UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA BERHAD Level 27&38, Menara Standard Chartered Jalan Sultan Ismail Kuala Lumpur Malaysia

Transcription

1 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA BERHAD Level 27&38, Menara Standard Chartered Jalan Sultan Ismail Kuala Lumpur Malaysia Tel : Fax : contact.malaysia@unicorninvestmentbank.com ANNUAL REPORT 2010

2 TABLE of CONTENTS Vision 2 About Us 3 Corporate Information 4 International Presence 5 Board of directors ProfileS 6 SHARI AH SUPERVISORY BOARD 8 Senior Management Team 10 Business Lines 15 OrganiZation Chart by Functions 16 CEO s Message 18 Corporate Governance and Compliance 20 RISK MANAGEMENT 25 Financial Highlights 28 Financial Review 29 Corporate Events 31 Financial Statements 33

3 ANNUAL REPORT 2010

4 Vision Unicorn International Islamic Bank Malaysia Berhad aspires to be a leading global provider of Shari ah-compliant investment banking products and services and to deliver exceptional value to clients and shareholders through a focus on innovation, professionalism and integrity the shared values that drive the Bank s every endeavour. 2 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

5 About Us Unicorn International Islamic Bank Malaysia Berhad ( Unicorn Malaysia or the Bank ), a wholly-owned subsidiary of Unicorn Investment Bank B.S.C. (c) (Kingdom of Bahrain), is the first foreign Islamic bank to be licensed to conduct a full range of non-malaysia Ringgit banking activities under the Malaysia International Islamic Financial Centre (MIFC) initiative. This initiative aims to strengthen Malaysia s position as an international Islamic finance hub and build greater intermediation linkages between East Asia and the Middle East. Unicorn Malaysia s primary focus is in three core business lines: Corporate Banking, Treasury and Investment Banking to complement Unicorn Bahrain s existing operations. The Bank leverages its resources and expertise across each of these business lines to provide clients with a broad range of investment and banking solutions tailored to meet their specific requirements. Unicorn Malaysia seeks to deliver exceptional value to clients and shareholders through innovation, professionalism and integrity the shared values that drive the Bank s endeavour to be a leading global provider of Shari ah-compliant banking products and services. In every aspect of its business and through every level of the organization, Unicorn Malaysia is committed to upholding the highest standards of corporate governance and transparency. The Bank s innovative products and transactions are fully compliant with Shari ah principles and we believe that they are consistent with international financial best practice. ANNUAL REPORT

6 CORPORATE INFORMATION BOARD OF DIRECTORS Datuk Kamaruddin Taib Non-Executive and Independent Director Dato Abdul Aziz Abu Bakar Non-Executive and Independent Director Sheikh Dr. ABDUL AZIZ AL ORAYER Non-Executive and Independent Director CHIEF EXECUTIVE OFFICER Ikbal Daredia DEPUTY CHIEF EXECUTIVE OFFICER MOHAMED ThameeM Ghouse COMPANY SECRETARY Dale Affendy Yusof SENIOR MANAGEMENT TEAM Ikbal Daredia Chief Executive Officer Mohamed Thameem Ghouse Deputy Chief Executive Officer Dale Affendy Yusof Company Secretary Azlan Shaharuddin Head of Finance Khadijah Iskandar Head of Credit Management Nor Izdihar Mohd Azmi Head of Operations Mohd Fuad Abdullah Head of Treasury Mahmud abu bakar Head of Capital Markets Soong Lai Kuan Manager of Human Resources OFFICE ADDRESS Level 27 & 38 Menara Standard Chartered 30 Jalan Sultan Ismail Kuala Lumpur Malaysia Tel : Fax : contact.malaysia@ unicorninvestmentbank.com HEAD OFFICE ADDRESS Unicorn Investment Bank B.S.C. (c) P.O. Box MENA Telecom Building Building No Road 2830, Block 0428 Al-Seef District, Manama Kingdom of Bahrain Tel : Fax : SHARI AH ADVISORY BOARD (Head Office) Dr. Khalid Mathkoor Al-Mathkoor Chairman Dr. AAgil Jasim Al-Nashmy Deputy Chairman Dr. Abdul Sattar Abdul KareeM Abu Ghuddah Dr. Ali Muhyealdin Al-Quradaghi Dr. Mohammad Daud Bakar Sh. Nizam Mohammad Saleh Yaqouby REGISTERED ADDRESS Level 38, Menara Standard Chartered 30 Jalan Sultan Ismail Kuala Lumpur Malaysia Tel : Fax : AUDITORS KPMG Level 10, KPMG Tower 8, First Avenue, Bandar Utama Petaling Jaya Selangor Darul Ehsan Tel : Fax : UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

7 INTERNATIONAL PRESENCE Turkey KSA Bahrain Malaysia Unicorn Investment Bank B.S.C. (c) P.O. Box MENA Telecom Building Building No. 2304, Road 2830, Block 0428 Al-Seef District, Manama Kingdom of Bahrain Phone : Fax : contact@unicorninvestmentbank.com Unicorn International Islamic Bank Malaysia Berhad Level 27 & 38, Menara Standard Chartered 30, Jalan Sultan Ismail, Kuala Lumpur Malaysia Phone : Fax : contact.malaysia@unicorninvestmentbank.com Unicorn Capital Turkey Değerler A.S. Muallim Naci Cad. No Ortaköy, Istanbul Turkey Phone : Fax : contact@unicorncapital.com.tr Unicorn Capital Saudi Arabia P.O. Box Sky Towers, Olaya District, King Fahad Road 2nd Floor, North Tower, Riyadh Kingdom of Saudi Arabia Phone : Fax : contact@unicornsa.com ANNUAL REPORT

8 Board of directors ProfileS 1 1. Datuk Kamaruddin Taib Datuk Kamaruddin Taib is currently the Executive Chairman and partner of Germanisher Lloyd GLM Sdn. Bhd., a leading company specializing in industrial services for the oil and gas industry in the Asian Region. He has significant experience in merchant banking, corporate finance and mergers & acquisitions. His career started in 1980 with a leading merchant bank in Malaysia. Subsequently, he served as a director for several private companies as well as companies listed on Bursa Malaysia. Apart from the experience of serving on the board of companies listed on Bursa Malaysia, his experience include serving on the board of companies listed on the Stock Exchange of India as well as on the Nasdaq (USA). He currently serves as an Independent and Non- Executive Director of two companies listed on Bursa Malaysia. He holds a Bachelor of Science degree in Mathematics from the University of Salford, United Kingdom. 6 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

9 Sheikh Dr. ABDUL AZIZ AL ORAYER Dr. Abdul Aziz Al Orayer is currently the Chairman of t azur Company B.S.C. (c), a regional takaful company established in 2007 following two years of intensive research and development led by the Unicorn Group. Dr. Abdul Aziz is also the Undersecretary and a Member of the Shura Council (Saudi Arabia) since 1998 and Chairman of the Economic and Financial Committee since Previously, Dr. Abdul Aziz served as Chairman of the Boards of the Arab Company of Industrial Investments and the Saudi Bangladeshi Company for Agricultural and Industrial Investments. He was also a member of the board and the GM in charge of the Saudi Credit Bank; Vice Chairman of National Cooperative Insurance Co.; a board member of the Royal Board for Jubail and Yanbou; and a board member of King Fahad University for Petrol and Minerals. Dr. Abdul Aziz has also held numerous high level diplomatic posts such as Head of the Saudi Delegation to the 24 Ministerial Group at the INB and MF; Head of the Saudi Preparatory Committee for Economic, Trade and Cultural Cooperation with Yemen; and Head of the Negotiating Delegation for the Agreements on Protection and Encouragement of Investment with a number of countries. Dr. Abdul Aziz received his PhD in Economy and Business Administration in Wales and his Masters in Bank Economy and Cash from South Illinois University (USA). 3. Dato Abdul Aziz Abu Bakar Dato Abdul Aziz Abu Bakar is currently the Chief Executive Officer of the Malaysia Directors Academy (MINDA). Prior to his appointment as MINDA s first CEO, Dato Aziz was the Chief Human Capital Officer at Telekom Malaysia (now known as TM), a position he held for five years before his retirement in September He has also served in various senior positions across a number of industries including banking, oil & gas and aviation. Prior to his stint in TM, Dato Aziz was the Executive VP, HR Division, of RHB Bank Berhad from 2001 and Before that, Dato Aziz spent twenty years in Shell Malaysia in various management positions in Internal & Computing Audit, Marketing Economics, Sales, Supply & Planning and HR. In 1991, he was assigned an international posting to Shell Group Head Office in London where he held the position of the shareholders representative overseeing Shell s business interests in Hong Kong and China. He was made the General Manager of HR and Transformation for ASEAN countries upon his return. Prior to joining Shell Malaysia, he was a Fleet Planning Coordinator with Malaysia Airline System Berhad in Dato Aziz holds a Bachelor of Economics (Honours) degree from the University of Malaya. ANNUAL REPORT

10 SHARI AH SUPERVISORY BOARD DR. KHALID MATHKOOR AL-MATHKOOR Chairman Dr. Khalid Mathkoor Al-Mathkoor is the Chairman of the Higher Consultative Committee for Finalization of the Application of the Provisions of Islamic Shari ah for the State Kuwait. He is a lecturer in the Division of Comparative Jurisprudence and Shari ah Policy of the Faculty of Shari ah and Islamic Studies at the University of Kuwait. Dr. Khalid is a member of the Higher Planning Board of the State of Kuwait, and serves on the Shari ah Supervisory Boards of a number of Islamic banks. He holds a PhD in Shari ah from Al-Azhar University. 2. DR. AAGIL JASIM AL-NASHMY Deputy Chairman Dr. Aagil Jasim Al-Nashmy is a Professor at the Faculty of Shari ah and Islamic Studies at the University of Kuwait. He represents the State of Kuwait in the Islamic Fiqh Academy, which evolved from the Organizations of Islamic Conference in Jeddah, Saudi Arabia. He is a member of the Shari ah Supervisory Boards of a number of Islamic Financial Institutions, as well as of the Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI). Dr. Aagil also serves on the Fatwa Committee of the Kuwait Ministry of Awqaf and Islamic Affairs. He holds a PhD in Shari ah from Al-Azhar University. 3. DR. ABDUL SATTAR ABDULUL KAREEM ABU GHUDDAH Dr. Abdul Sattar Abdulul Kareem Abu Ghuddah is a member of the Islamic Fiqh Academy which evolved from the Organizations of Islamic Conference in Jeddah, Saudi Arabia. He sits on both the Standard Board and Shari ah Board of AAOIFI. He is also a member of the Shari ah Supervisory Boards of a number of Islamic banks. Previously, Dr. Abdul Sattar held the position of Expert and Reporter for the Islamic Fiqh Encyclopedia, Ministry of Awqaf and Islamic Affairs, State of Kuwait. He holds a PhD in Shari ah from Al-Azhar University. 8 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

11 DR. ALI MUHYEALDIN AL-QURADAGHI Dr. Ali Muhyealdin Al-Quradaghi is a Professor and Chairman of the Department of Jurisprudence and its principles in the Faculty of Shari ah Law and Islamic Studies at the University of Qatar. He is a member of the Islamic Fiqh Academy, Organization of Islamic Conference, in the Kingdom of Saudi Arabia. He also sits on the Shari ah Supervisory Boards of a number of Islamic banks. Dr. Ali holds a PhD in Shari ah from Al-Azhar University. 6. SH. NIZAM MOHAMMAD SALEH YAQOUBY Sh. Nizam Mohammad Saleh Yaqouby is a member of the Shari ah Supervisory Board of a number of Islamic banks and Institutions. He holds a BA in Economics and Comparative Religion from McGill University, Canada and at present is a PhD candidate in Islamic Law at the University of Wales. 5. DR. MOHAMMAD DAUD BAKAR Dr. Mohammad Daud Bakar is currently President and CEO of the International Institute of Islamic Finance Inc. and Amanie Business Solutions Sdn. Bhd., Kuala Lumpur, Malaysia. Previously, Dr. Bakar held the position of Deputy Rector for Student Affairs and Development of the International Islamic University, Malaysia. He also served as Dean of the Centre for Postgraduate Studies and Associate Professor of Islamic Law at the International Islamic University, Malaysia. Dr. Mohammad is a member of the Shari ah Advisory Councils of both the Securities Commission and Bank Negara Malaysia. Dr. Mohammad holds a PhD in Shari ah from St. Andrews University, UK. ANNUAL REPORT

12 SENIOR MANAGEMENT TEAM Ikbal Daredia Chief Executive Officer Ikbal Daredia has over 20 years of experience in Islamic Banking. Prior to joining Unicorn, he was the Deputy Chief Executive Officer of Noriba, UBS s global Islamic platform for Shari ah compliant products and services. Prior to this, he was the Global Head of Islamic Financial Services at ABN Amro Bank in Bahrain for four years. Ikbal has originated and executed several Islamically structured cross border transactions for sovereign entities and corporates in Turkey, the GCC countries, the Philippines, India, Pakistan and the United Kingdom. In 2007, he led the distribution efforts for two Sukuk with a total value of US$1.6 billion issued on behalf of a prominent Saudi corporate. He was also the Noriba project leader for the first ever US$750 million Exchangeable Sukuk for Khazanah, Malaysia, and the US$350 million first international rated corporate Sukuk for Sarawak Corporate Sukuk Inc. (Malaysia) which was jointly led by UBS Investment Bank and Noriba in Prior to this, in 2001, he worked on the Sukuk issue for Kumpulan Guthrie, Malaysia. Ikbal is an Associate of the Chartered Institute of Bankers, England. Mohamed Thameem Ghouse Deputy Chief Executive Officer Mohamed Thameem Ghouse is one of the founding executives of Unicorn Investment Bank B.S.C. (c) Bahrain and has over 15 years of experience in Islamic Banking, Corporate Finance, Treasury, Strategic Mergers & Acquisitions and Financial Control. Prior to becoming the Deputy CEO of Unicorn International Islamic Bank (Unicorn Malaysia), he was on the board of Unicorn Malaysia as a non-independent director and was also a board director of Dawood Islamic Bank Ltd., Pakistan. He was a Senior Director of Strategic Mergers & Acquisitions at Unicorn Bahrain. Prior to joining Unicorn, Thameem was a senior partner with The International Investor (TII), a wholesale Islamic investment house in Kuwait and the UAE. At TII, he was a member of the Corporate Finance team. Prior to that, Thameem worked as a Manager of Treasury and Credit for the Al Sayer Group of Companies (Kuwait), where he was instrumental in developing a hedging strategy to suit the requirements of the business, restructuring the banking facilities just after Iraq s invasion of Kuwait and negotiating competitive credit lines for the group. Thameem graduated from University of Sri Jayawardenapura, Sri Lanka with a Degree in Business Commerce. He is a member of the Institute of Financial Consultants, USA and a Chartered Management Accountant from the United Kingdom as well as a fellow member of the Chartered Institute of Management Accountants. 10 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

13 Dale Affendy Yusof Company Secretary Dale Affendy Yusof has over 14 years of experience in company secretarial and legal matters from various sectors of the marketplace. Apart from being Company Secretary of the Bank, he is also responsible for all of the Bank s legal and compliance matters as well as the Bank s corporate affairs-related matters. In his role as Company Secretary, he has worked across a broad range of industry sectors such as consulting engineering, toll concessionaire, property, IT, governmentlinked entities and banking. Prior to joining the Bank in April 2010, Dale Affendy was the Company Secretary for Maybank Islamic Berhad, Mayban Trustees Berhad and Maybank International (L) Ltd, to list a few. Dale Affendy graduated with a Degree in Law from Leeds Metropolitan University, United Kingdom and is an Associate Member of Malaysia Institute of Chartered Secretaries and Administrators (MAICSA). Azlan Shaharuddin Head of Finance Azlan Shaharuddin who recently joined the team is a young and energetic Chartered Accountant, and a fellow member of the ACCA. His professional career started at Deloitte and PricewaterhouseCoopers Malaysia where he has gained extensive experience in assurance and consulting services covering aspects of management and operations in highly regulated environments. His first commercial finance experience began with Malaysia Airports Holdings Berhad. He proceeded to develop his financial career in the banking sector by joining the RHB Banking Group where he was the front-runner in the Bank s initiative to adopt the new IFRS regime. His initiatives were subsequently scouted by Kuwait Finance House Malaysia where he was appointed Head of Group Accounting & Tax. Overall, Azlan has more than 10 years financial management experience in professional services, commercial finance, banking and private equity. ANNUAL REPORT

14 SENIOR MANAGEMENT TEAM KHADIJAH ISKANDAR Head of Credit Management Khadijah Iskandar graduated with a Bachelor s Degree in Accounting in 1991 from the University of Denver, Colorado, USA. She also holds a Certified Credit Professional qualification. With more than 17 years experience in financial services, her career began with RHB Bank in May 1994 as a trainee in the Commercial Loans Division. During her employment with RHB Group, she undertook various positions in credit related functions in both commercial and corporate loans, ranging from marketing, credit processing, product development, credit administration, credit restructuring, loan recovery/rehabilitation and credit evaluation. She left RHB Bank as the Senior Relationship Manager for the Corporate Banking Division, specializing in the consumer and financial services sectors where her primary role was to grow the bank s assets and profitability. Khadijah was appointed to the pioneering team formed to set up RHB Islamic Bank in December 2005 the first Islamic Bank in Malaysia being formed under the subsidiary structure. The Bank commenced operations in March 2005 and she was the Head of the Credit Management Division. Being in charge of asset quality, she was also responsible for the restructuring of the Credit Support Department and setting up of the Non-Performing Financing Department. Her primary role was to protect the bank s asset quality through credit evaluation, credit processes and credit recovery. Representing RHB Islamic Bank, she was an examination committee member of Certified Islamic Financing Professional (CIFP) under the purview of the Islamic Banking and Finance Institution Malaysia (IBFIM). In November 2008, she joined Unicorn International Islamic Bank, with the main task of setting up the credit management division. She continues to contribute to the industry as an expert in the moderation of Certified Credit Professionals Islamic (CCP-i) (2010) and External Moderator of Certified Islamic Finance Qualification (CIFQ) (2011). Nor Izdihar Mohd Azmi Head of Operations Nor Izdihar Mohd Azmi s career began in 2000 with ABN AMRO Bank Berhad where he was responsible for its Treasury Back-Office Operations. Subsequently, in 2004, he was employed by Citibank Berhad as an Assistant Manager for Client Services in the Securities Services Department where his duties comprised the processing of securities trades, the protection of financial assets and the servicing of associated portfolios. In May 2005, he was given the task of setting up an Islamic bank and subsequently launched Kuwait Finance House (M) Berhad within BNM s dateline. His responsibilities entailed the set up of a Treasury Operations Department comprising the implementation of policies and procedures, training of staff, and core banking system selection. In 2007, he crossed borders to Singapore to embark on his new role as the Assistant Vice President of Operations specializing in treasury operations with the Islamic Bank of Asia Limited. He established core banking system parameterization, testing and implementation, and drawing up of policies and procedures manuals. Nor Izdihar studied Investment Analysis and Business Administration & Finance and holds a Bachelor of Arts in Business Administration from Ashford University, UK; and a Diploma in Investment Analysis from the University of Technology MARA. 12 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

15 Mohd Fuad Abdullah Head of Treasury Mohd Fuad Abdullah has over 26 years of working experience in the area of treasury and debt capital across various financial sectors. Prior to joining Unicorn International Islamic Bank Malaysia, he was the Head of Treasury Dealing at PM Securities ( PMS ) and KAF Investment Bank, previously known as KAF Discounts Bhd. As an active participant in the development of the Malaysian bond market, he participated in numerous discussions and meetings with market participants and Bank Negara Malaysia while representing his organization as a Principal Dealer. His stint at PMS s corporate finance department in 2009, where he was involved and led a team in some of the PMS s independent corporate advisory exercises, earned him valuable corporate finance experience. Mohd Fuad is an International Member of Persatuan Pasaran Kewangan Malaysia ( PPKM ) which is a member of Association Cambiste International ( ACI ). He served as the Honorary Secretary of PPKM from 1992 to 1995 under the Presidentship of Dr. Raja Lope Raja Shahrom and Tan Sri Amirsham A. Aziz. It was during this tenure that BNM elevated the status of PPKM s membership where the need for PPKM s license was enforced as a pre-requisite before treasury dealers are allowed to deal in any financial instruments. These licensing requirements were further reinforced with the introduction of the Capital Market Services Act in 2007, which covers the whole spectrum of capital market activities in Malaysia. Mahmud ABU BAKAR Head of Capital Markets Mahmud Abu Bakar has over 23 years of experience in the banking sector in the areas of corporate banking, offshore banking and investment banking. He began his banking career in 1988 as a trainee officer in OCBC Bank (M) Bhd and later became Vice President in its Corporate Banking department. He was seconded as General Manager of OCBC Bank Labuan branch, where he was involved in various cross-border financing transactions. In 2002, Mahmud joined Affin Investment Bank Bhd as a First Vice President in the CEO Office, where he was responsible for spearheading the corporate planning initiatives to re-define the business strategy for the investment bank. He subsequently headed the Capital Markets division and was instrumental in structuring and executing a number of high profile transactions on Private Debt Securities ( PDS ), involving Sukuk and other financing instruments. Mahmud holds a Bachelor s degree in Business Administration and Economics from California State University, Sacramento (USA) and a Master s degree in Business Administration from the University of Leicester (UK). Mohd Fuad holds a Bachelor s Degree in Business Administration (Marketing) from the Royal Melbourne Institute of Technology University, Australia and also holds a Diploma in Investment Analysis from UiTM, Malaysia. ANNUAL REPORT

16 SENIOR MANAGEMENT TEAM Soong Lai Kuan Manager of Human Resources Soong Lai Kuan has over 15 years of professional experience in human resources. Prior to joining Unicorn Malaysia, Lai Kuan was a HR Generalist with Citibank Berhad. As a strategic business partner, she has contributed to the achievement of the business units and has created significant trust and credible working relationship with the management team. Lai Kuan started her career in human resources with Public Finance Berhad in She moved on to a managerial position at the Bank of China Malaysia Berhad. Subsequently, Lai Kuan joined Frost & Sullivan, a multi-national growth consulting company as a Senior Manager. She handled a full spectrum of human resources activities and contributed to the successful set up of new offices in Indonesia, Thailand and Vietnam. Lai Kuan has a Bachelor s Degree in Business Administration from University Putra Malaysia and a Certificate in Human Resources from the Malaysian Institute of Human Resource Management. 14 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

17 Business Lines Investment Banking Unicorn Malaysia s ability to originate, structure, execute and place innovative debt instruments and securitization transactions leaves the Bank s Investment Banking Division well placed to take advantage of the growing demand by both issuers and investors for Shari ah-compliant capital market products. The division caters to both corporate and sovereign clients, providing capital markets financing and advisory services, including access to the global capital markets (primarily through the structuring, arranging and issuance of Sukuks); structured finance; asset securitization; and client rating advisory services. The division also provides strategic advisory services encompassing valuations, business plans, restructuring and project advisory. Corporate Banking Through its Corporate Banking division, Unicorn Malaysia provides innovative advice to the Bank s clients, with an emphasis on delivering successful solutions tailored to meet each client s specific requirements. The division leverages the Bank s collective experience and expertise as well as its in-depth knowledge of local and regional market conditions to assist clients in meeting their financing needs. The Corporate Banking division also manages financing portfolios and client relationships. In addition, it provides strategic advisory services on a broad array of financing and fund raising strategies encompassing direct financing, club deals and syndicated financing. Treasury The Treasury division plays a key role in managing the Bank s liquidity requirements and funding needs. The Treasury division is a profit centre in itself, optimizing returns on the Bank s investments through various measures which involve matching both risk profile and level of returns. In addition, Treasury also interacts closely with corporate clients in sourcing funding needs and meeting clients expectations on the rate of return through product innovations and enhancements. This includes the structuring of Shari ah-compliant investment products which allow clients to efficiently manage their liquidity. ANNUAL REPORT

18 Organization Chart by Functions Shari ah Committee Board of Directors Audit & Risk Management Committee Executive Committee Chief Executive Officer Deputy Chief Executive Officer Shari ah Coordinator, Shari ah Bahrain Credit Management & Global Market Risk Internal Audit Treasury Credit Evaluation Money Market Credit Support Foreign Exchange Credit Risk Fixed Income Market Risk Operations Risk 16 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

19 Company Secretary Nomination & Remuneration Committee Capital Markets Compliance/ Legal Finance Operations Information Technology Human Resources & Administration Corporate Banking ANNUAL REPORT

20 CEO s Message Overview of 2010 In December 2007, Unicorn International Islamic Bank Malaysia Berhad ( Unicorn Malaysia or the Bank ) became the first foreign Islamic bank to be licensed to conduct a full range of non-malaysia Ringgit banking activities under the Malaysia International Islamic Financial Centre (MIFC) initiative, which aims to promote Malaysia as a major hub for international Islamic finance. The Bank originally focused on investment banking as its initial strategy, aimed at complementing the Unicorn Group s operations in Bahrain and promoting cooperation between the Gulf Cooperation Council ( GCC ) region and Malaysia in the area of Islamic finance. 18 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

21 Having been operational for three years, the Bank has actively been taking steps toward strengthening its presence in Malaysia by increasing its paid-up capital via a non-renounceable rights issue to US$24 million, over and above the minimum capital of RM10 million (US$3.3 million) required by Bank Negara Malaysia. We are committed to increasing our share capital further to support the Bank s business growth needs. The Bank has also put in place its key organizational structure and has identified the remaining resources required to continue to strengthen our operating capabilities. Operational Achievements During the year, Unicorn Malaysia s income grew to US$8.4 million and the Bank recorded total assets of US$159.2 million, whilst improving its net profit by 100% to US$1 million. The Bank s financing increased to US$58.7 million from US$28.5 million in Treasury and Corporate Banking were the key drivers of the Bank s business in In Treasury, Unicorn Malaysia was the first institution to obtain approval from Bank Negara Malaysia for our Wakala Deposit and Restricted Wakala Deposit products and successfully introduced these to the market. The Bank also signed Malaysia s standardized Commodity Murabaha Master Agreement and Master Wakala Agreement along with 22 other banks in Malaysia. These agreements are intended to promote uniformity and operating efficiencies within the Islamic banking sector. Strategic Direction and Prospects In order to reinforce the Bank s commitment to further broaden and deepen its presence locally, we have developed a new 5 Year Business and Financial Plan based on two key drivers, namely the value propositions that continue to exist in the Malaysian Islamic financial services market space and the changing imperatives for investment banking business. We have also rationalized our strategic objectives which encompass all the Bank s business lines: firstly, to have a balanced mix and emphasis on business lines according to the Bank s growth stage; secondly, to extend business capabilities and diversify funding sources; thirdly, to operate as a regional hub for the Unicorn Group; and lastly, to maintain innovative product capabilities. We have also taken concrete measures to strengthen our Corporate Governance and Risk framework. This includes the adoption of a revamped Group Risk Management Framework establishing the Unicorn Group s risk management standards, processes and structures, and defining the Group s risk philosophy. We are confident that with the newly developed 5 Year Business and Financial Plan, and with Allah s grace, the Bank will be able to achieve its aspirations going forward. Appreciation On behalf of the Bank, we would like to record our appreciation to the Management of our parent bank, Unicorn Investment Bank B.S.C. (c), for their continuous support; to Bank Negara Malaysia and the MIFC for their invaluable guidance; to our clients for their confidence in the Bank; and last but not least, to the staff of Unicorn Malaysia who worked tirelessly to make the Bank profitable and who have been instrumental in the achievements recorded by the Bank to date. We look forward to the coming year with enthusiasm for the opportunities ahead. Ikbal Daredia Chief Executive Officer ANNUAL REPORT

22 Corporate Governance and Compliance Unicorn Malaysia strives to achieve and maintain the highest standards of ethical conduct in full compliance with the Malaysian Banking rules and regulations, which comprise trustworthiness, transparency and accountability of the Bank s business practices. The Bank is committed to applying the highest level of corporate governance practices at all times, which exceeds meeting all minimal legal and regulatory governance requirements. The Bank sees good corporate governance as means to facilitate the Bank s ability to ascertain and attain its corporate objectives, in addition to being an end to itself. This enables the Management to become accountable to the Board and the Board to its owners and other stakeholders. The Board has adopted its own Corporate Governance Charter, which provides the authority and practices for the Bank s corporate governance, along with the Bank s Articles and Memorandum of Association and also the charters of certain Board committees. The Bank s guiding principles of good corporate governance are: Fairness, in terms of treating its minority shareholders, investors and other stakeholders, and taking their interests into account. Transparency and Timeliness in disclosure of all relevant banking information to its stakeholders. Accountability of Management towards the Board, and likewise, the Board toward its stakeholders, for the planning and implementation of policies that ensure the safeguarding of the Bank s assets and liabilities at all times. Responsibility, in terms of having clear lines of delegation of authority within decisions and actions that require Board or shareholder approval. 20 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

23 The Board provides leadership and direction to the Bank, in addition to establishing its objectives and approving its operational strategies for attaining these objectives. The Board is responsible for effective governance over the affairs of the Bank, as well as maintaining an adequate balance between the interests of its diverse constituencies around the world, which include its clients, employees, suppliers and local communities. The Directors are expected to exercise reasonable judgement in ensuring all actions taken by the Board are in the best interests of the Bank. They may rely on the honesty and professional integrity of the Bank s senior executives and its outside advisors and auditors, in so doing. The CEO has primary responsibility toward implementing Board decisions, and thus represents the Board in terms of communicating with the Management. The Board is required to fulfil the following responsibilities: Reviewing and approving strategies, business plans and significant policies, as well as monitoring of Management s performance when implementing them; Setting corporate values and clear lines of responsibility and accountability that are communicated well throughout the organization; Ensuring competent management; Ensuring Islamic banking operations are conducted prudently, and within the framework of relevant laws and policies; Ensuring the establishment of comprehensive risk management policies, processes and infrastructure for the management of the Bank s various types of risks; Ensuring Shari ah compliance in all aspects of operations, products and activities via the institution of comprehensive policies, procedures and infrastructure that support the same; Ensuring the set up of an effective internal audit department that performs various internal audit functions, covering the financial, management and Shari ah audit, while ensuring the department is staffed with qualified internal audit personnel; Establishing procedures to avoid self-serving practices and conflicts of interest, including dealings of any form with related entities; Ensuring protection of the interests of depositors, particularly investment account holders; Establishing and ensuring the effective functioning of various Board Committees; Ensuring the Bank has a beneficial influence toward the economic well-being of its community; Discussing, evaluating and providing input on strategies and policies to suit the local environment; and Deliberating and approving major issues and decisions. In summary, the Board is held accountable for the affairs and performance of the Bank. In so doing, it establishes the Bank s objectives, develops strategies to meet these objectives, and oversees the implementation of these strategies. Board Committees The Executive Committee, the Audit Committee & Risk Management Committee and the Nomination & Remuneration Committee are standing committees of the Board. At the Nomination & Remuneration Committee s recommendation, the Board: Appoints Committee members, after consulting the individual Directors; Rotates Committee Chairpersons and members. ANNUAL REPORT

24 Corporate Governance and Compliance Each Committee has its own written charter that complies with the applicable corporate governance rules, and other applicable laws and regulations. The written charter sets clarity to the following aspects of the Committee: Its mission and responsibilities; Qualification requirements for Committee members; Procedures for the appointment and removal of Committee members; and The Committee s structure, operations and reporting to the Board. The Chairman of the Board and the Chief Executive Officer (CEO) are not allowed to become Committee members. The appointments within the Committee are for a period of up to three (3) years, which may be extended for another two (2) further three (3)-year periods, so long as the Director remains independent. Nomination & Remuneration Committee The Committee comprises of: Only Non-Executive Directors; preferably Independent Directors; Not less than three (3) members. Audit & Risk Management Committee As a standing Committee of the Board, the Audit & Risk Management Committee s objective is to assist the Board in fulfilling its oversight of responsibility pertaining to: The integrity of the Bank s financial statements and financial reporting processes; as well as the Bank s systems of internal accounting and financial control; The appointment of an internal auditor, and the regular review of the internal audit function; The annual independent audit of the Bank s financial statements, the engagement of the external auditors, and the evaluation of the external auditors qualifications, independence and performance; The Bank s compliance with legal and regulatory requirements, including the Bank s disclosure controls and procedures; and Compliance with the Bank s code of conduct. The Committee comprises of: Only Non-Executive Directors; Not less than three (3) members; The Chairman of the Committee should be a Non- Executive, Independent Director. The Chairman of the Board may chair the Nomination & Remuneration Committee, except when the Committee is dealing with the appointment of the Board Chairmanship s successor. The Nomination & Remuneration Committee has the following responsibilities: Identifying qualified individuals for Board membership; Recommending the Director Nominees for the next Annual General Meeting (AGM) to the Board; Leading the Board in its annual review of its performance; Recommending to the Board candidates for each Committee for appointment by the Board; Taking a leadership role in shaping corporate governance policies and practices, including the Corporate Governance Charter applicable to the Bank, and monitoring Management s compliance with the Charter and policies; Evaluating the skills and expertise of the Directors and recommending the relevant training accordingly; A majority of Independent Directors. 22 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

25 Devising, with the CEO, the succession plan for the Board and Senior Management, specifically that of the Chief Executive Officer (CEO), Chief Operating Officer (COO) and Chief Financial Officer (CFO); Considering the CEO s recommendations on Senior Management s remuneration, and the Chairman s recommendation on the CEO s remuneration; and presenting these to the Board for approval; Recommending the form and amount of Director s compensation to the Board for approval at the Bank s Annual General Meeting (AGM); and Approving the remuneration policy and special compensation plans across the Bank, including annual bonus schemes, share option plans and staff saving schemes. Executive Committee The standing Committee of the Board becomes the Executive Committee of the Bank. The Committee plays a primary role in considering specific matters delegated to it by the full Board and making recommendations thereon to the Board, or making decisions based on authorities specifically delegated by the Board. The Nomination & Remuneration Committee reviews the Executive Committee s responsibilities and authority on an annual basis. The Executive Committee assists the Board in the following matters: Setting up annual budgets on operational expenditure and capital expenditure, as well as setting up of annual profit targets; and Reviewing Unicorn Malaysia s business performance and efficiencies. The Committee comprises of: Not less than four (4) Directors; At least three (3) Non-Executive Directors. The Board appoints members of the Committee, and may also remove them on recommendation of the Nomination & Remuneration Committee. Shari ah Supervisory Board The Bank relies on its Head Office s Shari ah Supervisory Board for guidance and advice on ensuring consistency throughout the entire Group. A seven (7) scholar Shari ah Supervisory Board is in place to provide Islamic advice and guidance, in ensuring that all of the Group s activities comply with Shari ah law. The Shari ah Supervisory Board s members are prominent Islamic scholars, who are also well-versed in international finance. They hold proven track-records in the implementation of rules and principles within Islamic banks, as well as in product development and Islamic finance structuring techniques. The Shari ah Supervisory Board is proactively involved in all product development and investment decisions relating to transactions. It also ensures all underlying contractual documentation is only finalized after obtaining the approval of the Assurance Department, which is under its direct oversight. The Shari ah Supervisory Board sets out Islamic opinions (Fatwas) which are required for approval of the structures of each financial transaction, service or investment product. The Group s Shari ah Assurance division works closely with the Shari ah Supervisory Board in developing and pre-screening every business proposition. The Assurance division also has a vital role in ensuring that the Fatwas of the Shari ah Supervisory Board are consistently applied. ANNUAL REPORT

26 Corporate Governance and Compliance Management Executive Committee The Management Executive Committee is the Bank s Management forum for major operational decisions. It serves as the Management s principal decision making body that oversees the overall direction and operations of the Bank. Credit Committee The Credit Committee s role is to act as the Bank s credit approving authority. It takes responsibility for overseeing the management and performance of the Bank s credit related transactions, in accordance with the Bank s guidelines and Credit Policy. Asset & Liability Committee The Asset & Liability Committee takes responsibility in managing the asset and liability structure, liquidity and funding strategy of the Bank, which involves monitoring and reviewing the Bank s overall financial risks, including liquidity risks, market risks and counterparty risks. The Committee also performs all such actions and activities as may be referred to it from time to time by the Board of the Bank. The Committee also ensures that appropriate strategies are in place for the effective management of the Bank s assets, liabilities and capital. IT Steering Committee The IT Steering Committee plays a primary role in providing IT direction to the Bank in terms of reviewing the Bank s IT strategy plans on an on-going basis, in order to ensure that these plans are consistent with the overall corporate direction of the Bank. The Committee also reviews new technology vendors and provides approval for them. It also monitors any major business initiative that may impact the Bank s IT systems. Post-Implementation Systems Reviews and IT Effectiveness Assessments that are independent of the IT department, are presented to the Steering Committee, along with findings and recommendations of the reviews, with response from the IT department. 24 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA

27 Risk Management Risk is an inherent part of the Group s business activities. The Group s risk management and governance framework is intended to provide progressive controls and continuous management of the major risks involved in the Group s activities. Risks are managed by a process of identification, measurement and monitoring, subject to risk limits and other controls. The process of risk management is critical to the Group s continuing profitability and each business unit within the Group is accountable for the risk exposures relating to their responsibilities. The Group is exposed to investment and credit risk, market risk, liquidity risk and operational risks, as well as concentration risk, reputation risk and other external business risks. The Group s ability to properly identify, measure, monitor, report and actively manage risks is a core element of the Group s operating philosophy and profitability. Risk identification: The Group s exposure to risk through its business activities, including investment in private equity, asset management, strategic mergers & acquisitions, corporate finance and lending as well as capital markets, is identified through the Group s risk management infrastructure. In 2010, the Risk Management infrastructure and governance model was significantly enhanced by the setup of specific risk management units for the handling of all risk policies, processes and infrastructures; the analysis of credit, investment and counterparty risk; as well as the monitoring and controlling of exposures on a global basis. Furthermore, local risk teams have been strengthened. This process continues through expansion of the Group s Risk Management infrastructure. Risk measurement: The Group measures risk using basic risk management position methodologies which reflect the Group s investment risks, foreign exchange and profit rate exposure risks. Risk monitoring: The Group s risk management policies and procedures incorporate risk appetite statements, converted to a range of limits appropriate to the Group s business model. Key areas of the Group s activities are subject to monitoring limits which are regularly reviewed. ANNUAL REPORT

28 Risk Management Risk reporting: The Group undertakes reporting of all core risks relevant to its businesses on a consolidated basis. The information is reported to the Group Asset and Liability Committee ( ALCO ) and the Group Risk Executive Committee ( REXCO ) on a regular basis. During 2010, the Bank revised the Risk Management Framework which resulted in the strengthening of the Bank s risk structure, whereby its Credit Risk and Market Risk functions were incorporated into the Unicorn Group s risk structures. These changes have allowed the Group REXCO to have oversight over the Bank s activity and facilitate the implementation of group level risk policies such as the Group Credit Policy and the Group Large Exposure Policy. Group Risk Framework and Governance The Board of Directors is ultimately accountable for the risk management of the Group. The Board has advocated a wholly integrated risk management process within the Group, in which all business activities are aligned to the risk framework. The Bank and the Unicorn Group as a whole have witnessed tremendous growth in operations and geographic footprint since its formative years, and arising from this growth is the need to adopt a harmonised Group risk architecture and framework. In 2010 the Board approved a revamped Group Risk Management Framework which establishes the Group risk governance framework covering critical Unicorn entities. The Group Risk Framework establishes Group risk management standards, risk processes, structures, and defines the Bank s risk philosophy. The Board has approved a number of supporting risk policies designed to support the framework as well as Basel II compliance efforts. The year 2010 saw the establishment of the Risk Committee based in Bahrain as the Unicorn Group Risk Executive Committee to act as the senior management Group risk oversight authority with all subsidiary Risk and Credit Committees having a reporting line to REXCO. The establishment of REXCO is designed to support effective Group risk oversight and governance across the Group through ensuring harmonization of Group risk standards, policies and reporting processes. The redesigning of the Group Risk Framework and architecture has brought Unicorn in compliance with the group risk governance recommendations of the Basel Committee on Bank Supervision ( BCBS ) in its Principles for Enhancing Corporate Governance guidelines for banking entities issued in October Board of Directors Oversight of Risk Management The Board of Directors is responsible for defining the Group s risk appetite within which it manages its risk exposures and reviews the Group s compliance with delegated risk authorities. As part of the newly established Group Risk Framework, the Audit Committee of the Board took on the additional responsibility for risk management oversight and the committee is now a key part of the risk governance framework and receives periodic Group-wide risk reports from the Chief Risk Officer. To ensure the independence of the Risk Management Function, the Chief Risk Officer ( CRO ) reports functionally to the Board and administratively to the Chief Executive Officer. Internal Audit & Independent Review All key operational, financial and risk management processes are audited by Internal Audit according to risk based auditing standards. Internal Audit examines the strategies of the Group, the adequacy of the relevant policies and procedures and the Group s compliance with internal policies and regulatory guidelines. Internal Audit discusses the result of all assessments with Management and reports its findings and recommendations to the Audit Committee. The Internal Audit recommendations are tracked for resolution via the Committee. 26 UNICORN INTERNATIONAL ISLAMIC BANK MALAYSIA