mr. Keizo Ohashi Member (resigned on 9 February 2012) Number of Meetings Held Attended The Board Risk Management Committee is responsible for: reviewing and recommending risk management strategies, policies and risk tolerance for the Board's approval; reviewing and assessing the adequacy of MCBM's risk management policies and framework in identifying, measuring, monitoring and controlling risks, and the extent to which these policies and frameworks are effective; deciding whether any new credit activity or product is suitable from the business perspective, whether it complies with MCBM s business plan and regulations, and whether it will be adequately incorporated within the credit risk management process of MCBM and conducted according to standards set by the Board; ensuring infrastructure, resources and systems are in place for risk management, i.e. ensuring that the staff responsible for implementing risk management systems perform those duties independently of MCBM s risk taking activities; and reviewing and commenting on management s periodic reports on risk exposure, risk portfolio composition and risk management activities. 15

18 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) BOARD RISK MANAGEMENT COMMITTEE (CONT'D) Committees supporting the Board Risk Management Committee The Board Risk Management Committee ( BRMC ), Credit Risk Management Committee ( CRMC ) and Asset and Liability Management Committee ( ALMC ) have been established by the Board to assume responsibility for the risk oversight and any approved policies and frameworks formulated on Credit, Market, Liquidity and Operational Risk. ALMC The ALMC supports the BRMC in the oversight of market and liquidity risk management. The ALMC, chaired by MCBM s CEO, has primary responsibility for the following: CRMC reviewing, assessing and reporting to the Board matters in relation to market risk, liquidity risk and market-oriented profits; reviewing and assessing Asset and Liability Management ( ALM ) operations in relation to funding management, market risk management and any other policies. The CRMC supports the BRMC in the oversight of Credit Risk Management. The CRMC is chaired by Independent Non-Executive Director. The Role of the CRMC is as follows: evaluating and assessing strategies to manage overall credit risks of MCBM; overseeing development of credit policies, monitoring and assessing the credit risk portfolio composition of MCBM; evaluating risks of MCBM under stress scenarios; assessing the risk-return trade-off of MCBM; reviewing and commenting on the reports of the credit review process, asset quality and ensure corrective action is taken; and reviewing and evaluating the various credit products to ensure compliance with standards set by the Board. 16

19 DIRECTORS' REPORT STATEMENT OF CORPORATE GOVERNANCE (CONT'D) BOARD COMMITTEES (CONT'D) MANAGEMENT INFORMATION All the Directors have reviewed the Board reports prior to the Board Meetings. Information and materials, duly endorsed by the CEO and the relevant functional heads that are important to the Directors' understanding of the agenda items and related topics are distributed in advance prior to the date of the meeting. The Board reports include among others, the monthly performance of the Bank, minutes of the various Board and Management Committees, risk portfolio reports, any other prevailing regulatory developments as well as economic and business environment updates. These reports are issued timely to enable the Directors to obtain further explanations, where necessary, in order to be briefed properly before the meeting. RELATED PARTY TRANSACTIONS During the financial year period 31 March 2012, the Bank entered into transactions with its immediate holding company, Mizuho Corporate Bank Ltd. in the normal course of business. The details and nature of the transactions are disclosed in Note 20 to the financial statements. AUDITORS The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with their resolution. HIROYUKI YOSHINARI DIRECTOR DATO' SERI TALAAT BIN HUSAIN DIRECTOR Kuala Lumpur 17

20 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2012 Note 2012 RM'000 ASSETS Cash and short-term funds 2 327,667 Deposits and placements with banks 25,000 Loans, advances and financing 3 89,642 Financial investments available-for-sale 4 40,024 Derivative financial assets 5 10,634 Other assets 6 1,096 Property and equipment 7 12,335 Intangible asset 8 1,633 TOTAL ASSETS 508,031 LIABILITIES AND EQUITY Deposits from customers 9 99,172 Deposits and placements of banks 10 54,030 Derivative financial liabilities 5 6,428 Other liabilities 11 1,181 Deferred tax liabilities 12 1,117 TOTAL LIABILITIES 161,928 Share capital ,000 Available-for-sale reserve Accumulated losses (3,915) TOTAL EQUITY 346,103 TOTAL LIABILITIES AND EQUITY 508,031 COMMITMENTS AND CONTINGENCIES ,095 18

21 STATEMENT OF COMPREHENSIVE INCOME Note 2012 RM'000 Interest income 17 15,296 Interest expense 18 (2,699) Net interest income 12,597 Other operating income 19 7,960 Net operating income 20,557 Other operating expenses 20 (21,996) Operating loss (1,439) Impairment allowance on loans, advances and financing 21 (1,365) Loss before taxation (2,804) Income tax expense 23 (1,111) Loss for the financial period (3,915) Other comprehensive income - Unrealised gain on securities - available-for-sale 24 Less: Income tax relating to component of other comprehensive income (6) Other comprehensive income for the financial period, net of tax 18 Total comprehensive income for the financial period (3,897) 19

22 STATEMENT OF CHANGES IN EQUITY Available Share for-sale Retained capital reserve earnings Total RM'000 RM'000 RM'000 RM'000 At 29 November 2010 (date of incorporation) * Issuance of shares 350, ,000 Loss for the financial period - - (3,915) (3,915) Other comprehensive income Balance as at 31 March , (3,915) 346,103 * Representing 3 ordinary shares of RM1 each 20

23 STATEMENT OF CASH FLOWS Cash Flows from Operating Activities Note 2012 RM'000 Loss before taxation (2,804) Adjustment for non-cash items Depreciation of property and equipment and intangible asset 7 1,338 Amortisation of premium net of accretion of discount 18 Impairment allowance on loans, advances and financing 1,365 Unrealised foreign exchange gain and mark-to-market gain (104) Unrealised gain on revaluation of derivatives 19 (4,120) Unrealised foreign exchange gain (86) Operating loss before changes in working capital (4,393) Changes in working capital: Increase in other assets (1,073) Increase in loans, advances and financing (91,007) Increase in deposits and placements with banks and other financial institutions (25,000) Increase in deposits and placements of banks and other financial institutions 54,030 Increase in other liabilities 1,181 Increase in deposits from customers 99,172 Net cash generated from operating activities 32,910 Cash Flows from Investing Activities Purchase of property and equipment 7 (13,559) Purchase of intangible assets 8 (1,747) Purchase of financial assets available-for-sale (39,937) Net cash used in investing activities (55,243) Cash Flow from Financing Activity Proceeds from issuance of ordinary share, representing 350,000 net cash generating from financing activity 350,000 Net increase in cash and cash equivalents 327,667 Cash and cash equivalents - at the date of incorporation - - at the end of the financial period 327,667 Analysis of Cash and Cash equivalents Cash and short-term funds 2 327,667 21

24 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements, unless otherwise stated. A BASIS OF PREPARATION The financial statements of the Bank have been prepared under historical cost convention unless otherwise indicated in this summary of significant accounting policies. The financial statements comply with the Financial Reporting Standards ("FRS"), Bank Negara Malaysia ("BNM") Guidelines and the provisions of the Companies Act, The preparation of financial statements in conformity with the provisions of the Companies Act, 1965, FRS and BNM Guidelines requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Bank's accounting policies. Although these estimates are based on the Directors' best knowledge of current events and actions, actual results may differ from estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in accounting policy Note H. (a) Standards, amendments to published standards and interpretations that are effective and applicable to the Bank. The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Bank's financial period beginning on or after 1 January 2011 are as follows: Amendment to FRS 7 "Financial instruments: Disclosures - improving disclosures about financial instruments" IC Interpretation 4 "Determining whether an arrangement contains a lease" Improvements to FRSs (2010) 22

25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION (CONT'D) (b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Bank but not yet effective. The Bank will apply the new standards, amendments to standards and interpretations in the following period: (i) Financial year beginning on 1 January 2012 In the next financial year, the Bank will be adopting the new IFRS-compliant framework, Malaysian Financial Reporting Standards ("MFRS"). MFRS 1 "First-time adoption of MFRS" provides for certain optional exemptions and certain mandatory exceptions for first-time MFRS adopters. MFRS 139 "Financial instruments: recognition and measurement" - BNM has removed the transitional provision for banking institutions on loan impairment assessment and provisioning to comply with the MFRS 139 requirements. The revised MFRS 124 "Related party disclosures" (effective from 1 January 2012) removes the exemption to disclose transactions between government-related entities and the government, and all other government-related entities. The following new disclosures are now required for government related entities: - The name of the government and the nature of their relationship; - The nature and amount of each individually significant transactions; and - The extent of any collectively significant transactions, qualitatively or quantitatively. Amendments to IC Interpretation 14 "MFRS The limit on a defined benefit assets, minimum funding requirements and their interaction" (effective from 1 July 2011) permits an entity to recognise the prepayments of contributions as an asset, rather than an expense in circumstances when the entity is subject to a minimum funding requirement and makes an early payment of contributions to meet those requirements. 23

26 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION (CONT'D) (b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Bank but not yet effective (cont'd) (ii) Financial year beginning on/after 1 January 2013 MFRS 9 "Financial instruments - classification and measurement of financial assets and financial liabilities" (effective from 1 January 2013) replaces the multiple classification and measurement models in MFRS 139 with a single model that has only two classification categories: amortised cost and fair value. The basis of classification depends on the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. The accounting and presentation for financial liabilities and for de-recognising financial instruments has been relocated from MFRS 139, without change, except for financial liabilities that are designated at fair value through profit or loss ("FVTPL"). Entities with financial liabilities designated at FVTPL recognise changes in the fair value due to changes in the liability's credit risk directly in other comprehensive income ("OCI"). There is no subsequent recycling of the amounts in OCI to profit or loss, but accumulated gains or losses may be transferred within equity. The guidance in MFRS 139 on impairment of financial assets and hedge accounting continues to apply. MFRS 13 "Fair value measurement" (effective from 1 January 2013) aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across MFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The enhanced disclosure requirements are similar to those in MFRS 7 "Financial instruments: Disclosures", but apply to all assets and liabilities measured at fair value, not just financial ones. Amendment to MFRS 7 "Financial instruments: Disclosures on transfers of financial assets" (effective from 1 July 2011) promotes transparency in the reporting of transfer transactions and improve users' understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity's financial position, particularly those involving securitisation of financial assets. 24

27 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION (CONT'D) (b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Bank but not yet effective (cont'd) (ii) Financial year beginning on/after 1 January 2013 (cont'd) Amendment to MFRS 101 "Financial statement presentation" (effective from 1 July 2012) requires entities to separate items presented in 'other comprehensive income' ("OCI") in the statement of comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in the future. The amendments do not address which items are presented in OCI. Amendment to MFRS 119 "Employee benefits" (effective from 1 January 2013) makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. Actuarial gains and losses will no longer be deferred using the corridor approach. MFRS 119 shall be withdrawn on application of this amendment. The adoption of the above revised MASB accounting standards is not expected to have any significant financial impact on the results of the Bank except for MFRS9 where financial assets currently classified as available for sale is allowed to be reclassified and measured accordingly. B FINANCIAL ASSETS AND LIABILITIES (a) Loans and receivables Loans and receivables include credit provided by the Bank and the Bank's share in syndicated loans, unless they are held for trading purposes. Loans and receivables are initially measured at fair value or equivalent, which is usually the net amount disbursed at inception including directly attributable origination costs and certain types of fees or commission (syndication commission, commitment fees and handling charges) that are regarded as an adjustment to the effective interest rate on the loan. Loans and receivables are subsequently measured at amortised cost. The income from the loan, representing interest plus transaction costs and fees/commission included in the initial value of the loan, is calculated using the effective interest method and taken to profit or loss over the life of the loan. 25

28 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B FINANCIAL ASSETS AND LIABILITIES (CONT'D) (a) Loans and receivables (cont'd) Commission earned on financing commitments prior to the inception of a loan is deferred and included in the value of the loan when the loan is made. Commission earned on financing commitments when the probability of drawdown is low, or when there is uncertainty as to the timing and amount of drawdowns, is recognised on a straight-line basis over the life of the commitment. (b) Securities (i) Categories of securities Securities held by the Bank are classified into one of four categories. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss comprise of: - financial assets held for trading purposes; - financial assets that the Bank has designed, on initial recognition, at fair value through profit or loss using the fair value option available under FRS 139. Securities in this category are measured at fair value at the reporting date. Transaction costs are directly posted in the profit and loss account. Changes in fair value (excluding accrued interest on fixed-income securities) are presented in the profit and loss account under "Net gain/loss on financial instruments at fair value through profit or loss", along with dividends from variable-income securities and realised gains and losses on disposal. Income earned on fixed-income securities classified into this category is shown under "Interest income" in the profit and loss account. Fair value incorporates an assessment of the counterparty risk on these securities. Loans and receivables Securities with fixed or determinable payments that are not traded on an active market, apart from securities for which the owner may not recover almost all of its initial investment due to reasons other than credit deterioration, are classified as "Loans and receivables" if they do not meet the criteria to be classified as "Financial assets at fair value through profit or loss." These assets are measured and recognised as described in Note B(a). 26

29 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B FINANCIAL ASSETS AND LIABILITIES (CONT'D) (b) Securities (cont'd) (i) Categories of securities (cont'd) Securities held by the Bank are classified into one of four categories (cont'd) - Held-to-maturity financial assets Held-to-maturity financial assets are investments with fixed or determinable payments and fixed maturity that the Bank has the intention and ability to hold until maturity. Hedges contracted to cover assets in this category against interest rate risk do not qualify for hedge accounting as defined in FRS 139. Assets in this category are accounted for at amortised cost using the effective interest method, which builds in amortisation of premium and discount (corresponding to the difference between the purchase price and redemption value of the asset) and acquisition costs (where material). Income earned from this category of assets is included in "Interest income" in the profit and loss account. - Available-for-sale financial assets Available-for-sale financial assets are fixed-income and variable-income securities other than those classified as "fair value through profit or loss" or "held-to-maturity" or "loans and receivables". Assets included in the available-for-sale category are initially recorded at fair value plus transaction costs where material. At the reporting date, they are remeasured at fair value, with changes in fair value (excluding accrued interest) shown on a separate line in shareholders' equity, fair value reserve available for sale securities. Upon disposal, these unrealised gains and losses are transferred from shareholder's equity to the profit and loss account, where they are shown on the line "Net gain/loss on available-for-sale financial assets". Income recognised using the effective interest method for fixed-income available-for-sale securities is recorded under "Interest income" in the profit and loss account. Dividend income from variable-income securities is recognised when the Bank's right to receive payment is established. (c) Date of recognition for securities transactions Securities classified as at fair value through profit or loss, held-to-maturity or available-for-sale financial assets are recognised at the trade date. Securities transactions are carried on the statement of financial position until the Bank's rights to receive the related cash flows expire, or until the Bank has substantially transferred all the risks and rewards related to ownership of the securities. 27

30 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B FINANCIAL ASSETS AND LIABILITIES (CONT'D) (d) Foreign currency transactions The methods used to account for assets and liabilities relating to foreign currency transactions entered into by the Bank, and to measure the foreign exchange risk arising on such transactions, depend on whether the asset or liability in question is classified as a monetary or a non-monetary item. Monetary assets and liabilities expressed in foreign currencies Monetary assets and liabilities expressed in foreign currencies are translated into the functional currency of the relevant Bank entity at the closing rate. Translation differences are recognised in the profit and loss account, except for those arising from financial instruments designated as a cash flow hedge or a net foreign investment hedge, which are recognised in shareholder's equity. Non-monetary assets and liabilities expressed in foreign currencies Non-monetary assets may be measured either at historical cost or at fair value. Non-monetary assets expressed in foreign currencies are translated using the exchange rate at the date of the transaction if they are measured at historical cost, and at the closing rate if they are measured at fair value. Translation differences on non-monetary assets expressed in foreign currencies and measured at fair value (variable-income securities) are recognised in the profit and loss account if the asset is classified under "Financial assets at fair value through profit or loss", and in shareholders' equity if the asset is classified under "Available-for-sale financial assets", unless the financial asset in question is designated as an item hedged against foreign exchange risk in a fair value hedging relationship, in which case the translation difference is recognised in the profit and loss account. (e) Impairment of financial assets Impairment of loans and receivables and held-to-maturity financial assets, provisions for financing and guarantee commitments An impairment loss is recognised against loans and held-to-maturity financial assets where (i) there is objective evidence of a decrease in value as a result of an event occurring after inception of the loan or acquisition of the asset; (ii) the event affects the amount or timing of future cash flows; and (iii) the consequences of the event can be reliably measured. Loans are initially assessed for evidence of impairment on an individual basis, and subsequently on a portfolio basis. Similar principles are applied to financing and guarantee commitments given by the Bank, with the probability of drawdown taken into account in any assessment of financing commitments. At an individual level, objective evidence that a financial asset is impaired includes observable data regarding the following events: the existence of accounts that are more than three months past due; 28

31 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B FINANCIAL ASSETS AND LIABILITIES (CONT'D) (e) Impairment of financial assets (cont'd) Impairment of loans and receivables and held-to-maturity financial assets, provisions for financing and guarantee commitments (cont'd) knowledge or indications that the borrower meets significant financial difficulty, such that a risk can be considered to have arisen regardless of whether the borrower has missed any payments; concessions with respect to the credit terms granted to the borrower that the lender would not have considered had the borrower not been meeting financial difficulty. The amount of the impairment is the difference between the carrying amount before impairment and the present value, discounted at the original effective interest rate of the asset, of those components (principal, interest, collateral, etc.) regarded as recoverable. Changes in the amount of impairment losses recognised in profit and loss account under "Allowances for losses on loans and advances". Any subsequent decrease in an impairment loss that can be related objectively to an event occurring after the impairment loss was recognised is credited to the profit and loss account, also under "Allowances for losses on loans and advances". Once an asset has been impaired, income earned on the carrying amount of the asset calculated at the original effective interest rate used to discount the estimated recoverable cash flows is recognised under "Interest income" in the profit and loss account. Impairment losses on loans and receivables are usually recorded in a separate provision account which reduces the amount for which the loan or receivable was recorded in assets upon initial recognition. Provisions relating to off-balance sheet financial instruments, financing and guarantee commitments or disputes are recognised in liabilities. Impaired receivables are written off in whole or in part and the corresponding provision is reversed for the amount of the loss when all other means available to the Bank for recovering the receivables or guarantees have failed, or when all or part of the receivables have been waived. Counterparties that are not individually impaired are risk-assessed on a portfolio basis with similar characteristics. This assessment draws upon an internal rating system based on historical data, adjusted as necessary to reflect circumstances prevailing at the reporting date. It enables the Bank to identify groups of counterparties which, as a result of events occurring since inception of the loans, have collectively acquired a probability of default at maturity that provides objective evidence of impairment of the entire portfolio, but without it being possible at that stage to allocate the impairment to individual counterparties. This assessment also estimates the amount of the loss on the portfolios in question, taking account of trends in the economic cycle during the assessment period. Changes in the amount of portfolio impairments are recognised in the profit and loss account under "Allowances for losses on loans and advances". Based on the experienced judgement of the Bank's divisions or Risk Management, the Bank may recognise additional collective impairment provisions with respect to a given economic sector or geographic area affected by exceptional economic events. This may be the case when the consequences of these events cannot be measured with sufficient accuracy to adjust the parameters used to determine the collective provision recognised against affected portfolios of loans with similar characteristics. 29