milestones and overview leadership perspectives achievements

FoCUs MALAYsIA29 AUGUst – 4 sePteMBeR 2015

FoCUs MALAYsIA26 MARCH – 1 APRIL 2016


FoCUs MALAYsIA26 DeCeMBeR 2015 – 1 JAnUARY 2016




26

Overview Leadership Perspectives

BIMB HOLDINGS BERHAD Annual Report 2015

Milestones and Achievements

MeDIAHIGHLIGHts

UtUsAn MALAYsIA13 JAnUARY 2015

BeRItA HARIAn7 JULY 2015

BeRItA HARIAn1 DeCeMBeR 2015

UtUsAn MALAYsIA12 JUne 2015

HARIAn MetRo4 AUGUst 2015

BeRItA HARIAn13 noVeMBeR 2015

tHe sUn6 MARCH 2015

MALAYsIAn ReseRVe6 noVeMBeR 2015

BeRItA HARIAn2 JUne 2015

UtUsAn MALAYsIA29 JULY 2015

BeRItA HARIAn4 JULY 2015

BeRItA MInGGU28 JUne 2015

KosMo21 oCtoBeR 2015

27

Accountability Financial StatementsShareholders Information

19th AGM Information


MeDIAHIGHLIGHts

FoCUs MALAYsIA25 – 31 JULY 2015



sMARtInVestoRAPRIL 2015

tHe BUsY WeeKLYJAnUARY 2015

UtUsAn MALAYsIA4 JULY 2015neW stRAIts tIMes

12 JUne 2015

DAILY eXPRess (KK)5 AUGUst 2015

KosMo16 JUne 2015

28





neW stRAIts tIMes15 MAY 2015

sIn CHeW DAILY4 JULY 2015



tHe stAR4 JULY 2015

tHe stAR13 MAY 2015

neW stRAIts tIMes3 JAnUARY 2015

tHe sUn7 JULY 2015

BoRneo Post (KK)16 DeCeMBeR 2015

UtUsAn sARAWAK5 AUGUst 2015

MALAY MAIL12 AUGUst 2015

KosMo7 JULY 2015

MALAYsIAn ReseRVe16 oCtoBeR 2015

sMARt InVestoR9 JULY 2015

KosMo16 JUne 2015

29




AWARDS & ACCOLADESOF THE GROUP

BAnK IsLAM MALAYsIA BeRHAD

• “IslamicBankoftheYear”AsiabyTheEuropean Global Banking & Finance Awards 2015

• StrongestIslamicRetailBankinMalaysia by Islamic Retail Banking Awards 2015 (Cambridge IF Analytica)

• BestIslamicBankMalaysiabyTheInternational Banker Asia & Australasia Banking Awards 2015

• BestIslamicBank–Malaysia&Award for Excellence in Shariah Compliant Banking by Wealth & Finance International 2015 Finance Awards

sYARIKAt tAKAFUL MALAYsIA BeRHAD

• BestTakafulCompanyinMalaysiaattheInternational Takaful Awards 2015 held at The Savoy Hotel, London on 17 February 2015

oUR sUBsIDIARIes ContInUeD to ReAP tHe ReWARDs oF oUR ReLentLess eFFoRts toWARDs ContInUoUs IMPRoVeMent In 2015.

30




31




SUSTAININGS�TRENGTHS�

Exceptional human capital resources with unwavering adherence

to Shariah principles are the key drivers of our strengths in every

market we serve. We place utmost importance on investing in the

capability and skills of our people.

TOTAL: RM7.5 BILLION

TOTAL ASSET SIZE

5.0%

the FIRST & ONLY listedTakafulOperatorinMalaysia

TakafulMalaysiaopened3newTakaful

myCare centres now 23 service centres nationwide

Named the Best Takaful Company in MALAYSIAfor three consecutive years at the International TakafulAwards2013-2015

Awarded the Best Performing Stock-Highest Returns to Shareholders over Three Years under the FinanceSectorattheEdgeBillionRinggitClubCorporateAwards2013

Takaful Malaysia

LETTER TOSHAREHOLDERS

As the only Islamic Financial Holding Company in the country, we acknowledge an even greater responsibility to create a new benchmark in governance in the area of Islamic finance.

Tan Sri Samsudin OsmanChairman

PROFIT BEFORE ZAKAT AND TAX

RM834.44MILLION

+2.34%

34 BIMB HOLDINGS BERHAD Annual Report 2015

Overview LeadershipMilestones and Achievements Perspectives

DEAR SHAREHOLDERS,

The year 2015 was challenging on several fronts, with global headwinds impacting financial markets the world over, causing greater upheaval in emerging economies as opposed to developed ones. Within this volatile environment, however, Islamic finance continued to sustain its growth momentum.

In Malaysia, the sector has entered a new, more dynamic phase in its ongoing evolution. 2015 saw the execution of a deposit transition plan under which the funding of Islamic banks is being classified as either deposit or investment accounts. This gives Islamic finance a new dimension and value proposition, transforming Islamic banking from a credit intermediary into an investment intermediary.

It gives me great pleasure to share that BIMB Holdings Berhad (“BHB” or “the Group”) has not been just a passive beneficiary of this transformation. Through our subsidiaries, we are playing an integral role in driving the sector as it gears up to participate more actively in the real economy.

As a financial holding company (“FHC”), BHB has further strengthened our Group risk management and adopted a more proactive role in our capital management in order to minimise contagion risk between our operating units. We have also beefed up our resources and will invest in our infrastructure in anticipation of the new requirements for FHC under Bank Negara Malaysia’s (“BNM”) regulatory framework. As an FHC, we have in place a robust capital management plan to comply with the minimum regulatory capital requirement by 2018 as stipulated under the Islamic Financial Services Act (“IFSA”) 2013. We believe that such a robust risk management infrastructure would create long-term and sustainable shareholder value, a fundamental measure of our success. The practice of sound risk management will drive our ability to sustain our organic growth momentum as well as solidify our market position as a flag bearer of Shariah-compliant institutions.

35





Our strong franchise as Malaysia’s premier Shariah compliant financial group that promotes ethical and responsible financial solutions will provide us an avenue for stronger revenue, sustainable profitability, greater capital velocity and a corresponding return on capital. BHB has been supportive of and will continue to support the capital plans of our subsidiaries as well as efforts to develop their footprint and expand their branch networks by leveraging our customer base and aggressive promotion of our brand and investment in infrastructure to establish an enduring Islamic finance franchise.

Our continued success will be largely affected by our ability to attract and retain highly motivated employees. As the Islamic financial landscape continues to evolve, we require a new mindset, enhanced competencies and greater understanding of Shariah principles. We are therefore committed to investing in our people and developing their careers as professional Islamic finance executives. We are fortunate to have a team of senior management and employees who are dedicated and passionate about exploring new ideas to drive Islamic finance to the next level.

Notwithstanding the challenging economic environment, stringent regulatory requirements and stiff competition, BHB has once again pulled in a very encouraging performance for the year ended 31 December 2015. I take great pleasure in presenting a snapshot of our achievements over this period.

CREATING VALUE FOR SHAREHOLDERS AND FUTURE INVESTORS

Alhamdulillah, as a result of strong performances by our core businesses, BHB has once again produced an encouraging financial scorecard, recording a 2.34% increase in profit before zakat and tax (“PBZT”) year-on-year to RM834.44 million.

In line with the increase in PBZT, our net profit attributable to shareholders grew 2.81% to RM547.28 million. During the year, BHB embarked on a dividend reinvestment plan as part of our proactive capital management, which drew strong support from our shareholders. We attracted a subscription rate of 82.67%, which enabled the issuance of 48,703,800 new shares on 13 January 2015 to help the Group satisfy our capital adequacy requirement. Earnings per share of 35.53 sen for the financial year under review was only marginally lower than the 35.64 sen recorded in the previous year. BHB also recorded a return on equity of 24.2% with a return on assets of 1.5%.

BHB’s performance overall was very competitive compared with other stocks on Bursa Malaysia. The Group was in fact named the best performing stock on Bursa Malaysia by the weekly publication, Focus Malaysia, based on our full-year net profit in 2014, and nine-month net profit up to September in 2015.

The Board on 30 November 2015 was pleased to declare an interim single tier dividend of 12.20 sen per ordinary share amounting to RM188.2 million for the financial year 2015. From the total dividend, approximately 16.3%, or RM30.7 million, was distributed in cash on 22 January 2016 while the remaining 83.7%, amounting to RM157.5 million, was reinvested to subscribe for 46,469,480 new ordinary shares of RM1.00 each at an issue price of RM3.39 each via the dividend reinvestment plan.

PROFIT BEFORE ZAKAT AND TAXATION

SHAREHOLDERS’ EQUITY

EARNINGS PER SHARE

REVENUE

2015

RM834.44MILLION

2015

RM3,413,66MILLION

2015

35.53 SEN

2015

RM3,310,61MILLION

2014

RM815.38MILLION

2014

RM2,949,04MILLION

2014

35.64 SEN

2014

RM2,967,47MILLION

36

Overview LeadershipMilestones and Achievements


Perspectives

GROWTH IN UNCERTAIN TIMES

In Malaysia, despite the drop in oil prices, geopolitical tensions in the Middle East, slowdown in China as well as weakening currencies, gross domestic product (“GDP”) grew at a respectable 5%. Consumer sentiment was, however, dampened by various factors including the introduction of the Goods and Services Tax (“GST”) effective 1 April 2015, leading to more prudent financial decisions. These factors necessarily affected the banking industry, which saw a contraction in household and personal financing. In response, our banking arm, Bank Islam Malaysia Berhad (“Bank Islam“ or “the Bank”), has continued to maintain a high degree of vigilance and enhanced its underwriting criteria not only to adhere to the responsible financing guidelines by BNM but also to ensure a healthy credit portfolio.

Banks were further impacted by the Basel III requirement of minimum liquidity coverage ratio (“LCR“) in order to manage the industry’s liquidity risk. As part of this new requirement introduced in April 2015, the industry was required to have a minimum of 60% LCR as of 1 June 2015, and to increase this gradually to 100% by 2019. From the time the requirement was made known in the third quarter of 2014, competition for deposits intensified, pushing up the cost of funding and further compressing the net income margin (“NIM”) which was already under considerable pressure.

Following the implementation of the IFSA 2013, Islamic banks have for the first time introduced investment accounts, through which they are able to offer consumers returns commensurate with the risk taken. These investment accounts also enable Islamic banks to provide financing for new growth areas such as innovative greenfield businesses, creating a triple-win situation: helping to grow fledgling enterprises; enabling investors wishing to finance such companies; as well as attracting banks’ participation in non-traditional sectors.

Bank Islam was among the first to introduce investment accounts that comply with the guidelines under IFSA. In April 2015, it created a Restricted Investment Account (“RIA”) for Lembaga Tabung Haji (“LTH”), dedicated to developing Muslim Bumiputra entrepreneurs in the Small Medium Enterprises (“SME”) sector. The Bank was also one of the four founding Islamic banks to form a consortium to market investment accounts via the Investment Account Platform (“IAP”), a brainchild of BNM. This is the first time Islamic banks in Malaysia are collaborating in such a manner and we feel honoured to be part of the efforts to support such an important sector of the nation’s economic machinery.

It is widely acknowledged that the future of Islamic banking lies in its ability to innovate and tap into opportunities in the broader economic realm. Investment accounts will be a catalyst to such innovation. The IAP promotes economies of scale and reduces the initial investment costs for Islamic banks to embark into a new business line, which in this case is the offering of investment account products through a shared platform. As a centralised platform, IAP offers wider choices for investors in terms of servicing financial institutions (sponsoring banks) and the selection of ventures to invest in. This can lead towards achieving critical mass of potential investors via a wider outreach, beyond the existing customer base of individual banks. It also expands the offerings of Islamic banks beyond traditional banking business.

In the takaful sector, Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”), along with other composite Islamic insurance providers in the country, is working towards separating its family and general business to meet the 2018 deadline imposed by BNM. As its holding company, BHB is working with our subsidiary to achieve the most tax-efficient structure for the required demarcation. We are also supporting Takaful Malaysia as it keeps a firm eye on its capital adequacy to meet BNM’s Risk Based Capital for Takaful (“RBCT”) Framework, which was effective since 1 January 2014. Despite the challenges it poses, we welcome the RBCT as it places Takaful Malaysia on an equal footing with conventional players, empowering the company to take its rightful position in the insurance market alongside more established counterparts. We feel confident, moreover, that in adhering to this regulatory requirement, Takaful Malaysia will strengthen its fundamentals to better serve its customers over the long term.

37





The Group remains committed to providing attractive returns to our much valued shareholders, and has assigned specific roles and responsibilities to each Group committee to harness business synergies and optimise the Group’s resources.

BHB AS AN ISLAMIC FINANCIAL HOLDING COMPANY

Since becoming the first, and to date the only, Islamic FHC approved by BNM on 2 December 2014, BHB has been making conscientious efforts to fulfil our newly acquired obligations. These include satisfying the same capital adequacy requirements that are imposed on banks under IFSA, with a 2019 deadline.

On 21 May 2014, BNM issued an approach to regulate financial groups which requires BHB to enhance our resources and infrastructure to discharge our duty. The regulatory and supervisory framework strengthens BHB’s oversight of our subsidiaries such that material risks from activities undertaken are effectively managed and controlled on a group-wide basis, and do not undermine the safety and soundness of licensed institutions within the Group. In order to avoid duplication in the infrastructure, some key management from Bank Islam have been brought over to BHB to undertake Group functions.

Under the new framework, BHB plays a more involved and integral role in our core businesses with regard to prudential requirements including capital management, risk management and governance. Accordingly, a Group Risk Management Committee (“GRMC”) has been established to identify inherent and emerging risks, to set our tolerance levels for each of the operating businesses, and develop a framework to compute and aggregate risk exposures across the Group, ensuring they are within accepted parameters.

We have also set up a Group Management Committee (“GMC”) and Inter-group Business Working Committee to drive greater synergies across the organisation as well as preserve and enhance our stakeholders’ value. In addition, we are exploring avenues to cross-market and sell the products and services of our individual core businesses – targeting high net worth clients, corporate clients and commercial clients – so as to gain a bigger share of each market.

Together, our initiatives to fulfil our regulatory obligations and to leverage on our existing resources serve to deliver greater shareholder value. The Group remains committed to providing attractive returns to our much valued shareholders, and has assigned specific roles and responsibilities to each Group committee to harness business synergies and optimise the Group’s resources. The Board itself has overall responsibility for achieving the outcomes we have outlined as we strive to sustain organic growth through strengthened fundamentals.

38



Perspectives

STRENGTHENING OUR ISLAMIC BANKING ARM

The year under review saw Bank Islam complete its Hijrah to Excellence (“H2E”) programme, a strategic blueprint developed to build the Bank at its core over a three-year period from 2013 to 2015. H2E focused on six main pillars, namely robust organic growth, service excellence, Shariah-led innovation, resource optimisation, being an employer of choice and regionalisation.

Given that H2E was developed in 2012, prior to the implementation of IFSA, certain targets had to be modified over the course of the three years as the Bank prioritised adapting to the new regulatory regime. Asset growth, for example, was consciously scaled down to right-size its value chain. Profit growth, meanwhile, has been impacted by the current economic condition. Yet, I am pleased to share, the Bank continued to present encouraging performances throughout the H2E years, in some instances outperforming the industry.

In 2015, too, its performance overall was highly commendable. Despite the challenging environment, Bank Islam achieved a PBZT of RM685.7 million for the year. This came on the back of various positive parameters. The Bank achieved net financing growth of 16.1%, mainly from its consumer financing portfolio, as compared with the industry figure of 7.9%. Its total assets growth also surpassed that of the industry, at 8.6% as opposed to 6.1%. While increasing its financing portfolio,

HIJRAH TO EXCELLENCE

(“H2E”)

robust organic growth

resource optimisation

being an employer of

choice

regionalisationservice

excellence

Shariah-led innovation

the Bank managed to keep its impaired financing at a low of 1.09%, marking a further reduction from 1.14% achieved in 2014, and resulting in its being one of the best performers in terms of asset quality industry-wide. This forms part of the Bank’s overarching commitment to responsible banking, prudent risk taking and adherence to Shariah principles that discourage over-leveraging.

Despite the stiff competition for deposits, Bank Islam managed to increase its customer deposits by 6.3% – from RM41 billion to RM43.7 billion – which was much higher than the deposit growth of 1.8% industry-wide. Current Account and Saving Account (“CASA”) made up 35.1% of total deposits (better than the industry’s 25.6%). At the same time, concerted efforts to achieve a healthy financing to deposit ratio led to this key indicator increasing to 79%, surpassing the H2E target of 75%.

In efforts to cultivate a more customer-oriented culture, various enhancements have been made. The Bank has improved its delivery touch point by upgrading its ATMs and relocating some of the machines to more strategic sites while improving the cash replenishment mechanism to minimise cash outages and service disruptions. The Bank is also continuing to expand its network for easier accessibility. It secured seven new branch licences during the year and opened five new outlets. Bank Islam has also installed 228 Customer Satisfaction Rating Systems (“CSRS”) which allows service issues to be detected and immediately resolved.

NET FINANCING GROWTH

BANK ISLAM

16.1%INDUSTRY

7.9%

TOTAL ASSETS GROWTH

BANK ISLAM

8.6%INDUSTRY

6.1%

CUSTOMER DEPOSITS

BANK ISLAM

6.3%INDUSTRY

1.8%

CASA

BANK ISLAM

35.1%INDUSTRY

25.6%

39





Additionally, Bank Islam is providing a suite of products and services to support a cashless society. These include the launch of JomPay to drive e-payment initiatives; issuance of UniDebit Card catering to students, faculty and management of five local universities; digitalising the process of account opening, which reduces customers’ waiting time; enabling voucher encashment and implementing MudahZakat, a facility for zakat (tithes) payment via various touch points. During the year, the Bank further enhanced its internet banking services, resulting in a doubling of Internet Banking users and 48% growth in the volume of online transactions.

The management has made a deliberate decision to defer its regionalisation plan taking into account weakening of the Ringgit and economic uncertainties. However, with the establishment of the ASEAN Banking Integrated Framework, Bank Islam has expressed keen interest in attaining Qualified Bank (“QB”) status, which is to be offered to two banks and which would enable it to set up operations within the region while enjoying certain regulatory privileges.

The Bank’s leadership in Shariah innovation is well documented. Bank Islam has over the years pioneered several firsts in Islamic banking, and continues to lead in the creation of a more vibrant, dynamic and relevant ecosystem. During the year, it launched the country’s first investment accounts, which include the Un-Restricted Investment Account (“URIA”) and the aforementioned RIA. URIA was developed based on the principle of providing a stable return to the IA account holders while minimising their risks through collateralised underlying assets. Under RIA, the investor dictates the underwriting criteria as well as pricing to be charged to customers. The first RIA, rolled out in June 2015, is based on the Wakalah concept whereby Bank Islam effectively serves as a mediator to fund a viable project guided by criteria set by the investors. The Bank has no rights or obligations in respect of the assets related to the RIA except for the incentive fee generated from managing the funds. The programme requires strict adherence to the mandate and criteria approved by LTH. The Bank also introduced the first Term and Transactional Investment Account to the industry under the Mudarabah and Wakalah concept. This saw the Al-Awfar account re-designed to comply with the new terms and guidelines of the investment account products.

While the Al-Awfar is targeted at retail investment account holders, the Bank has introduced Waheed-i for corporate customers, based on Wakalah, as well as the Special Investment Account (“SIA”), under the concept of Mudarabah. Al-Awfar account holders will continue to enjoy the chance to win monthly and quarterly prizes as well as the RM1 million cash prize offered during the annual campaign.

PROFIT BEFORE ZAKAT AND TAX

RM685.7MILLION

40



Perspectives

The Bank was also one of the four founding Islamic banks to form a consortium to market investment accounts via the Investment Account Platform (“IAP”), a brainchild of BNM.

For the Mudarabah account, profits will be distributed upon maturity based on a profit-sharing ratio mutually agreed by the investor and the Bank, and depending on the performance of the underlying assets. Wakalah account holders will receive a predetermined profit rate except when the fund underperforms, in which case the account holder will receive the actual rate of return. Investors will be provided with risk management controls over their portfolios and operational activities such as asset allocation, valuation as well as monitoring performance as outlined in BNM’s Investment Account Policy. Both the Mudarabah and Wakalah accounts leverage on the Bank’s house financing assets therefore are similar to collateralised instruments.

Towards end October 2015, Bank Islam together with three other Islamic banks established a consortium – Raeed Holdings Sdn Bhd (“Raeed”) – to develop the IAP, essentially a marketplace where investors and ventures can ‘meet and consider their prospects’. Before supporting a venture, the sponsoring banks will perform due diligence and ensure only those projects that comply with minimum disclosure standards are selected. In addition, the official inclusion of RAM ratings on ventures will further strengthen investors’ confidence to invest in these businesses. The sponsoring banks will also provide progress reports to the investors. This initiative will provide new sources of funding.

To meet the capital requirements of Basel III, during the year, the Bank undertook a sukuk issuance – acting as the Principal Adviser, Lead Arranger, Facility Agent and Shariah Adviser for the transaction, making it the first Islamic bank to issue a sukuk for itself. The first tranche amounting to RM300 million was issued on 22 April 2015 based on a direct placement with selected institutional investors to build investors’ confidence; the second tranche of RM400 million was issued on 15 December 2015 based on a book-building exercise to minimise the cost of funding. The second tranche issuance attracted the participation of takaful and insurance companies, asset management companies, unit trust companies, corporations and banks. Both were fully subscribed. These successful exercises helped the Bank to strengthen its capital to 15.3% which is above the capital buffer requirement of 8.625% beginning 2016. The minimum regulatory capital for banking institutions will be gradually increased to 10.5% by 2019.

From another perspective, as an employer of choice, Bank Islam has over the years stepped up efforts to create a dynamic, performance-driven culture that attracts and retains the best talent. Ongoing efforts to cultivate a strong employee-centric culture led to it being named among the Top 3 Most Popular Graduate Employers in the Banking and Financial Services sector for the second consecutive year. It also ranked 13th in the Top Malaysia’s 100 Leading Graduate Employers for Year 2015, a significant improvement from 51 in 2013. The survey was conducted by GTI Media and powered by the Graduate Barometer.

The Bank also gained increasing international and local recognition for its operations during the year. These included it being named the Islamic Bank of the Year in Asia by The European Global Banking & Finance Awards 2015; Strongest Islamic Retail Bank in Malaysia by Islamic Retail Banking Awards 2015 (Cambridge IF Analytica); the Best Commercial Bank – Malaysia in conjunction with the 10th Islamic Business & Finance Awards by CPI Financial, Dubai; and the Strongest Bank by Focus Malaysia in its 29 August – 4 September 2015 issue.

41





GROWING THE TAKAFUL BUSINESS

As the country’s takaful industry continued to record steady growth, Takaful Malaysia further entrenched its leadership by developing more products to better serve the needs of different consumer segments while exploring ways to expand its distribution capabilities. At the same time, it continued to build the level of professionalism of its distribution force to manage the increasingly complex needs of the marketplace.

Higher sales generated by the Family Takaful business, better underwriting results, as well as higher net Wakalah fee income contributed to increases in both revenue and profit. Takaful Malaysia’s operating revenue grew 8% to RM1.79 billion, while PBZT increased 9% to RM204.2 million, and – in light of a lower tax regime – profit after zakat and tax (“PAZT”) grew by a significant 17.7% to RM163.3 million. Meanwhile, the Group’s total asset size increased by 5% to RM7.5 billion.

Concerted efforts to develop its competitive edge in Family Takaful enabled Takaful Malaysia to maintain its leadership in this segment. Contribution of its Family Takaful business increased by 9% to RM1.04 billion, mainly due to the success of group medical products. The contribution from General Takaful also grew, by 6%, to close at RM476.1 million, primarily as a result of the fire and motor businesses.

PROFIT AFTER ZAKAT AND TAX

RM163.3MILLION

42



Perspectives

In terms of underwriting, prudent assessment combined with sales efforts led to an 8% growth in the gross contributions of both Family and General businesses, with employee benefit products, mortgage protection and investment-linked businesses featuring most visibly as contributors.

For the 4th quarter of 2015, Takaful Malaysia sustained its position as the market leader in the Family Takaful business, capturing 23% of the market share that translates into RM823 million in gross contributions. In addition, Takaful Malaysia also maintained its No. 1 ranking in the Group Family Takaful business, securing 26% of the market share that translates into RM445 million in gross contributions. Industry reports up to Q4 2015 witnessed Takaful Malaysia sustaining its position as the second largest General Takaful Operator, capturing 19% of the General Takaful business.

The enforcement of the Risk Based Capital for Takaful (“RBCT”) Framework effective 1 January 2014 has transformed takaful operators to meet stringent capital requirements. Consequently, Takaful Malaysia is now on equal ground with well established conventional players due to its stronger capital base.

On the investment front, Takaful Malaysia cautiously made some changes to its strategic asset allocation during the year under review focusing more on asset classes that provide a stable and predictable recurring income such as sukuk and alternative assets. These strategies have proven to be effective as the asset classes turned out to be the better performing and generated encouraging returns on investment for the year 2015.

During the year, Takaful Malaysia continued to churn out a number of exciting new products targeting corporate customers. Specifically to meet the takaful needs of retail, food and beverage,

REVENUE

RM1.79BILLION

as well as office and services businesses, it introduced Takaful mySME BizPartner. This was followed by the launch of Takaful myTravel Partner, which provides comprehensive travel protection and 24-hour assistance. In addition, it partnered with Bank Islam and Telekom Malaysia (“TM”) to provide personal accident products for their customers. With the former, it is marketing Takaful myElite PA, while for TM’s customers; it has developed Takaful myEasy PA.

Takaful Malaysia also entered into a strategic bancatakaful agreement with RHB Islamic Bank (“RHB”) to distribute its wide range of Family and General takaful products via RHB’s distribution channels. The 10-year bancatakaful relationship is anticipated to further strengthen Takaful Malaysia’s foothold in the industry and expand its market share.

While increasing its product portfolio, Takaful Malaysia also invested in enhancing its operational efficiencies. In line with GST regulatory requirements, it implemented two core systems for different businesses. The Integral Group caters for the Family Group Takaful, Mortgage Reducing Term Takaful (“MRTT”) and Group Credit Family Takaful (“GCFT”) business; while the Integral Property & Casualty has been designed for the General business.

Various strategies were adopted to provide capacity flexibility, quicken the product development cycle, and improve distribution to manage an increasing volume of business, while also ensuring a positive customer experience at all times.

The company acknowledges that technological enhancements have to be supported by investments in human capital, especially in a challenging environment. Accordingly, it continues to build its employees’ capabilities to increase their productivity and performance. It has also adopted a policy of employee diversity and inclusion in order to bring in fresh perspectives that will help the organisation to improve its service delivery and enhance its shareholder returns.

To widen its recruitment net and increase its visibility in the job market, Takaful Malaysia is promoting its brand in partnership with certain public and private universities. The company’s unflagging efforts to grow its business in a prudent and responsible manner have led to numerous awards. During the year under review, it was named the Best Takaful Company in Malaysia at the 9th International Takaful Summit 2015 held in London on 17 February 2015. This is the third time the company is being recognised with this award, which is a remarkable recognition of its commitment to provide quality Islamic insurance solutions to suit the diverse needs of its customers.

43





ENHANCING ISLAMIC STOCKBROKING PORTFOLIO

The stockbroking industry faced a decline in brokerage rates amid a challenging market environment marked by lower earnings growth and margin financing. Global uncertainties and the southward movement of commodity prices saw markets tumbling across the region and currencies being hit. With corporate earnings being cut for four consecutive quarters, confidence was shaken and less income was generated. Within this environment, however, the average value of Shariah trade on Bursa increased to 3.45%, from 2.28% in 2014.

The stockbroking business commenced in 2015 with a larger volume and value of trade only to see these drastically decline in the second and third quarters before picking up slightly in the fourth quarter. BIMB Securities Sdn Bhd’s strategy was to focus on institutional instead of retail investors, allowing the company to safeguard its asset portfolio. By adhering to robust risk management practices, further, it was able to mitigate the adverse market condition and stringent underwriting for margin facility.

Aggressive marketing in the fourth quarter led to 83% and 106% increases in gross brokerage and value of dealing quarter-on-quarter. For the year as a whole, our stockbroking group managed to record RM14.9 million in total income, marking an increase of 1.4% from the previous year. Its PBZT was also marginally higher, at RM0.64 million compared with RM0.58 million in 2014. This was due partly to higher profits on investment deposits and other operating income which compensated for the lower brokerage fees.

TOTAL INCOME

RM14.9MILLION

44



Perspectives

FORTIFYING OUR GOVERNANCE

As a public listed organisation, BHB is aware of our responsibility to our stakeholders, including our shareholders. The Board has always led the management and Group in upholding the highest standards of corporate governance to ensure the interests of our stakeholders are protected.

Today, as the first Islamic FHC in the country, we acknowledge an even greater responsibility to create a new benchmark in governance in the area of Islamic finance, which will serve both to hasten the sector’s evolution into the mainstream economy, and to build public trust in the services as well as level of professionalism Islamic finance has to offer. This, in turn, will ensure the long-term sustainability of financial services based on Shariah principles for the benefit of society.

The Board remains guided in setting the tone on governance in BHB by best practices as advocated by BNM, Bursa Malaysia Securities Berhad and the Malaysian Code of Corporate Governance. We have reviewed the composition of our Board membership and increased the representation of independent directors. At the same time, we continue to strengthen our Shariah-based risk management framework and will act as the policymaker in determining the Group’s risk appetite, limits and tolerance level. We are also working with industry leaders to standardise the level of disclosed capital ratios by financial groups headed by banks and those headed by FHCs, as required by BNM.

This is a time of enormous change in Islamic financial services, and BHB feels proud to be able to lead the sector as it enters a new phase in its ongoing evolution.

EMBEDDING CORPORATE RESPONSIBILITY IN ALL WE DO

Being an FHC, our principal responsibility is to ensure that ethical and responsible behaviour forms part of the DNA of our core businesses as well as of the Group as a whole. This entails adopting the moral high ground in all our dealings with stakeholders, while ensuring business profitability to safeguard the interests of shareholders.

We also believe that we have a duty to give back to the communities that surround us in ways that are meaningful and that have a lasting impact on lives. In 2015, the Group continued to contribute to Sahabat Korporat Tabung Haji as part of our annual contribution to help ease the burden of Malaysian pilgrims performing the hajj.

Bank Islam continues to commit itself to various corporate responsibility (“CR”) initiatives, focusing on the four pillars of Community Development, Education, Projek Bantuan Rumah (Housing Aid Project) and the Environment. To streamline its efforts and create greater visibility of its programmes, in 2015 the Bank rebranded all its CR initiatives under the umbrella of AMAL.

Its Community Development efforts are directed towards providing support to the marginalised and underprivileged. Educational initiatives centre on the PINTAR school adoption programme that the Bank has embraced since 2008. Through this programme, it motivates underprivileged children to excel in both the academic and non-academic realms. In terms of Housing Aid, the Bank builds and renovates homes for those living below the poverty line. Since 2008, when the programme was first launched, Bank Islam has channelled more than RM5.5 million to this initiative, benefitting some 213 families who now have a secure roof to live under.

45




We are also part of the Government’s Skim Latihan 1 Malaysia (”SL1M”) which aims to increase the employability of graduates. Under this programme, we continue to provide these young graduates valuable exposure to the industry, in the hope of attracting a steady talent pipeline. As part of SL1M, we have taken in a total of 200 graduates to date.

Takaful Malaysia contributed to the development of the ummah through various community development activities throughout 2015. Among others, it continues to support Actuarial Science students of UiTM in an effort to produce more professionals in the field, while helping to fulfil the education needs of disadvantaged children at the Al-Khadeem Home of Hope.

Although our business does not significantly impact the environment, we also take seriously our responsibility as a corporate leader to make a difference to environmental protection, especially in light of climate change challenges. We reduce as far as possible any waste of natural resources and other materials within the organisation. Outside of our own premises, we support the efforts of various environmental organisations in creating a greener and more sustainable environment for generations to come.

LOOKING AHEAD

Along with declining commodity and oil prices, and fluctuation in currency, the year 2016 looks set to be challenging for Malaysia. In a telling move, the Government has revised its Budget 2016 while also capping the nation’s GDP growth at between 4.0%-4.5%.

Despite this scenario, we expect Islamic finance to continue to grow though perhaps at a slower rate than in 2015. BHB itself will focus on strengthening our fundamentals to comply with regulatory requirements as well as create even more synergies across our various businesses boundaries as we welcome new opportunities envisaged under IFSA 2013.

Having completed its H2E programme, Bank Islam will seek to increase the momentum of change by laying down the building blocks for its next phase of growth. The Bank is set to be guided by a new business strategy themed Sustaining Capital through Robust Liability Management, concentrating its efforts on both financial and non-financial aspects of operations. Financially it has set targets for capital preservation, safeguarding its asset quality, and enhancing earnings stability. A key focus will be to drive aggressive deposit growth and to leverage on new products including IA, whilst continuing to foster a culture of service excellence.

Takaful Malaysia is committed to strengthening its image through targeted marketing and advertising to achieve greater brand visibility and appeal. This will be supported by continuous efforts to enhance its product offerings and retain its reputation for innovative solutions that best meet Malaysians’ protection needs. The company is optimistic of being able to maintain its record of positive top line and bottom line growth by focusing on the essentials of customer reach, operational agility, cost competitiveness and stakeholder confidence.

We expect the stock market to continue to be volatile in 2016 along with ongoing trends in the world’s two largest economies – as interest rates in the US increase, and China’s growth decreases. At the same time, we are confident that BIMB Securities will remain resilient and chart growth in both its net dealing income as well as total income.


46



Perspectives

ACKNOWLEDGEMENTS

Islamic finance is entering a new frontier in Malaysia, one in which we will be able to pitch our products and services on an even playing field with our conventional contemporaries. This is an extremely exciting development for the sector, presenting us with both challenges as well as opportunities. We at BHB are determined to seize all opportunities that present themselves to fulfil the needs of our customers and the public at large.

With the continued contributions of various parties, we have what it takes to achieve our objectives. At this juncture I would like to thank our many stakeholders who have been supporting us over the years. The list includes our industry regulators namely BNM, Securities Commission, Bursa Securities, the Minority Shareholder Watchdog Group (“MSWG”), as well as analysts, fund managers and members of the media. It also encompasses our shareholders and customers, whose trust in our ability empowers us and drives us to continue to outperform.

On behalf of the Board of Directors, I would like to take this opportunity to extend our heartfelt appreciation to two of our esteemed Directors Yang Berbahagia Tan Sri Ismee Ismail and

Yang Berbahagia Dato’ Johan Abdullah for their valuable contributions to the Group during their tenure, and wish them all the best in their future undertakings.

Most of all, I would like to thank the entire BHB family – the Boards, management and employees of our subsidiary companies as well as that of the holding company itself – for your dedication to the advancement of Islamic finance. We have accomplished much together, and my fervent wish is for us to continue to collaborate in the next few years to entrench BHB into the financial landscape of Malaysia and, gradually, the regional sphere.

With the synergies that we are able to create, the future looks bright – for our customers, shareholders, the Group itself and the sector that we represent.

Thank you.

Tan Sri Samsudin OsmanChairman

47




STATEMENT OF INTENTON SUSTAINABILITY

Dato’ Sri Zukri SamatGroup Chief Executive Officer

We continue to enhance our position as an Islamic financial institution together with the support of the community we serve – in a responsible, ethical, sustainable and transparent environment.

48



Perspectives

Aim:

To ensure BHB upholds its Shariah principles and place importance on sustainability through continuous engagement with our stakeholders.

“Given the magnitude of the Sustainable Development Goals and the important role that can be played by Islamic finance in supporting their implementation and ensuring more robust and inclusive growth, the opportunity to more closely link Islamic finance with sustainable development cannot be missed.”

– World Bank ¹

In our pursuit of sustainable growth, we commit:

1. To uphold the organisation as a responsible entity by

ensuring ethical business decisions based on Shariah

principles at every level;

2. To grow together with the communities we serve by

providing products and services that will contribute to

the enrichment of society;

3. To develop our employees by providing opportunities

for them to be the best that they can be;

4. To build greater awareness and knowledge of Islamic

Finance and its role in achieving sustainability for the

industry and its consumers; and

5. To ensure governance, compliance and transparency

in reporting on our progress towards these

commitments.“Islamic markets thus can provide a model for socially responsible, sustainable changes in the financial system”

– International Institute for Sustainable Development ²

¹ Habib Ahmed et. al. (May 2015): On the Sustainable Development Goals and the Role of Islamic Finance, World Bank Policy Research Working Paper 7266

² Thomas A. Myers et. al. (July 2013): The Interconnections Between Islamic Finance and Sustainable Finance

49BIMB HOLDINGS BERHAD Annual Report 2015



FULFILLINGRES�PONS�IBILITIES�

The Group’s Corporate Responsibility initiatives encompass

a heightened sense of duty towards deserving communities,

customers, business partners, employees and other stakeholders.

TOTAL:

RM12,910,754

ZAKAT CONTRIBUTION

Launched

the AMALbrand

BankIslampaidout

RM12,746,625inzakattoall14states

TakafulMalaysiachannelled

RM164,129zakatfunds

Corporate Responsibility

CORPORATERESPONSIBILITY

Creating a strong business and building a better world need not conflict with each other – they are both essential ingredients for long-term success.



CHANNELLING GOOD FOR THE BENEFIT OF EVERYONE

The most significant manner in which BIMB Holdings Berhad (“BHB”) can endorse its sense of responsibility is by ensuring that the Group and its operating companies create value for our key stakeholders - namely our shareholders, customers and employees. We are also mindful of our duty to the larger communities within which we operate. In extension, we acknowledge our responsibility to protect the natural resources which is crucial to the well-being of society, both today and tomorrow. Hence, our Corporate Responsibility (“CR”) initiatives and programmes have been structured to address the needs of society; from addressing education needs, caring for the underprivileged and conserving the environment.

We are conscious of our duty to the Islamic financial industry, having been recognised as an Islamic Financial Holding Company (“FHC”). Over the years we have been propagating some of the most innovative Islamic financial and banking instruments to advance the industry’s marketplace and ensure its sustained development. The introduction of the new Investment Account products and Investment Account Platform (“IAP”) under the new Islamic Financial Act 2013 (“IFSA 2013”), marks our continued zeal in pioneering and transforming the Islamic financial landscape for the better. We are also committed to ensuring proper and transparent lines of communication with our shareholders, and fulfilling our obligations to BHB stakeholders. By consolidating our investor-related activities and making good on our promise to investors as well as stakeholders, we contribute to the industry’s sustainability and further support the country’s aspiration to become a global Islamic financial hub.

As an FHC, we take a keen interest in the activities of our subsidiaries – namely Bank Islam, Takaful Malaysia and BIMB Securities – and fully support their initiatives to enhance the Group’s reputation through community programmes and other stakeholder engagements.

ZAKAT AS AN INSTRUMENT FOR GOOD

Zakat funds continue to underpin our CR efforts. It is our obligation to ensure fair and proper distribution of these funds for a variety of noble causes such as helping the marginalised community to create better lives for themselves, thus contributing

RM12,746,625

RM164,129

Spirit of Volunteerism

We also believe strongly that CR is most meaningful when it engages people at a personal level. Hence we encourage our employees to play an active role in our programmes and even to suggest initiatives that the Group can support. The spirit of volunteerism not only creates a stronger bond between BHB and our companies with the community, it also enhances the spirit of genuine caring that we would like to instil as part of our corporate culture. It was therefore very encouraging to see how, while building on its business, the Group’s employees continue to contribute more time to a larger number of CR projects.

ZAKAT DISTRIBUTION

to the health and wealth of a society. In Malaysia, BHB is among the leading corporations in developing and organising zakat-related CR programmes and initiatives, playing an important role in disseminating this wealth among the community.

SKIM LATIHAN 1 MALAYSIA (SL1M)

In tandem with our position as a leading financial institution intent on developing and advancing the nation’s Islamic financial industry, we have taken up the challenge of sustaining this industry by developing young talents. We have been a strong proponent of SL1M – a government initiative designed to help young graduates gain employment and valuable training working experience at corporations. As the sole Shariah-compliant financial holding company, we take responsibility in nurturing the interest of young graduates in the field of Islamic finance and banking. To date, we have taken in 200 graduates for this programme, enhancing their employability and marketability in securing a job. This expands our role in supporting the nation’s agenda and ensuring the industry’s sustainability.

53




AMAL“Strengthening our resolve to do good”

AMAL is an endeavour to streamline and re-brand Bank Islam’s CR efforts under one umbrella, bringing about greater attention and awareness from the public to these efforts. From the stakeholders’ perspective, AMAL creates more visibility for the Bank’s CR initiatives and further reinforces our commitment to sustainability.


PROJEK BANTUAN RUMAH (HOUSING AID PROJECT)Our commitment to provide secure and comfortable housing for the needy and disadvantaged

ENVIRONMENTOur pledge to leave minimal impact on the natural environment and contribute to its conservation

COMMUNITYOur dedication to elevate the lives of the destitute and develop marginalised community

EDUCATIONOur obligation to help every underprivileged child get the proper education he or she deserves

(‘good deeds’ or ‘actions’ in Arabic)

2015 2014

398staff volunteers

184staff volunteers

152,881total hours of

community work

36,800total hours of

community work

KEY TAKEAWAYS

OFFICIALLY INTRODUCED DURING THE BLESSED MONTH OF RAMADAN

54



Perspectives

CR INITIATIVES

Takaful myJalinan KasihOur service to the underprivileged

OBJECTIVEProviding assistance for the needy

CR INITIATIVES

Takaful myJalinan IlmuOur dedication to promoting education

OBJECTIVECreating education opportunities for the underprivileged, and cultivating a culture of learning

A DEMONSTRATION OF CHARITY“We Protect. We Care. We Share”

Incorporating the intrinsic values of takaful business, Takaful Malaysia’s core CR initiatives are all about helping the marginalised and protecting their rights to equal opportunities, be it through wealth distribution or proper education.

RM2.1 million

TOTAL CONTRIBUTIONS

FOSTERING A BENEFICIAL INVESTMENT CULTURE “A commitment to knowledge-sharing”

BIMB Securities is dedicated to fostering and advancing knowledge on Shariah-compliant equity market and investments, especially among the youths, with the aim of helping the Islamic financial industry to further develop for generations to come.

FOCUS ON UNIVERSITY STUDENTSInvestment Coaching SessionProviding real insights on equity investment, from the Islamic finance point of view

Road Shows & TalksThe many opportunities to be found in Shariah-compliant investment market and practices

Investment Game Challenge(A collaboration with Bursa Malaysia)Educational programme & initiative designed to nurture potential smart young investors

PROMOTING & PROPAGATING SHARIAH-COMPLIANT INVESTMENT NATIONWIDE, FOR THE PUBLIC AND CORPORATIONSInstitutional Clients– Company Briefings– Site Visits– Presentations & Seminars– Corporate Talks– Technical Outlook Workshops

Retail Clients– Shariah Investment Seminars– Participation in Minggu Amanah Saham– Awareness Programmes– Participation in GLC Open Day

55




NEPAL EARTHQUAKE DISASTERA GLOBAL SHOW OF SUPPORT

NEPALESE RESILIENCE(A charity event organised by theSun Cares Fund to raise funds through the sale of selected original press photographs)

• AseriesofphotographicworksbyZulfadhliZakifromtheSun&BaudoinNachfromAdventistDisasterReliefAgency (“ADRA”).

• AshowcaseofthefortitudeandresilienceoftheNepaleseintheaftermathofthetragedyinwhichover9000perishedandanother26,000injured.

• FundsdonatedtoNextGenerationNepalwhichofferscareandeducationfortherescuedchildrenandhelpsre-unite them with their families.

TAKAFUL MALAYSIA CONTRIBUTION

RM5,000donatedtoNextGenerationNepal which offers care and education

for the rescued children.


WHEN CALAMITY STRIKES“Overcoming adversity together”

The Group has always come out in force to support relief efforts, especially those Malaysians afflicted by the annual floods. Our support also extends beyond national borders, as shown by our contribution to earthquake victims and survivors in Kathmandu, Nepal last year, which claimed over 9,000 lives and left 26,000 more injured.

EAST COAST FLOOD DISASTERPROVIDINGRELIEFFORVICTIMS

CONTRIBUTION TO TERENGGANU

RM150,000CONTRIBUTION TO PAHANG

RM150,000CONTRIBUTION TO KELANTAN

RM100,000RM1,100,000 (ZAKAT)

Directed helping hands from other Bank Islam staff in assisting their affected colleagues to rebuild lives after the flood.

contribution

RM300,000• (RM150,000toTabung Bencana NSTP

by Media Prima)• (RM150,000totheSun Cares Fund

by Sun Media Corporation Sdn Bhd)

• ‘Gotong-Royong’programmebyTakafulMalaysia’sKelantanRetailBusinessteamat‘Madrasah’toMesir,Kota Bharu, Kelantan.

• Concertedeffortsbythestaff&retailagentsincleaningupthe‘Madrasah’aftertheflooddisaster.

56



Perspectives

FESTIVE COMMUNITY PROGRAMMES“Inspiring Compassion & Spreading Joy”

Sharing festive joy has always been the hallmark of BHB and its subsidiaries. We ensure that the poor and the needy get to immerse themselves into the celebratory mood of the festive season by making substantial contributions to their needs.

MAJLIS IFTAR BANK ISLAM 2015• EasternRegion

Selera Tepi Sungai, Tanah Merah, Kelantan

• EastMalaysiaRegionHotel Juta, Keningau, Sabah

• NorthernRegionHotel Taiping Perdana, Taiping, Perak

SEMARAK RAMADAN(INCOLLABORATIONWITHBERITAHARIAN)• SouthernRegion

MasjidAl-HudaKg.FeldaAir Tawar, Kota Tinggi, Johor

MAJLIS IFTAR BANK ISLAM BERSAMA RTMRTM Angkasapuri, Kuala Lumpur

MAJLIS IFTAR BANK ISLAM BERSAMA PETROSAINS (MOUBETWEENBANKISLAMANDPETROSAINSWASSIGNEDONCRCOLLABORATIONS)Galeria1,PETROSAINS, Menara KLCC, Kuala Lumpur

MAJLIS IFTAR PERDANA BANK ISLAM(BANKISLAM’SAMALINITIATIVEWASINTRODUCEDFORTHEFIRST TIME)Menara Bank Islam, Kuala Lumpur

BENEFICIARIES• MajlisPerundingan

Pertubuhan Islam Malaysia (“MAPIM”)

• PusatJagaanDarul Fikrah

TOTALCONTRIBUTIONFROMZAKAT

RM1,017,140

867students

35schools

• PersatuanSeruanIslamSelangor & Wilayah Persekutuan

• PersatuanOrangCacatPenglihatan Malaysia (“PERTIS”)

• PusatDakwahSerantau

RAMADAN

Provided convenience for

500 OFFICE WORKERSdailyinthevicinityofKualaLumpur’sgoldentriangleareatohavetheir‘BukaPuasa’meal.

COMMUNITY IFTAR• AcollaborationwithSWADD(SurauAhmadDawjeeDadabhoy)• Annualhostingof‘BukaPuasa’getheringsforthewholefastingmonthof

Ramadan at Menara Bank Islam.

ContributedmorethanRM70,000to

300 FAMILIES of the community.

SEMARAK QURBANAcollaborative‘IbadahKorban’initiativewhereBHBpooledtheeffortsoftheGroup’sstafftoengagetheRohingyacommunityinTandop,AlorSetar,Kedah.

57




RAMADAN FOOD DISTRIBUTION• 5NGVStationsaroundKualaLumpur:

– Kg. Baru– Bandar Tun Razak– Jalan Cochrane Perkasa– Wangsa Melawati– Bangsar

• NGV&TaxiStand,KLSentral,KualaLumpur

• AKLEH

CONTRIBUTION

‘BUKA PUASA’ FOOD

AIDILFITRI


BENEFICIARIES BENEFICIARIES

BENEFICIARIES

AIDILADHA

TOTALCONTRIBUTIONFROMZAKAT

RM80,750

taxidrivers highway users

asnaf & underprivileged children

mosques

1935

• CentralregionCheras, Selangor

• EasternregionDungun, Terengganu

• SouthernregionKg. Alai, Melaka

• EastMalaysiaregionMukah, Sarawak

• NorthernregionKg. Sungai Bugis Simpang Empat, Perlis

IBADAH KORBAN BANK ISLAM 2015

TOTAL CONTRIBUTION FROM ZAKAT

RM56,700

200students from 13 schools

RUMAH TERBUKA AIDILFITRI 2015Sharing the joy of Aidilfitri with the underprivileged

58



Perspectives

CONTRIBUTION

RM100,000

SOCIAL OUTREACH INITIATIVE“Engaging the rural community and seeing to their needs”

We do not forget the ‘Orang Asli’ community who make their homes in rural areas across Peninsular Malaysia. A recent trip to the Temenggor-Belum Forest Reserve, organised jointly with NGOs, afforded us the opportunity to get closer to them and contribute to their community needs.

BANK ISLAM HOUSING AID PROJECT

SPIRIT OF RAMADAN“Fulfilling the education needs of disadvantaged children”

Aget-togetherbetweenthechildrenandTakafulMalaysia’semployeesfor‘BukaPuasa’gathering.

HARI RAYA SHOPPING SPREERaya shopping treat for less fortunate children

BENEFICIARIES

50 childrenof Al-Khadeem Home of Hope

RM5,000for the home

Shopping Treat & ‘Duit Raya’ for the children

CON

TRIBUTIO

N

50 childrenofPertubuhanKebajikandan PerlindunganNurQasehMalaysia

BENEFICIARIES

TEMENGGOR-BELUM EXPEDITION• SocialoutreachprogrammeinvolvingBank

Islam volunteers and non-profit organisations• InstallationofWaterSupplySystem• Provisionofmedicalassistance,foodand

essential items

Kampung Sungai Chiong, Temenggor-Belum Forest Reserve

BENEFICIARIESOrang Asli community (population:300)

OUR CONTRIBUTION SINCE 2008

11states

Touched more than1,000 lives

213 housesbuilt/rehabilitated

More thanRM5.5 million invested

2015

28 HOUSESbuilt/rehabilitated

in Kelantan

RM1.1 MILLIONcontributed for the construction and

repair of houses in Kelantan as part of flood relief efforts

59




Pilgrims’ Progress


Visit to School Programme• Seriesofworkshopsconductedat

various schools nationwide designed tonurturestudents’interestinSciencesubjects.

• Engagingstudentswiththeconceptof STEM (Science, Technology, Engineering & Mathematics) with hands-on, fun and casual activities.

Science Show Competition• National-levelannualscience

competition for secondary school students, where students have to demonstrateexamplesofscientifictheory.

• Nurturestudents’creativity&interestin the field of science and technology.

SAHABAT KORPORAT TABUNG HAJI 2015“LookingafterthewellbeingofHajjpilgrims”

Total contributions worth

RM600,000to assist the pilgrims in performing their duties at the holy city of Mecca.

Education“An instrument to change one’s life for the better”

Education remains one of the cornerstones of our CR initiatives. We have always been steadfast in supporting accessibility to proper education for everyone, especially marginalised children from poor backgrounds. While we focus on promoting the study of Islamic finance for the propagation of the industry, we have also been making inroads in instilling interests in other field, namely science and technology.

KNOWEDGE-SHARING INITIATIVE• ImplementationofIFSA2013marksanew

era for the Islamic finance industry• SignalsthetransitionofIslamicbanking

institutions into investment intermediaries

TitleIslamic Financial ServicesAct2013:WhatYouNeedtoKnow

TitleSahabat BankIslam:Fundamentals of Islamic Banking

Audience• BankIslam’sworkforce• Aneducationalwalkthroughofthe

reclassificationofBankIslam’sdepositand investment account products.

Audience• PublicandCorporations• Detailedguideandinformationonthe

Islamic banking system and Shariah applications in the finance industry.

PINTARPromoting Intelligence, NurturingTalent&AdvocatingResponsibility

• NationwideSchoolAdoptionProgrammebyPINTARFoundation

• Fosteracademic&non-academicexcellenceamong students from under-served communities

• CollaborativeinitiativeinvolvingGLCsandprivatecorporationsalongwithNGOsandtheGovernment.

• Atotalof20schoolsadoptedsince2008• 2schoolsadoptedfortheyear2016

BANK ISLAM IS COLLABORATION WITH PETROSAINS• NurturinginterestinsubjectsrelatingtoScience&Technology• Puttingthefunbackintoeducation

BENEFICIARIES

87 secondary schoolsnationwide

CONTRIBUTION

RM500,000

60



Perspectives

INITIATIVE

UiTM Invention, Innovation & Design Exposition(OfficialPartnersince2006)CONTRIBUTION

RM45,000

INITIATIVE

Contributions for development of Tertiary Education.CONTRIBUTION

RM758,000 (Zakat)

INITIATIVE

Giving the blind the ability to read and get acquainted with books of knowledge.CONTRIBUTION

RM183,490• BraillePrintingMachine• BrailleAl-Qurans

INITIATIVE

MalamSumbangsihPerdana2015CONTRIBUTION

RM200,000 (Zakat)

BENEFICIARY/BENEFITA platform for public, corporate citizens, private institutions and Government to build a RM1 billion Tabung Pendidikan to advance education among the younger generation

BENEFICIARY/BENEFITA platform for aspiring inventors to showcase their ideas.

BENEFICIARY/BENEFIT

BENEFICIARY/BENEFITPERTIS Islam Blind Association

SESSIONTalksconductedby:• GroupManagingDirector&TakafulMalaysia’sActuarialDepartment

BENEFICIARYUiTM• AspiringDiploma&UndergraduateHoldersofActuarialScienceStudents

• Inspiringstudentstopursueandrealisetheirgoalofbecomingqualifiedactuaries

• Excellentfeederchanneltoattractgraduateswithhighly-specialisedskillsto fulfil specific requirements.

Knowledge-Sharing Session

Supporting UiTM’s Actuarial Science Programme

29 Higher Learning Institutions

61




MEDIA COMMUNITY DRIVE 2016Morethan140mediaparticipantsfromallmajornewsagenciesdrovefromMenaraBank Islam, Kuala Lumpur to Pulau Pinang with a stopover in Meru, Perak


Environmental Awareness ProgrammeWe have been sponsoring and engaging the media fraternity to participate in environmental awareness and conservation programmes. Our ‘green’ initiative is incorporated into our annual Media Community Drive programme, a treasure hunt event organised in collaboration with BERNAMA.

INITIATIVES/CONTRIBUTIONSCollaboration with SWCorp Malaysia to creategreaterawarenessonthe3R’sofwastemanagement – Reduce, Reuse & Recycle

PROPER GOVERNANCE

As the sole Islamic FHC, we have naturally become the benchmark for others to follow. We are both honoured by this distinction and committed to live up to the expectations placed on us. Most significantly, we have created a new Group governance structure to ensure that our subsidiaries remain guided in their policies and operations.

The new structure ensures that our values and principles as a ‘true-blue’ Islamic financial institution will thrive at all levels, from the top management right down to the employees. We are committed to ensuring that our Board members and senior management team uphold the proper ethical values expected of morally upright individuals, and serve as an example to the rest of the workforce who in turn will then serve the public better and earn their trust. By running our business well, not only do we ensure that our company will prosper but the community and the environment in which we operate in will also thrive. By committing to sustainable practices, we can be a powerful force for good.

Meru, Perak

Waqf Development ProgrammeWaqf remains one of the pioneering efforts by Bank Islam to develop and provide commercial value for waqf (donated) properties. Menara Bank Islam is a shining example of this effort. Built on the waqf land in the ‘golden triangle’ area of Kuala Lumpur city centre, the building is now Bank Islam’s headquarters in addition to housing several corporations as tenants. The programme is a platform for initiating further development of waqf initiatives among government agencies, private corporations and the public.

COLLABORATION WITH YAYASAN ISLAM PERLIS (“YIP”)Arau, PerlisConstruction of Al Madrasah Al Alawiyah Ad Diniah, a girls-only secondary school on a waqfland,withYIPastheProjectManagerand Bank Islam as the Collection Agent and Main Bank

An initiative to develop and refine waqf through collaborations and discussionswiththeauthoritiesandexpertsofthefield.

Efforts will advance waqf applications in the industry through implementation of Sadaqa House as a Banking Product.

Funded by public donations to a special waqf fund account opened by YIP at Bank Islam

62



Perspectives

Semarak Qurban 2015 (Tandop, Alor Setar, Kedah)“Just as we embrace the ‘Banking for All’ philosophy, our caring spirit is also extended to everyone, including the Rohingya community who have made their home here due to the oppressive regime in their home country.”

GROUP CORPORATE EVENTSCALENDAR

JanuaryBank Islam contributed RM1.3 million to the State Government of Kelantan to help rebuild the lives of flood victims.

AprilBank Islam launched Sahabat Bank Islam and Islamic Banking Seminar, an initiative to create greater awareness of Islamic banking held at Masjid Wilayah Persekutuan, Kuala Lumpur.

AprilBank Islam organised a prize-giving ceremony for the winner of Al-Awfar’s ‘The Search For More Millionaires Is Back!!!’ at Menara Bank Islam, Kuala Lumpur.

AprilBank Islam is the official banker of Dana Bumiputera Al-Ansar, Malaysia’s first Restricted Investment Account, which was launched by Lembaga Tabung Haji in Parliament. The event was graced by Prime Minister Dato’ Sri Mohd Najib Tun Abdul Razak.

JanuaryTakaful Malaysia donated RM150,000 to each of Tabung Bencana NSTP and theSun Cares Fund to assist in disaster relief operations for flood-affected areas of the East Coast Region of Malaysia.

12

14

02

19

16

2015

64



Perspectives

MayBIMB Securities organised investment coaching sessions with students at UiTM, UKM, USIM and IIUM with a focus on equities.

MayTakaful Malaysia held its 30th Annual General Meeting at Menara Takaful Malaysia, in Kuala Lumpur.

AprilBank Islam contributed RM200,000 to the Tabung Pendidikan 1 Bilion at Malam Sumbangsih Perdana dan Perasmian Tabung Pendidikan 1 Billion by Persatuan Alumni UiTM. The fund provides financial aid to students of public universities throughout the country.

JanuaryTakaful Malaysia donated RM150,000 to each of Tabung Bencana NSTP and theSun Cares Fund to assist in disaster relief operations for flood-affected areas of the East Coast Region of Malaysia.

FebruaryBank Islam received a study visit from Morocco Shariah Board and delegates from Bank Al-Maghribi at Menara Bank Islam, Kuala Lumpur.

MarchBHB held a corporate briefing for analysts and fund managers after the announcement of its FY2014 results.

06 21to 12

11

24 24

65





MayBank Islam collaborated with BERNAMA to organise an environment-themed Media Treasure Hunt from Kuala Lumpur to Penang to encourage members of the media to perform CR activities as well as strengthening bonds with the Bank.

JuneBank Islam organised a media briefing to introduce its new Term Investment Accounts products and educate the media as well as the public on Investment Account under IFSA 2013.

JuneBank Islam presented Zakat funds to 14 Pusat Zakat Negeri at a ceremony graced by the Minister in the Prime Minister’s Officer, Dato’ Seri Jamil Khir Baharom in Menara Bank Islam, Kuala Lumpur.

JuneTakaful Malaysia contributed RM100,000 to Pertubuhan Al-Khaadem Home of Hope, home to 50 children, at a Majlis Berbuka Puasa event held at a residence located in Kampung Jalan Kebun, Shah Alam.

09

01 11

27

10to

2015

66



Perspectives

JuneBIMB Securities organised the IFSA 2013: Corporate Talk on Introduction to Investment Account.

JuneBank Islam sponsored RM25,000 for the “Semarak Ramadan Bank Islam & Berita Harian” at Masjid Felda Air Tawar 3 in Kota Tinggi, Johor for sahur and berbuka puasa programmes with the local community.

MayBHB held its 18th Annual General Meeting in Menara Felda, Kuala Lumpur.

MayBIMB Securities collaborated with Bursa Malaysia on Investment Game Challenge with the participation of students from UiTM, UKM and USIM.

14 23

16

27 28to

67





JulyTakaful Malaysia treated 50 children of Pertubuhan Kebajikan dan Perlindungan Nur Qaseh Malaysia (“Nur Qaseh”) to a Raya shopping spree at AEON One Utama Shopping Mall, Petaling Jaya. Group Managing Director, Dato’ Sri Mohamed Hassan Kamil also presented a mock cheque for RM5,000 to the home.

JulyBank Islam hosted a berbuka puasa session for staff at Menara Bank Islam, Kuala Lumpur in conjunction with the launch of “AMAL” as the brand for its Corporate Responsibility initiatives.

03 06

AugustBank Islam raised RM121.44 million in syndicated Islamic financing facilities for Kerian Energy Sdn Bhd for the construction of a 14MW Mini Hydro Power Plant in Sungai Kerian, Perak.

11

AugustBank Islam organised a Southern Region Hari Raya open house at Holiday Inn, Melaka for its corporate clients. The Chairman of Bank Islam, Datuk Zamani Abdul Ghani distributed Zakat to 100 asnaf from all around Melaka.

05

AugustBHB and its Group of Companies participated in the GLC Open day, organised by Khazanah Malaysia.

AugustBank Islam signed an MoU with Yayasan Islam Perlis to collect Waqf funds for the development of Sekolah Menengah Agama (Perempuan) Al Madrasah Al Alawiyah Ad Diniah in Kangar, Perlis. The event was witnessed by the Menteri Besar of Perlis.

17

to 0907

2015

68



Perspectives

AugustBank Islam organised a Hari Raya open house at Sime Darby Convention Centre, Kuala Lumpur for corporate clients in the central region. Similar events were also held in Pahang, Melaka, Penang and Sarawak.

11

AugustBank Islam signed an MoU with Yayasan Islam Perlis to collect Waqf funds for the development of Sekolah Menengah Agama (Perempuan) Al Madrasah Al Alawiyah Ad Diniah in Kangar, Perlis. The event was witnessed by the Menteri Besar of Perlis.

SeptemberBHB sponsored RM70,000 to the Semarak Qurban BHB – Berita Harian programme to help Rohingya refugees and local communities in Alor Setar, Kedah.

26

AugustBHB and its Group of Companies contributed RM675,000 to Sahabat Korporat Tabung Haji in the form of medical equipment, sling bags and ‘Buku Panduan Kesihatan Jemaah Haji’.

04

69





NovemberBank Islam sponsored a Braille Al Quran and Braille printing machine to the PERTIS Islam Blind Association Malaysia.

03

NovemberTakaful Malaysia organised career talks for Actuarial Science students at University Technology Mara (“UiTM”), with speakers from its Actuarial Department as well as the Managing Director of Remark Asia, Ms Na Jia. Takaful Malaysia’s Group Managing Director, Dato’ Sri Mohamed Hassan Kamil, presented Certificates of Excellence to students who have passed the professional examinations.

19

NovemberBIMB Invest launched Malaysia’s first multi-currency Shariah and ESG compliant global equity fund, BIMB-Arabesque i Global Dividend Fund 1, in partnership with global asset manager, Arabesque Asset Management Holding Ltd, UK.

12

OctoberBHB held a corporate briefing for analysts and fund managers after the announcement of its IH2015 results.

08

2015

70



Perspectives

OctoberBank Islam, together with KUIS, organised a Seminar on Sadaqa House 2015 at Menara Bank Islam, Kuala Lumpur. The programme provided a platform for scholars and industry players to discuss issues and solutions, exchange ideas and recommendations to policy makers on implementing Sadaqa House as a banking product.

29

NovemberBIMB Invest launched Malaysia’s first multi-currency Shariah and ESG compliant global equity fund, BIMB-Arabesque i Global Dividend Fund 1, in partnership with global asset manager, Arabesque Asset Management Holding Ltd, UK.

NovemberBank Islam was named the Strongest Islamic Retail Bank in Malaysia by Islamic Retail Banking Awards 2015 during the Gala Dinner in Dubai, United Arab Emirates.

January 2016Bank Islam was named the Best Commercial Bank – Malaysia in conjunction with the 10th Islamic Business & Finance Awards by CPI Financial, Dubai.

17

19



71BIMB HOLDINGS BERHAD Annual Report 2015

ENSURINGTRANS�PARENCY

Our reputation for ethical practices and commitment to

good governance continues to broaden our appeal to discerning

investors and customers.

TOTAL: RM14.4 MILLION

TOTAL INCOME

8.2%

the first & ONLY Shariah-CompliantStockbrokingCompanyinMalaysia

16% increase in GrossBrokerageIncome

Launched the Mobile Trading Application for its Internet Tradingplatform,BISonline,onAndroidandAppleIOS

BIMB Securities

STATEMENT OFCORPORATE GOVERNANCE(Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)

Shareholders

Group Chief Executive Officer

Group Management Committee

Group Risk Management Committee

Board of Directors

Audit & Examination Committee

Internal and External Committee

Remuneration Committee

Nomination & Assessment Committee

Bo

ard

C

om

mit

tees

Man

agem

ent

Co

mm

itte

es

The Board of Directors of BIMB Holdings Berhad (“BHB” or “the Company”) is committed to upholding high standards of corporate governance to preserve stakeholders’ trust, safeguard their interest and enhance their value in line with BHB Group’s objective to be the premier Islamic financial services provider.

To achieve these objectives, BHB Group adopts the principles and best practices on corporate governance and is guided by:

1. Bank Negara Malaysia’s (“BNM”) Revised Guidelines on Corporate Governance for Licensed Islamic Banks (“BNM GP1-i”);

2. Bursa Malaysia Securities Berhad’s (“Bursa Securities”) Main Market Listing Requirements (“Listing Requirements”);

3. Malaysian Code on Corporate Governance 2012 (“the MCCG 2012”);

4. Green Book on Enhancing Board Effectiveness (“Green Book”) by the Putrajaya Committee on Government Linked-Companies High Performance; and

5. Corporate Governance Guide (“CG Guide”): Towards Boardroom Excellence 2nd Edition (“CG Guide”) by Bursa Securities.

The chart below illustrates BHB’s corporate governance structure:

The application of the respective principles and best practices on corporate governance are highlighted in the various sections of this Statement of Corporate Governance.



1. BOARD OF DIRECTORS

1.1 Board Charter (Recommendation 1.1 and 1.7 of the MCCG 2012)

In discharging its duties, the Board of Directors (“Board”) is guided by its Terms of Reference (“TOR”), a document which specifies the Board’s role, powers, duties and functions.

The TOR is a dynamic document that is reviewed and updated from time to time to reflect relevant changes to policies, procedures and processes as well as amendments to rules and regulations.

The TOR of the Board are available on the Company’s website www.bimbholdings.com.

1.2 Roles and Responsibility of the Board (Recommendation 1.2 of the MCCG 2012)

The Board has the responsibility to periodically review and approve the overall strategies, business and pertinent policies of the Company. Matters reserved for the Board’s deliberation and approval include:

• Reviewingandapprovingallstrategicandpolicymattersincludingbusinessplansandpertinentoperatingpolicies,andmonitoring Management’s performance based on Key Performance Indicators;

•MonitoringandreviewingtheoverallperformanceoftheCompanyandBHBGroupagainstsettargetsandobjectives;

• OverseeingtheconductoftheCompany’sbusinesstoevaluatewhetherthebusinessisbeingproperlymanaged;

• ReviewingriskmanagementpracticeswithinBHBGroupandtheCompany:

(i) to ensure adequate internal controls and infrastructure;

(ii) to identify and manage principal risks; and

(iii) to ensure the implementation of appropriate systems to manage these risks;

• Reviewing and approving succession plans, including appointing, training, fixing the compensation of and, whereappropriate, replacement of Senior Management;

• Approvingpoliciespertainingtostaffsalaryandbenefits;

• ApprovingtheappointmentofDirectorsandDirectors’emolumentsandbenefits;

• ApprovingtheCompany’sinvestorrelationsprogrammeorshareholdercommunicationpolicy;

• Reviewing theadequacy and integrityof theCompany’s internal control systemsand infrastructure andmanagementinformation systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines;

• Approvingtransactionsinaccordancewiththeauthoritylimit,andensuringthattheCompany’sbusinessoperationsareconducted in accordance with Shariah principles; and

• Ensuring the Company’s activities comply with the Islamic Financial Services Act 2013, Companies Act 1965, BursaSecurities Listing Requirements, the Articles of Association of the Company and any regulation or guidelines under the relevant laws.

75

Financial StatementsShareholders Information



Accountability

STATEMENT OFCORPORATE GOVERNANCE

1.3 Board Composition

The Board of BHB currently consists of eight (8) Non-Executive Directors – four (4) are Independent Non-Executive Directors whilst three (3) Non-Independent Non-Executive Directors, including the Chairman, are nominees of Lembaga Tabung Haji (“TH”). One (1) Non-Independent Non-Executive Director does not represent any interested corporate shareholder. The said Director was re-designated as a Non-Independent Non-Executive Director in 2014 after serving the Board for nine (9) consecutive years.

Recommendation 3.5 of the MCCG 2012 states that, where the Chairman of the Board is not an Independent Director, the majority of the Directors must be independent. Although the current composition of independent and non-independent directors are equal, it has not affected the effectiveness of the Board as the Chairman has the ability to ensure proper checks and balances to facilitate the Board’s proceedings and decision-making.

Within the Board there is diversity and a wealth of knowledge, experience and skills in the fields of accountancy, banking, takaful, international business operations and development, finance and risk management. A brief profile of each member of the Board is presented on pages 14 to 15 of this Annual Report.

The diverse background of the Directors brings new perspective to the Company’s operations and enhances the effectiveness of the Board.

All appointment of the Directors, including the Chairman and the Group Chief Executive Officer (“GCEO”) is assessed by the Nomination and Assessment Committee (“NAC”) and subsequently approved by the Board based on merit, guided by the Company’s Policy on Fit and Proper Criteria for Key Responsible Persons (“KRP Policy”).

The Board has taken note of Recommendation 2.2 of MCCG 2012 on its approach to gender diversity and the number of female Directors. During the year under review, four (4) or 50% of BHB’s Board consists of female Directors. The Board also took note of the expectation on Directors’ time commitment to carry out their responsibilities as outlined in Recommendation 4.1 of MCCG 2012. In addition in line with Paragraph 15.06 of Listing Requirements, a Director must not hold more than five (5) directorships in listed companies.

1.4 Independent Non-Executive Director (“INED”)

Pursuant to Paragraph 15.02(1) of Bursa Securities Listing Requirements and BNM/GP1-i on Independent Directors, 50% of the Board of Directors of the Company are INEDs.

The proportion of INEDs within the current Board facilitates the Board to provide effective and independent oversight over the Management. The presence of suitably qualified independent director helps to provide the necessary checks and balances in ensuring the Company operates in a safe and sound manner.

Pursuant to Recommendation 3.1 of the MCCG 2012, the Company has adopted a set of criteria for the purpose of assessing the independence of its Independent Directors. The criteria are based on the Director’s skills, experience, contributions and economic and family relationships beyond the Independent Director’s background. The assessment also focuses on the tenure of directorship. The said criteria are in line with BNM/GP1-i and Bursa Securities Listing Requirements.

In view of the above, all INEDs are to declare their independence as INEDs of BHB on a monthly basis, following which these declarations were tabled to the Board on a quarterly basis.

76



The INEDs are also expected to have the following attributes:

• Theabilitytochallengetheassumptions,beliefsorviewpointsofotherswiththeobjectiveofquestioningandchallengingconstructively in the interest of the Company;

•Willingtostandupanddefendhis/herviews,beliefsandopinionsfortheultimategoodoftheCompany;and

• HasagoodunderstandingoftheCompany’sbusinessactivitiesinordertoprovideappropriateresponsesonthevariousstrategic and technical issues put forth and deliberated by the Board.

In this regard, the INEDs of the Company comply with the above criteria.

Recommendation 3.2 of the MCCG 2012 states that an Independent Director who has served a cumulative term of nine (9) years may continue to serve the Board subject to the director’s re-designation as a non-independent director or alternatively continue as an independent director upon shareholders’ approval. Two (2) of BHB’s Directors have served for more than a cumulative period of nine (9) years. One of the directors had been re-designated as a non-independent director whilst the other director is seeking for shareholders’ approval to remain as an independent director.

Pursuant to Recommendation 3.3 of MCCG 2012, the Board has formed a view that the said Independent Director’s presence and contributions are pertinent considering the director’s wealth of experience.

This matter is one of the Agenda at the upcoming 19th AGM of BHB.

1.5 Senior Independent Non-Executive Director (Recommendation 2.1 of the MCCG 2012)

In accordance with best practices on corporate governance, Tan Sri Ismail Adam continues to play his role as the Senior Independent Director (“SID”) of the Board to whom concerns of shareholders and other stakeholders can be conveyed.

Tan Sri Ismail can be reached at [email protected].

1.6 Director’s Appointment Process (Recommendation 2.2 of the MCCG 2012)

The appointment of a new Director is set out in a formal and transparent process, for which the primary responsibility is delegated to the NAC. The procedure is in line with the Company’s KRP Policy which has been implemented since August 2011, BNM’s Guideline on Fit and Proper Criteria and BNM/GP1-i. Under the said procedure, the NAC makes recommendation to the Board on the suitability of candidates for appointment as directors in the Company. The NAC is also responsible for ensuring the candidates satisfy the requisite skills and core competencies in accordance with the KRP Policy of the Company, Bursa Securities Listing Requirements and the MCCG 2012.

The KRP Policy outlines the attributes/qualifications required by a candidate to be deemed “fit and proper” for the appointment as a director. In assessing the suitability of a candidate, the NAC also conducts an interview with the candidate.

The process flow for the appointment of a new director is as follows:

Identification of candidates

Evaluation of suitability on Fit and Proper Requirement of candidates

Deliberation by NAC

Recommendation to the Board

Upon the Board’s concurrence, an application for the appointment of a director would be submitted to BNM for its approval.

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Accountability


The process for the appointment of an Executive Director is similarly robust to ensure that the candidate possesses the minimum qualifications, experience and qualities, which will enable him to effectively perform his duties. In determining if an individual is ‘fit and proper’ to hold the position of director or GCEO, the following shall be taken into consideration:

• Hisprobity,diligence,competenceandsoundnessofjudgment;

• Hisreputation,character,integrity(includingfinancialintegrity)andhonesty;

• Hishistoryofoffence(s)involvingfraud/dishonesty/violence;

•Whetherhehasbeenengagedindeceitful/oppressive/improperbusinesspracticesoranypracticeswhichwoulddiscredithim;

•Whether he has been engaged/associated/had conducted himself in amannerwhichmay cast doubt on his fitness,competence and soundness of judgment;

•Whetherhehascontravenedanyprovisionmadebyorunderanywrittenlawdesignedforprotectingmembersofthepublic against financial loss due to dishonesty, incompetence or malpractice; and

•Whetherhehasbeendeclaredabankrupt.

The process includes the identification of potential candidates, both internal as well as external, governed by the expectation of the roles and capabilities described and required by the Board. This process includes an interview session, followed by a submission to the NAC for deliberation, recommendation to the Board for endorsement and, ultimately, submission to BNM for approval.

1.7 Board and Individual Director’s Effectiveness (Recommendation 2.2 of the MCCG 2012)

Through a Board and Peer Annual Assessment (“Board Evaluation”) conducted on an annual basis, the NAC undertakes a formal and transparent process to assess the effectiveness of individual Directors and the Board as a whole.

The Board Evaluation comprises a detailed set of questionnaires which covers amongst others, the responsibilities of the Board in relation to strategic planning, risk management, performance management, financial reporting, communication and corporate governance. The Board’s composition and size, the contributions of each member at Board meetings, the Board’s decision-making and output, information and support rendered to the Board as well as meeting arrangements are also incorporated into the questionnaires.

Upon completion of the evaluation, the results are tabulated and reviewed by the NAC for endorsement prior to deliberation by the Board. If required, the Chairman will engage and discuss the peer assessment results with individual members.

1.8 Succession Plan (Recommendation 1.2 of the MCCG 2012)

The MCCG 2012 outlines the general limitations on the tenure of directorship for Non-Executive Directors who have reached the age of 70 and above, and/or Independent Directors who have served the Board for nine (9) years or more. The Company has conducted a gap analysis exercise which covers both of the above provisions as well as gap in the mix of skills, number of Independent Directors and succession plan for the GCEO and Chairman.

Appointments on the Board are not considered in isolation but as part of the Board’s succession plan. In this context, the limitation on age and tenure of directorship as described in the MCCG 2012 provides the Board with the opportunity to consider and reassess its succession plan, not only to ensure continuity in accomplishing its long-term goals and objectives but also to affirm that the knowledge, experience and skills-sets of its members are well-suited to meet the demands of an ever-changing financial landscape.

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1.9 Roles and Responsibilities of the Chairman and the GCEO (Recommendations 1.1 and 3.4 of the MCCG 2012)

The roles and responsibilities of the Chairman and the GCEO are distinct and separate. This is to ensure appropriate supervision of the Management, with a clear hierarchical structure. This distinction allows for a better understanding and distribution of jurisdictional responsibilities and accountabilities. This clear structure and focused approach facilitates efficiency and expedites informed decision-making.

1.9.1 Chairman

The Chairman provides leadership to the Board. He plays an important role in encouraging and inculcating a positive culture within the Board. In order to ensure that relevant issues are discussed, the Chairman will lead the agenda for Board meetings and request for views and inputs from the other Directors.

Pertinent information and analysis are disseminated to members of the Board prior to Board meetings, at which the Chairman encourages an open debate on critical issues, high ethical standards, integrity and professional conduct which facilitates decision making.

The Chairman also ensures that consensus is reached at Board meetings. Where deemed necessary, the Chairman shall call for a vote such that a decision can be reached by a simple majority. In the event that a consensus cannot be obtained, the Chairman may defer the agenda, with further analysis conducted on the subject matter, to the next meeting.

1.9.2 GCEO

The GCEO is responsible for the day-to-day operations of the Company and is accountable for implementing the policies and decisions of the Board as well as developing and translating the Group’s strategies into a set of manageable goals and priorities. The GCEO also ensures continuous engagement with shareholders, investors, analysts as well as employees, in managing the Group’s affairs.

1.10 Company Secretary

The Company Secretary is responsible for advising the Board on issues relating to relevant laws, rules, procedures and regulations affecting the Board, as well as best governance practices. She is also responsible for advising the Directors on their obligations and duties, disclosure of their interest in securities or any conflict of interest in any transaction involving the Company, prohibition on dealing in securities and restrictions on disclosure of price-sensitive information.

All Directors have direct and unlimited access to the advice and services of the Company Secretary.

1.11 Directors’ Retirement, Re-Election, Re-Appointment (Recommendation 2.2 of the MCCG 2012)

In accordance with the Company’s Articles of Association, all Directors of BHB are subject to re-election by the shareholders at AGM at the first opportunity after their appointment, and in subsequent year one-third (1/3) of the directors for the time being, or if their number is not three or a multiple of three, then the nearest one-third are subject to retirement by rotation at least once every three years in accordance with the Bursa Securities Listing Requirements and Articles 61 and 66 of the Company’s Article of Association.

Tan Sri Ismail Adam and Puan Rifina Md Ariff who are due for retirement and seeking for re-election at the forthcoming AGM pursuant to Article 61 of the Company’s Articles of Association. In addition, Encik Zahari @ Mohd Zin Idris, who is due for retirement pursuant to Section 129(2) of the Companies Act, 1965, after having reached the age of 70 years, would also be seeking re-appointment at the forthcoming AGM.

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Accountability


Encik Mohd Tarmidzi Ahmad Nordin and Puan Noraini Che Dan were appointed as the Independent Non-Executive Directors effective from 29 June 2015 and 1 April 2016 respectively. Both of them shall retire at the AGM pursuant to Article 66 of the Company’s Article of Association. Encik Mohd Tarmidzi Ahmad Nordin and Puan Noraini Che Dan would also be seeking re-election at the forthcoming AGM.

Details of Directors who are due for retirement, re-election and re-appointment at the forthcoming AGM are disclosed on pages 270 to 274 of this Annual Report.

In relation to the application for the re-appointment of Directors to BNM, the NAC will first assess the Directors who are due for re-appointment and then submit its recommendation to the Board for deliberation and approval. Upon obtaining the Board’s endorsement, the relevant submission, including justifications for such re-appointment, is made to BNM for approval prior to the expiry of the relevant Director’s term of appointment by BNM.

1.12 Board Meetings

Board meetings are scheduled in advance at the beginning of a new calendar year to enable Directors to plan ahead and fit the year’s meetings into their own schedules. The Board meets on a scheduled basis every quarter. When the need arises, Special Board meetings are also convened. The Board continues to proactively engage with Senior Management or external advisors for information and/or clarification on relevant matters to ensure that the various concerns and issues relevant to the Company’s operations are duly addressed.

In the financial year ended 31 December 2015, all the Directors attended at least 50% of Board meetings held, pursuant to the Bursa Securities Listing Requirements. They also complied with the requirement they must attend at least 75% of Board meetings held in accordance with BNM/GP1-i, save for Tan Sri Ismee Ismail who ceased office with effect from 9 October 2015.

Directors’ attendance at the nine (9) Board meetings held during the financial year was as follows:

DIRECTOR

NO. OF MEETINGS

*HELD ATTENDED %

Tan Sri Samsudin OsmanChairman/Non-Independent Non-Executive Director

9 9 100

Tan Sri Ismail AdamSenior Independent Non-Executive Director

9 9 100

Tan Sri Ismee IsmailNon-Independent Non-Executive Director

7 5 71

Dato’ Johan Abdullah**Non-Independent Non-Executive Director

8 6 75

Datuk Zaiton Mohd HassanIndependent Non-Executive Director

9 8 89

Datuk Rozaida OmarNon-Independent Non-Executive Director

9 9 100

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DIRECTOR

NO. OF MEETINGS

*HELD ATTENDED %

Zahari @ Mohd Zin IdrisNon-Independent Non-Executive Director

9 8 89

Rifina Md AriffNon-Independent Non-Executive Director

9 8 89

Salih Amaran Jamiaan***Non-Independent Non-Executive Director

3 3 100

Mohd Tarmidzi Ahmad Nordin****Independent Non-Executive Director

4 4 100

Noraini Che Dan****Independent Non-Executive Director

n/a n/a n/a

Notes:-* Reflects the number of meetings held during the time the Director held office. ** Tan Sri Ismee Ismail and Dato’ Johan Abdullah ceased to be directors w.e.f. 9 October 2015 and 17 February 2016 respectively.*** Retired after the 18th AGM held on 14 May 2015.**** Mohd Tarmidzi Ahmad Nordin and Noraini Che Dan were appointed on 29 June 2015 and 1 April 2016 respectively.

1.13 Access to Information (Recommendation 1.5 of the MCCG 2012)

The Board of Directors have full and unrestricted access to all information pertaining to BHB’s affairs including, inter alia, the Group’s financial results, annual budgets, reviews against business plans and progress reports on corporate developments to enable them to discharge their duties effectively.

The schedule of Board Meetings is circulated in advance to the Board members. The Agenda and Board meeting papers are disseminated to the Directors at least five (5) days prior to the Board meeting to allow sufficient time for the Directors to study and review the issues and, where necessary, obtain further information and explanation to facilitate informed decision making. At the Board meeting, the Directors deliberate at length on the different items as per the agenda prior to making decisions.

The Management and external advisers may be invited to attend the Board meetings when necessary, to furnish the Board with explanations on items tabled or to provide clarification on issue(s) that may be raised by any Director(s).

The deliberations and resolutions passed by the Board are recorded properly, and minutes of the meeting are confirmed at the next Board Meeting.

The Board is also regularly updated by the Company Secretary and/or Management on any changes to regulations and guidelines as issued by BNM, Bursa Securities, Securities Commission, Companies Commission of Malaysia or other regulatory authorities.

All Directors have direct and unlimited access to the advice and services of Senior Management and may seek independent professional advice at the Company’s expense, if required, in furtherance of their duties.

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Accountability


1.14 Number of Directorships (Recommendation 4.1 of the MCCG 2012)

Bursa Securities Listing Requirements, require Directors of a listed issuer to hold not more than five (5) directorships in listed issuers.

At present, all Directors of BHB comply with the best practices as recommended by the Green Book which states that Directors shall not sit on the boards of more than five (5) listed companies. This is to ensure that their commitment, resources and time are focused to enable them to discharge their duties effectively.

1.15 Conflict of Interest

In accordance with statutory requirements, members of the Board are required to declare their interest, including whether such interest arises through close family members to relevant regulators, and these disclosures are subsequently noted at Board meetings.

In the event where there may be a conflict of interest, the Director(s) will abstain from voting and will not participate in any deliberations or decisions of the Board. In this regard, the Director(s) will excuse themselves from the meeting.

1.16 Directors’ Training (Recommendation 4.2 of the MCCG 2012)

The Board recognises the value of enhancing the skills and knowledge of its members on relevant new laws and regulations, the changing business environment and risk profile, as well as the latest developments and key challenges in the financial sector.

The Board is mindful of the need for continuous training to keep abreast of new developments and is encouraged to attend forums and seminars facilitated by external professionals in accordance with their respective needs in discharging their duties as Directors. The Board will continue to evaluate and determine the training needs of its Directors to enhance their skills and knowledge.

The Company provides a dedicated training budget for the Directors’ continuing education. Relevant training programmes are arranged by the Company for the Directors and members of the Board Committees. The Directors may also request to attend additional training courses according to their specific requirements as Directors or members of the Board Committees.

As at to date, all Board members (save for one newly appointed member) have attended the Financial Institutions Directors’ Education (“FIDE”) programme and Mandatory Accreditation Programme by Bursa Securities. In addition, all Directors are required to attend at least two (2) training programmes in a calendar year. The Management conducts an induction programme for all new Directors appointed on the Board of BHB. During the induction programme, the newly appointed Director will be briefed on the Company’s business and activities, the Company’s financial performance and operations, the Governance Structure of the Company, Director’s responsibility, their remuneration and other relevant laws, guidelines and policy which they will be subjected to.

The Company Secretary co-ordinates the organisation of internal training programmes and the Directors’ attendance of external seminars and programmes. The Company Secretary keeps a complete record of the trainings attended by the Directors.

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The conferences, seminars and training programmes attended by each Director in 2015 were as follows:

DIRECTOR TRAINING PROGRAMMES

Tan Sri Samsudin Osman • StrategyWorkshop-SpecialKnowledgeSharingSession• InternationalSocialSecurityConference–SustainableSocialSecurityEcosystem

within an Aging Society•MacquarieInfrastructure&RealAssetsCourse• InvestmentSeminar2015• BoardChairmanSeries“TonefromtheChairmanandEstablishingBoundaries”• EPFGlobalPESummit2015

Tan Sri Ismail Adam • LeadtheChange:GettingWomenonBoards• GLCOpenDay2015:GLCTransformationProgramme• ResolvingConflictintheBoardroom:NavigatingWin-WinOutcomes

Tan Sri Ismee Ismail • GLCTGraduationCeremonyandForumPerdana• LeadershipExcellencefortheChairTakaful• BreakfastTalkforSyarikatTakaful’sDirectors• UNDP&YayasanSejahtera’sInternationalDayfortheEradicationofPoverty2015• IntegrityForumLembagaTabungHaji•MakingaGreatLeaderSeminar

Datuk Zaiton Mohd Hassan • ADialoguewithTanSriLinSeeYan–FinancialServicesinTurbulentTimes• FocusGroupDiscussioninPreparationforDialoguewithGovernor,BNMBanking

Sector• BNM-FIDEForumDialoguewithGovernor,BNM• 2015Non-ExecutiveDirectors’RemunerationStudy• ImpactoftheNewAccountingStandardonBanks–WhatDirectorsshouldbe

aware of by Mr. Darrel Scott• 4thDistinguishedBoardLeadershipSeries:“BoardLeadingChange:Organisational

Transformation Strategy as Key to Sustainable Growth in Challenging Times” by Prof William J. Rothwell

• 6thDistinguishedBoardLeadershipSeries:“DigitalTransformationandItsImpacton Financial Services – Role of the Board in Maximising Potential” by Mr. Joydeep Sengupta

• LaunchandBriefingonDirectors’RemunerationReport2015

Datuk Rozaida Omar • CorporateGovernanceDirector’sWorkshop:TheInterplaybetweenCorporateGovernance, Non-Financial Information & Investment Decision

• Today’sSynergyTomorrowsRealityConference

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Accountability


DIRECTOR TRAINING PROGRAMME

Dato’ Johan Abdullah • IntegrityForumLembagaTabungHaji• BriefingbyKPMGonNewFinancialReportingStandardandPreparationon

Takaful Financial Statement 2015 • KhazanahMegatrandsForum2015–“HarnessingCreativeDisruption:Unlocking

The Power of Inclusive Innovation”

Encik Zahari @ Mohd Zin Idris • ADialoguewithTanSriLinSeeYan–FinancialServicesinTurbulentTimes• AuditCommitteeConference2015• ImpactoftheNewAccountingStandardonBanks–WhatDirectorsshouldbe

aware of by Mr. Darrel Scott

Puan Rifina Md Ariff • IntegrityForumLembagaTabungHaji• FIDEMandatoryProgramme

Encik Mohd Tarmidzi Ahmad Nordin

•MandatoryAccreditationProgramme(MAP)• FIDEMandatoryProgramme

1.17 Directors Trading During Closed Period

Directors and principal officers of BHB are prohibited from trading in any affected securities based on price sensitive information and/or knowledge which have not been publicly announced, in accordance with Bursa Securities’ Listing Requirements and relevant provisions of the Capital Markets & Services Act 2007. Notices on the closed period for trading in BHB and/or any affected securities are circulated to Directors and principal officers deemed privy to any price sensitive information in advance of the closed period, wherever applicable.

2. DIRECTORS’ REMUNERATION (Recommendation 2.3 of the MCCG 2012)

The Directors’ remuneration is a means to acknowledge the Directors’ contributions. It is also a means to attract and retain Directors of certain caliber who are willing to contribute their time, efforts and experience towards the Company.

2.1 Director’s Remuneration Policy

The policy on the remuneration for Directors is as follows:

(a) Fees and Other Emoluments

Non-Executive Directors are remunerated by way of monthly fees, a sitting allowance and other emoluments. Fees payable to Non-Executive Directors are subject to shareholders’ approval at the Annual General Meeting.

(b) Benefits In Kind

Other benefits such as Directors’ Health and Medical Benefit together with Directors’ and officers’ liability insurance and travelling allowance are also provided.

The remuneration of the Directors is reviewed regularly to ensure the Directors are reasonably remunerated to reflect their role, responsibilities and efforts in discharging their fiduciary duties.

The remuneration of the Directors in office during the financial year is disclosed in Note 39 of BHB’s Financial Statements on pages 191 to 193 of the Annual Report.

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The number of Directors of the Company, whose remuneration are paid/payable for their services, fall within the following bands:

GROUP

1.1.2015 TO 31.12.2015

1.1.2014 TO 31.12.2014

EXECUTIVE DIRECTOR

RM2,500,001 and RM3,000,000 – 1

NON-EXECUTIVE DIRECTORS

Below RM100,000 2 –

RM100,001 and RM150,000 1 1

RM150,001 and RM200,000 – 1

RM200,001 and RM250,001 1 1

RM250,001 and RM300,000 1 2

RM300,001 and RM350,000 1 –

RM350,001 and RM400,000 – –

RM400,001 and RM450,000 – –

RM450,001 and RM500,000 – –

RM500,001 and RM550,000 1 1

RM550,001 and RM600,000 2 –

RM600,001 and RM650,000 – 2

RM650,001 and RM700,000 – –

RM750,001 and RM800,000 – –

RM850,001 and RM900,000 – –

Above RM900,001 1 –

TOTAL 10 9

The detail remuneration of each Directors in office during the financial year is disclosed in Note 39 of BHB’s Financial Statements on pages 191 to 193 of the Annual Report.

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3. BOARD COMMITTEES

To assist the Board in discharging its duties and responsibilities, the Board delegates certain responsibilities to the following Board Committees, which operate within clearly defined terms of reference, primarily to assist the Board in the execution of its duties and responsibilities. Although the Board has delegated its authority to these Board Committees to deliberate and decide on certain key and operational matters, the ultimate responsibility for final decisions on all matters lies with the entire Board.

BOARD OF DIRECTORS

AUDIT & EXAMINATION COMMITTEE

NOMINATION & ASSESSMENT COMMITTEE

REMUNERATION COMMITTEE

3.1 Nomination And Assessment Committee (“NAC” or “Committee”) (Recommendations 2.1 and 2.2 of the MCCG 2012)

The Committee comprises Non-Executive Directors, the majority of whom are independent, and is chaired by the Senior Independent Non-Executive Director. Meetings are held every quarter and as and when necessary. The NAC held five (5) meetings during the financial year ended 31 December 2015. Details of the members’ attendance at the meetings are as follows:

COMMITTEE MEMBER ATTENDANCE %

Tan Sri Ismail Adam (Chairman)Senior Independent Non-Executive Director

5/5 100

Tan Sri Ismee Ismail*Non-Independent Non-Executive Director

2/4 50


5/5 100

Encik Zahari @ Mohd Zin Idris**Non Independent Non-Executive Director

– –

Datuk Rozaida Omar**Non-Independent Non-Executive Director

– –

Encik Mohd Tarmidzi Ahmad Nordin**Independent Non-Executive Director

– –

Notes:-* Tan Sri Ismee Ismail ceased to be a director w.e.f 9 October 2015.** Encik Zahari @ Mohd Zin Idris, Datuk Rozaida Omar and Encik Mohd Tarmidzi Ahmad Nordin were appointed as members of NAC w.e.f.

8 January 2016.

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The Committee is responsible for assessing and recommending to the Board candidates for directorship, the GCEO, Executive Director, and key Management personnel to be appointed, in the Company and where relevant in its key subsidiaries. The NAC also assess the re-appointment of directors and renewal of key Management personnel’s contract of service.

On the annual assessment on the effectiveness of the Board and individual Directors, the Committee will review the results of the annual assessment. Where relevant, appropriate recommendations will be submitted to the Board to enhance the Board’s performance as a whole and the effectiveness of the individual Directors.

The Terms of Reference of the NAC are available on the Company’s website www.bimbholdings.com.

3.2 Remuneration Committee (“RC” or “Committee”) (Recommendation 2.3 of the MCCG 2012)

The Committee comprises Non-Executive Directors, the majority of whom are independent, and is presently chaired by the Senior Independent Non-Executive Director. The Committee held five (5) meetings during the financial year ended 31 December 2015. When the need arises, special meetings are convened. Details of the members’ attendance at the meetings are as follows:


Tan Sri Ismail Adam (Chairman)Senior Independent Non-Executive Director

5/5 100

Tan Sri Ismee Ismail*Non-Independent Non-Executive Director

2/4 50


5/5 100

Encik Zahari @ Mohd Zin Idris**Non Independent Non-Executive Director

– –

Datuk Rozaida Omar**Non-Independent Non-Executive Director

– –

Encik Mohd Tarmidzi Ahmad Nordin**Independent Non-Executive Director

– –

Notes:-

* Tan Sri Ismee Ismail ceased to be a director w.e.f 9 October 2015.

** Encik Zahari @ Mohd Zin Idris, Datuk Rozaida Omar and Encik Mohd Tarmidzi Ahmad Nordin were appointed as members of the RC

w.e.f. 8 January 2016.

The Committee’s role is to assist and support the Board by recommending the remuneration of Directors, GCEO and Executive Directors, as well as key Management Personnel of the Company.

The Terms of Reference of the RC are available on the Company’s website www.bimbholdings.com.

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3.3 Audit And Examination Committee (“AEC” or “Committee”)

The AEC is authorised by the Board to conduct activities within its Terms of Reference and has unrestricted access to both the internal and external auditors and the Management. The Committee comprises Non-Executive Directors, the majority of whom are independent, and is presently chaired by Datuk Zaiton Mohd Hassan, an Independent Non-Executive Director. Datuk Zaiton is a qualified accountant. The Committee met six (6) times during the year under review. Its activities are summarised in the AEC’s Report disclosed on pages 96 to 99 of this Annual Report.

3.4 Group Shariah Committee

Three (3) separate Shariah Committees provide Shariah guidance and consultation to BHB’s key subsidiaries (Islamic Banking, Takaful and Stockbroking).

In compliance with BNM’s Guidelines on the Governance Framework and the Company’s Memorandum and Articles of Association, the Shariah Committees ensure that the key subsidiaries operate in accordance with Shariah principles.

(a) The composition of the Shariah Supervisory Council of Bank Islam is as follows:

MEMBERS NATIONALITY

Ustaz Professor Dato’ Dr. Ahmad Hidayat Buang (Chairman) Malaysian

Ustaz Dr. Ahmad Shahbari @ Sobri Salamon Malaysian

Ustazah Dr. Uzaimah Ibrahim Malaysian

Ustaz Dr. Muhammad Syafii Antonio Indonesian

Ustazah Dr. Yasmin Hanani Mohd Safian Malaysian

Ustaz Mohd Nazri Chik (Secretary) Malaysian

Muhammad Zahid Abdul Aziz (Subject Matter Expert) Malaysian

(b) The composition of the Shariah Advisory Body of Syarikat Takaful Malaysia Berhad is as follows:

MEMBERS NATIONALITY

Ustaz Dr. Ahmad Shahbari @ Sobri Salamon (Chairman) Malaysian

Dato’ Mohd Bakir Haji Mansor Malaysian

Dr. Marhanum Che Mohd Salleh Malaysian

Professor Dr. Muhamad Rahimi Osman Malaysian

Dato’ Wan Mohamad Dato’ Sheikh Abdul Aziz Malaysian

Dr. Ahmad Sufian Che Abdullah Malaysian

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(c) The composition of the Shariah Committee of BIMB Securities Sdn Bhd is as follows:

MEMBERS NATIONALITY

Dato’ Mohd Bakir Haji Mansor (Chairman) Malaysian

Professor Emeritus Dato’ Paduka Dr. Mahmood Zuhdi Haji Abdul Majid Malaysian

Ir. Dr. Muhammad Fuad Abdullah Malaysian

4. SHAREHOLDERS

The Board recognises the importance of timely, complete, accurate and equal dissemination of information with regard to the Company and Group’s performance and other matters affecting shareholders’ interest, investors and the general public.

4.1 Investor Relations (Recommendation 7.1 of the MCCG 2012)

Investor Relations (“IR”) is guided by a set of internal guidelines and practices to ensure that stakeholders, investors and the investment community, both local and international, as well as the general public are provided with relevant, timely and comprehensive information about BHB. The Company is committed to providing effective and open communication in order to improve disclosure and transparency.

IR provides an important opportunity to promote effective communication and proactive engagement between the Group, its shareholders and the general public. It is also an effective tool to reach out and keep the stakeholders posted on the Group and the Company’s corporate activities, such as dialogues and discussions with fund managers, financial analysts and the media. These initiatives provide vital channels of communication for disclosure of pertinent matters that may affect stakeholders which include corporate direction, strategic developments, financial results and other business matters affecting the Company and Group, and provide a better understanding of the business and operations within BHB Group.

Within BHB, a dedicated IR unit is responsible in facilitating communications between the Company and the investment community. Holding regular meetings and knowledge-sharing sessions, BHB’s senior management actively engages with the investment community, intended to keep them abreast with the Company’s strategic developments and financial performance. Feedbacks from these series of engagements are significant in refining the Company’s operations and further contributing to the Company’s overall improvement.

BHB’s financial results are released on a quarterly basis, which provide the investment community with an up-to-date view of the Company’s performance and operations. Press releases and analysts briefings are timed to be issued and held concurrently with the release of those quarterly results. The results, together with the accompanying presentation which further details the Company’s financial performance and corporate direction are made available for public viewing at the Company’s website, www.bimbholdings.com.

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Any queries or concerns relating to the Company and/or BHB Group can be conveyed to the following persons:

Haryati YahyaHead, Investor RelationsTel: +6 (03) 2088 8073

Azizzi MohammedDeputy Manager, Investor RelationsTel: +6 (03) 2781 2903

Contact e-mail at: [email protected]

4.2 Conferences and Roadshows

The Company and its subsidiaries participate in various domestic and international conferences and roadshows, during which its business outlook, strategy and direction are communicated to the relevant stakeholders.

4.3 Financial Results

The Company and Group’s unaudited quarterly and audited annual financial results are released within the stipulated regulatory timeline to Bursa Securities, together with the accompanying press releases.

4.4 Annual Report

One of the most important methods of communication to shareholders is through the Company’s Annual Report, which contains comprehensive details about the financial results and overall performance of the Company and BHB Group.

The Chairman’s Statement in the Annual Report provides an overview of the Company and BHB Group’s performance, operations and other matters affecting shareholders’ interest. The Company also discloses its corporate governance and internal control statements in the Annual Report. Information disclosed in the Annual Report allows shareholders and investors to make informed investment decisions regarding the BHB Group.

4.5 General Meetings (Recommendation 8.1 of the MCCG 2012)

The Annual General Meeting is regarded as the main forum for dialogue and communication during which shareholders and investors are informed of the financial performance and current developments of the Group. Shareholders are encouraged to attend the Annual General Meeting and participate in the proceedings. Their approval is required on all material issues including, but not limited to, the election and appointment of Directors, corporate exercises as well as the appointment of auditors and dividend payments (if any).

At the General Meetings, shareholders are invited to ask questions or seek clarifications before any resolutions are put forth for approval. The GCEO will also brief shareholders on the Group’s financial performance. The Directors, Management of BHB and of its subsidiaries and the Company’s external auditors are available to respond to shareholders’ queries during the Annual General Meeting.

A press conference is held after each Annual General Meeting, at which the Company’s GCEO together with the Managing Director (“MD”)/CEOs of the major operating subsidiaries, will brief the media on the Group’s financial performance and corporate developments. This session also enables the Board and Management to clarify issues and answer questions raised by members of the media.

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4.6 Media Coverage

The Company’s major operating subsidiaries, namely Bank Islam, Takaful Malaysia and BIMB Securities, engage the media from time to time on matters pertaining to their respective products and services that are of interest to the public.

For any media related enquiries in relation to BHB Group, our Media Relations team can be reached at: [email protected].

4.7 Website (Recommendation 7.2 of the MCCG 2012)

BHB’s corporate website, www.bimbholdings.com, represents another channel of communication with stakeholders and acts as an effective platform to disseminate information to the public at large. It contains information on the Company and BHB Group such as its corporate profile, Senior Management, investor information, financial results and corporate news which can be assessed easily and promptly.

The latest BHB and Group updates can be obtained through the corporate website. In addition, stakeholders can obtain regulatory announcements made by BHB to Bursa Malaysia on the latter’s website, www.bursamalaysia.com.

5. ACCOUNTABILITY AND AUDIT

5.1 Financial Reporting and Disclosure

The Board has a fiduciary responsibility to present a clear, balanced and comprehensive assessment of the Company and Group’s performance and prospects. This is presented at the end of each quarter and financial year, primarily through the annual financial statements, quarterly and half-yearly announcement of results to shareholders as well as the Letter to Shareholders in the Annual Report. In order to meet its fiduciary responsibility, the Board is assisted by the AEC to ensure that the financial statements present a true and fair view of BHB Group’s financial performance and state of affairs.

The Board also ensures that the Company and BHB Group’s financial reporting complies with the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and Companies Act, 1965 (“Act”).

5.2 Directors’ Responsibility Statement

Pursuant to the Act, the Directors are required to provide annual financial statements which have been prepared in accordance with the provisions of the Act and applicable approved accounting standards.

The Statement by Directors pursuant to Section 169(15) of the Act is set out on page 110 of this Annual Report.

5.3 Internal Control

The Board recognises the importance of maintaining a sound internal control system that covers financial, operational and compliance controls to safeguard shareholders’ investments and the Company’s assets. The Statement on Risk Management and Internal Control, which provides an overview of the state of internal control, is set out on pages 100 to 105 of this Annual Report.

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Accountability


5.4 Policies (Recommendations 1.3, 1.4, 4.2 and 7.1 of the MCCG 2012)

(i) Corporate Disclosure Policy

A Corporate Disclosure Policy (“CDP”) has been formulated to enhance BHB’s corporate governance, particularly in the area of transparent disclosure to the public. The purpose of the CDP is to enable shareholders and stakeholders to access business information beyond the Company’s financial disclosure. In addition, it ensures that both the Board and Management are able to communicate effectively with stakeholders on a timely basis.

(ii) Corporate Social Responsibility (“CSR”) and the Environment

The Company has adopted an objective and positive stand by promoting a wide range of CSR activities through various community programmes and use of natural resources.

The Directors are of the view that the Company has adopted a good balance between value creation and corporate responsibility. Details of the Company’s CSR initiatives are set out on pages 52 to 63 of this Annual Report.

(iii) Code of Ethics (“COE”)

BHB’s COE was introduced on 4 June 2014 for reference of all BHB’s employees, to ensure they meet with the required standards of integrity, professionalism and ethical behaviour. BHB’s reputation as a responsible financial holding company and a good corporate citizen must be maintained and safeguarded for a sustainable growth of the organisation. The COE outlines how BHB’s employees should act with stakeholders, namely customers, service providers, communities, the media (electronic and print), investors and regulators.

The COE also provides the basis for all employees to adhere to a working environment that is productive, positive, enjoyable, safe and free from harassment and discrimination.

Each section of the COE covers an area in which employees have responsibilities to BHB, as follows:

(a) Personal conduct and protection of BHB’s assets;

(b) Obligations in conducting BHB’s business with other people and organization; and

(c) Conflict of interest and other considerations affecting BHB.

(iv) Whistle-Blowing Policy

BHB is committed to the values of transparency, integrity, impartiality and accountability in the conduct of its business and affairs. Wrongdoing such as fraud, corruption, financial impropriety and gross mismanagement should be reported and dealt with in accordance with the Company’s established due process. A whistle-blowing policy reflects BHB’s commitment to be vigilant at all times. It also assists BHB to manage its risks and contingencies as well as to avoid recurring acts of wrongdoing.

BHB promotes an open communication and transparent work culture by setting up internal procedures to address concerns regarding any likely wrongdoing. The policy complements the normal channels of communication and reporting lines within BHB. It also provides an alternative route for employees to raise concerns if the usual lines of communication are not available when the complaint relates to his or her immediate supervisor or head of department.

BHB encourages its employees to aspire to the highest possible standards of compliance and ethics. Whistle-blowing policies have therefore been integrated into BHB’s practices and culture to help to deter fraud, corruption and mismanagement.

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(v) Directors’ Code of Conduct and Ethics

BHB adopts the Code of Ethics for Company Directors issued by the Companies Commission of Malaysia. The Code of Ethics provides guidance for proper standards of conduct with sound and prudent business practices as well as standards of ethical behaviour for Directors, based on the principles of integrity, responsibility, sincerity and corporate social responsibility.

BHB’s Directors’ Code of Conduct and Ethics encompasses three (3) major areas, namely:

• CorporateGovernance;

• Relationshipwithshareholders,employees,creditorsandcustomers;and

• Socialresponsibilityandtheenvironment.

Based on the aforesaid, BHB’s Directors are required to discharge their duties and deal with various stakeholders with utmost integrity. This is in line with the Company’s core values which place emphasis on ethical dealings with third parties and employees.

(vi) Sustainability Policy

As a pioneer Shariah compliant financial services provider, BHB and its subsidiaries strive to be a responsible corporate citizen. BHB is committed to upholding Shariah principles in relation to its business and social responsibilities:

• Marketplace

BHB Group is committed to strengthening its Shariah governance, adopting a customer-centric philosophy for service excellence and promoting literacy in the areas of Shariah-compliant banking, takaful and stockbroking products.

• Workplace

BHB Group aspires to be an employer of choice by providing a conducive working environment, continuous education and development of talent, encouraging volunteerism and managing responsibly its most valuable asset, which is the staff.

• Community

BHB Group is focused on efforts to enrich deserving communities via education, social development and economic inclusion, poverty alleviation and humanitarian relief.

• Environment

BHB Group champions environmental conservation and the protection of natural resources via educational efforts targeted at its business constituents on the importance of environmental preservation.

In enhancing the Group’s sustainability practices, BHB and its subsidiaries are committed to adopting a new sustainability framework in compliance with MCCG 2012. Under the new framework, the Group intends to promote sustainable economic and social development, while at the same time creating positive impact on both the community and the environment.

The Group’s commitment to Sustainability is encapsulated by the GCEO’s Statement of Intent on Sustainability, which can be found in page 48 to 49 of this Annual Report.

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(vii) Directors’ Training Policy

As part of good corporate governance and acknowledging the significance of Directors’ roles and responsibilities in BHB, they are provided with continuous training. This equips the Directors with the relevant knowledge to be able to discharge their duties effectively.

(viii) Dividend Policy

BHB adopts a dividend pay-out policy of at least 50% of the Company’s net profit attributable to its ordinary shareholders. While the Board believes in rewarding the Company’s shareholders with steady returns on their investment, the Board is also mindful of retaining adequate reserves for future growth of the Company.

(ix) Procurement Policy

The policy is formed as a guide to procure assets, supplies and services in the most economical manner, taking into consideration factors such as quality, price, delivery, reliability and service level. Any compromise of any of these five (5) factors shall be subject to close scrutiny. It is also BHB’s policy to use the Red Book issued by the Putrajaya Committee on GLC High Performance (“PCG”) as a procurement best practices benchmark to complement its efforts to create greater shareholder value. Under the policy, all budgeted and unbudgeted procurement require prior approval of designated Approving Authorities as outlined in BHB’s Authority Limits document.

5.5 Relationship with Auditors (Recommendation 5.2 of MCCG 2012)

(a) Internal Auditors

The Company’s internal auditors (currently the function is outsourced to the Internal Audit Division of Bank Islam) report directly to the AEC and have unrestricted access to the AEC. The internal audit function is independent of the activities and operations of other operating units. The internal auditors conduct regular audits to evaluate the operating effectiveness of internal controls, and compliance with internal and regulatory requirements across the Company. The audit report, which highlights any findings, along with its recommendations and Management’s responses, are tabled to the AEC. Minutes of the AEC meetings are subsequently tabled to the Board for notation, which serves as useful reference on pertinent issues that the AEC wishes to highlight to the Board.

(b) External Auditors

The Board has established a transparent and appropriate relationship with its external auditors through the AEC. The AEC and Board maintain strong emphasis on the objectivity and independence of the auditors in providing relevant and transparent reports to shareholders. It is the policy of the AEC to meet with the external auditors at least two (2) times a year to discuss their audit plan, audit findings and BHB’s financial statements. There will be two (2) meetings with the external auditors held without the presence of the Management. The AEC also meets with the external auditors whenever it deems necessary. In addition, the external auditors are invited to attend BHB’s Annual General Meetings to answer shareholders’ questions on the conduct of the statutory audit and the preparation and contents of their audit report.

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The audit committee is responsible for reviewing the audits, as well as the recurring audit-related and non-audit services provided by the external auditors. These recurring audit-related and non-audit services comprise regulatory reviews and reporting, interim reviews, tax advisory and compliance services. The audit committee also reviews all ad-hoc non-audit services. In reviewing such cases, the audit committee ensures that the independence and objectivity of the external auditors are not compromised in accordance with the assessment criteria set out in the policies and procedures for appointment/re-appointment of external auditors for audit and non-audit services. The terms of engagement for services provided by the external auditors are reviewed by the AEC prior to submission to the Board for approval.

The AEC has considered the provision of non-audit services by the external auditors during the year and concluded that the provision of these services did not compromise the external auditors’ independence or objectivity and that the fees paid for these services was not significant when compared to the total fees paid to the external auditors.

(c) Audit Fees

Details of the statutory audit, audit-related and non-audit fees paid/payable in 2015 to the auditors are set out below:

GROUP RM’000

COMPANY RM’000

FEES PAID/PAYABLE TO KPMG DESA MEGAT & COStatutory Audit 1,379 78Audit-Related 536 50

– Validation or Perbadanan Insurans Deposit Malaysia Returns– Half-year Limited Review– Quarter 3 Limited Review– Statement of Risk Management and Internal Control– Review of Statement of Realised and Unrealised Profit or Losses– Verification of motor contribution income

16318014128222

––

181814

–

Non-Audit 40 22

– Accounting confirmation on Proposed Subordinated Sukuk– Other expenses

1822

–22

1,955 150

FEES PAID/PAYABLE TO OTHER AUDITORSStatutory Audit 123 –

TOTAL 2,078 150

This statement is made in accordance with the resolution of the Board dated 13 April 2016.

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AUDIT AND EXAMINATIONCOMMITTEE REPORT(“AEC” or “Committee”)

COMMITTEE:Datuk Zaiton Mohd Hassan (Chairman)Independent Non-Executive Director


Encik Zahari @ Mohd Zin IdrisNon-Independent Non-Executive Director

Encik Mohd Tarmidzi Ahmad NordinIndependent Non-Executive Director

The Committee conducts its activities based on its Terms of Reference. It derives its mandate and authority from the Board and has full access to the internal and external auditors as well as the management of the Company.

The Terms of Reference of the AEC can be found at www.bimbholdings.com.

The AEC of BHB consists of experienced and qualified members. The Committee is led by its Chairman, Datuk Zaiton Mohd Hassan, who is a Fellow of the Association of Chartered Certified Accountants (“ACCA”) and a member of the Malaysian Institute of Accountant (“MIA”) as well as the Malaysian Institute of Certified Public Accountants (MICPA). This is in line with the requirements under paragraph 15.09(1)(c) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and the Guidelines issued by Bank Negara Malaysia (“BNM”) on Corporate Governance for Licensed Islamic Banks (GP1-i) that at least one member of the Committee must be a member of the MIA or equivalent expertise or experience in the field of finance.

During the year under review, Encik Mohd Tarmidzi Ahmad Nordin, was appointed as an additional member of the AEC. Encik Mohd Tarmidzi brings with him the experience of more than thirty (30) years in the takaful industry. His experience and knowledge will enhance the effectiveness of the Committee, in particular when assessing and reviewing the financial information and internal controls related to the Group and takaful matters. Encik Mohd Tarmidzi holds an MBA in Islamic Finance (IIUM). He is also an Associate of the Chartered Insurance Institute UK (ACII) and Associate of the Malaysian Insurance Institute (AMII).

The Committee facilitates and assists the Board in fulfilling its statutory, oversight and fiduciary responsibilities to its stakeholders. The AEC’s salient responsibilities include the review of the following:

(a) integrity of the financial statements;

(b) performance of the external auditors;

(c) effectiveness of internal controls;

(d) performance of the Internal Audit functions; and

(e) compliance with legal and regulatory requirements.

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GOVERNANCE

The AEC provides an independent oversight of the internal and external audit functions, internal controls and checks and balances within the Company. The AEC meets at least once every quarter. The AEC has convened five (5) meetings during the year under review.

Details of the members’ attendance at the AEC meetings held during the financial year ended 31 December 2015 are as follows:


Datuk Zaiton Mohd Hassan (Chairman)Independent Non-Executive Director

5/5 100


5/5 100

Encik Zahari @ Mohd Zin IdrisNon Independent Non-Executive Director

5/5 100

Encik Mohd Tarmidzi Ahmad Nordin*Independent Non-Executive Director

1/1 100

Note:* Encik Mohd Tarmidzi Ahmad Nordin was appointed as a member on 3 September 2015.

The Chairman of the Committee updates the Board on key matters deliberated at the AEC’s meetings. In addition, minutes of the AEC meetings are circulated to the Board for notification. Any member of the Board may enquire or seek clarification on the matters deliberated by the AEC as recorded in the minutes.

The AEC meets with the external auditors without the presence of the management twice a year. This is the forum where the external auditors will highlight any concern they may have on the preparation of the financial statements or material issues of internal control within the Company.

The Terms of Reference of the AEC is reviewed at least once every two (2) years or as and when necessary. This will ensure the roles and responsibilities of the AEC are reflective of the expected roles of the AEC pursuant to the relevant guidelines issued by BNM and Bursa Securities.

FUNCTIONS AND ACTIVITIES

During the year under review, the AEC’s key activities include:

1. Financial Reporting

(a) Review the quarterly unaudited financial results and related press statements for recommendation to the Board prior to the release of the same to BNM and Bursa Securities;

(b) Review the consolidated audited financial statements, prepared in accordance with the Financial Reporting Standards which will give a true and fair view of the state of affairs of the Group;

(c) Review the financial performance of the Group’s major operating subsidiaries;

(d) Consider proposals for interim dividend and Dividend Reinvestment Plan;

(e) Review Letter of Management Representation in relation to the audited financial statements; and

(f) Review the updates on Internal Accounting Controls.

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AUDIT AND EXAMINATIONCOMMITTEE REPORT

The AEC assists the Board in ensuring the financial statements of the Company and its Group is prepared in accordance with the applicable financial reporting standards and is accurate and reliable. The AEC will review and determine whether in the preparation of the financial statements appropriate accounting policies have been adopted and supported by reasonable and prudent judgment and estimates.

The Group Chief Financial Officer (“GCFO”) is responsible for the financial management of the Company. Mr. Malkit Singh Maan, the GCFO, assumed the position since early 2015. He was previously the CFO of Bank Islam Malaysia Berhad (“Bank Islam”). Mr. Malkit is a Certified Practising Accountant (“CPA”), a member of the Australian Society of CPAs and Chartered Accountant of MIA.

The GCFO presents the quarterly financial statements and the consolidated audited financial statements of the Group at the AEC meeting. On quarterly basis, the GCFO also provides the update on the Group’s financial performance as well as the financial industry’s performance to compare the Group’s performance against the other financial Groups.

For the preparation of the Group’s financial statements the GCFO highlights key issues including the adoption of new accounting standards/policies.

During the year under review, the GCFO and the external auditors have highlighted on the new requirements on key audit matters. A special briefing for the Board and the management of the Group on the new financial reporting standards, including the requirements on key audit matters was organised. The briefing was conducted to help the management and the Board to understand the requirements of the new/revised standards and to facilitate actions to address and meet the new requirements within the stipulated deadline. The AEC also considered the impact of the new/revised standards to the Company and/or Group.

2. Internal Audit & External Audit

Internal Audit

The internal audit function of BHB and its wholly-owned subsidiaries, namely Syarikat Al-Ijarah Sdn Bhd, BIMB Securities Sdn Bhd and BIMB Securities (Holdings) Sdn Bhd has been outsourced to the IAD of Bank Islam since December 2008. The IAD is led by the Chief Internal Auditor, Encik Mohamed Iran Moriff Mohd Shariff. Encik Iran was appointed as Bank Islam’s Chief Internal Auditor in May 2014. He is a Certified Public Accountant and a fellowship member of the ACCA, Encik Iran is also a certified Internal Auditor for Financial Institutions (CIAFIN).

The AEC reviews and approves the annual audit plan at the beginning of each financial year. The IAD adopts the COSO Framework for its audit engagement. The said Framework ensures a holistic and structured approach to assess formal and informal controls as well as provides greater communication to enhance understanding of control concept, task and improving operational efficiency. The results of the audits conducted, including its risks and recommendations are reported to the AEC.

The internal audit functions of Bank Islam and Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”) are carried out by their respective internal audit divisions.

For the financial year ended 31 December 2015, the total cost incurred for the internal audit function of the Group and Company were RM25,500 and RM18,500, respectively.

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External Audit

The AEC reviews the external auditors’ audit plan, which summarizes the responsibilities and scope of work for the financial year ended 31 December 2015. The audit plan includes the audit approach for year 2015, covering the scope, audit methodology and timetable, critical milestones, audit materiality, focus area and timeframe for issuance of periodic financial information. The AEC considers the audit fees of the external auditors and makes the necessary recommendation to the Board.

The AEC reviews the audit methodology, focusing on risk assessment, control evaluation and substantive testing. The external auditors will highlight to the AEC key findings on any audit matters. Where relevant and necessary, the Committee will make recommendations to the Board on the rectification actions to be taken.

BNM Policy Document on External Auditors requires an annual assessment on the external auditors. The said assessment is undertaken by the AEC. For the FYE 31 December 2015, the AEC has formed a collective view on the external auditors’ performance. The AEC has concluded that the external auditors’ team, led by the engagement partner, has met all the required criteria specified in the policy document and performed satisfactorily.

The assessment on the external auditors covers the external auditors’ independence, their ability to meet the company’s requirements, governance, efficiency and effectiveness in planning and conducting its audit.

3. Other Activities

The following is a summary of other activities carried out by the AEC during the year under review:

(a) Review the reports of related party transactions and the Circular to Shareholders with regard to the proposed renewal of shareholders’ mandate for existing recurrent related party transactions of a revenue or trading nature;

(b) Review the Zakat Computation for Company and its wholly owned subsidiaries for the year under review;

(c) Review the Company’s disclosures in the Annual Report, i.e., the Statement of Corporate Governance, AEC Report and the Statement on Risk Management and Internal Control; and

(d) Review the report on the Company’s status of compliance with regulatory requirements namely Listing Requirements of Bursa Securities, Islamic Financial Services Act 2013, BNM’s Guidelines, Companies Act 1965 and Capital Market and Services Act 2007. The report also highlights any new regulatory requirements as well as consultation papers issued by the relevant regulators and the deadline for compliance. Where relevant, the Committee will review the action plan proposed by the management in meeting the regulatory requirements.

PERFORMANCE REVIEW OF THE COMMITTEE

During the financial year, the Terms of Reference of the Committee was reviewed to reflect the regulatory requirements arising from the company being approved and designated as a Financial Holding Company. The evaluation on the effectiveness of the Board, its committees and the members of the Board revealed that the Board is satisfied with the performance of the AEC and its members. The AEC has discharged its duties in accordance with its Terms of Reference and in line with the requirements of BNM and Bursa Securities.

This statement is made in accordance with a resolution of the Board dated 13 April 2016.

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Accountability

STATEMENT ONRISK MANAGEMENT AND INTERNAL CONTROLINTRODUCTION

Pursuant to Paragraph 15.26(b) of the Listing Requirements of Bursa Malaysia Securities Berhad, the Board of Directors (“Board”) is pleased to provide the following Risk Management and Internal Control Statement (the “Statement”) which outlines the nature and scope of risk management and internal controls of the Group during the financial year ended 31 December 2015.

For the purpose of disclosure, this Statement is guided by the Statement on Risk Management & Internal Control: Guidelines for Directors of Listed Issuers. The Board is committed and acknowledges its responsibility to oversee the system of risk management and internal controls within the Group including reviewing its adequacy, integrity and effectiveness to safeguard shareholders’ investments and the Group’s assets.

RESPONSIBILITY

The Board recognises that a sound system of internal control and risk management practices are essential in ensuring good corporate governance. Such a system is designed to manage an acceptable risk profile rather than eliminate the risk of failure to achieve the business objectives of the BHB Group; and can only provide reasonable and not absolute assurance against material misstatement, fraud or loss.

As a financial holding company (“FHC”) enhancements are made to the system of internal control in line with the Board’s commitment to improve the Group’s governance, risk management and internal control framework, control culture and environment for the proper control of the Group’s business operations which is also in line with Bank Negara Malaysia’s (“BNM”) regulatory framework.

The Board has established appropriate controls and processes for identifying, evaluating, monitoring and managing significant risks that may affect the achievement of BHB Group’s objectives. For the year under review, the primary risk management and internal control oversight responsibilities was carried out by the Audit & Examination Committee (“AEC”) at BIMB Securities and BHB level while for Bank Islam and Takaful Malaysia, the oversight function is carried out by the respective Board Risk Committee (“BRC”).

The control structure and processes which have been instituted throughout the BHB Group is reviewed from time to time to cater for the changes in the business environment. The AEC and the respective BRC at the main operating subsidiaries regularly reviews and monitors the Management’s approach and actions in addressing key risks at Company and subsidiaries level. This process has been in place and continued to be BHB Group’s practice for the financial year under review and up to the date of approval of this Statement for inclusion in the Annual Report of the Company.

The Board of BHB receives quarterly reports relating to regulatory developments and compliance deficiencies identified within the Group. The Board focuses on the deficiencies reported, understands the root causes and directs Management to take all steps necessary to correct the circumstances and conditions that had caused the compliance deficiencies. This includes specific remediation plans and follow-up actions to ensure the deficiencies are addressed.

In addition to the above, two (2) new committees at group level namely: Group Management Committee (“GMC”) and Group Risk Management Committee (“GRMC”) had been established to assist the Board in managing the risk and internal control of the group. Through these committees, the Management is also responsible to ensure that the relevant key subsidiaries have performed the following:

• Identifytherisksrelevanttothebusiness,implementationofstrategiesandtheachievementofitsobjectives;

• Implementregularriskmanagementreporting,monitoringandreviewaspartofitsriskmanagementframework;

• Identifychangestorisksoremergingrisks,takeactionsasappropriate,andpromptlybringthesetotheattentionoftheBoard;

• ImplementthepoliciesapprovedbytheBoard;and

• ReportinatimelymannertotheBoardanychangestotheriskandanycorrectiveactiontaken.

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The BHB’s AEC assists the Board to review the adequacy and effectiveness of the systems of internal control and ensures that appropriate methods and procedures are in place to obtain the level of assurance required by the Board. The Risk Management and Internal Control Statements of the Group’s Islamic Banking and Takaful subsidiaries were approved by their respective Board. Any material internal control deficiencies within BHB Group will be presented to the respective Board, BHB would also review the risk related issues through a Risk Management Dashboard reporting (“RMD”) on quarterly basis.

KEY INTERNAL CONTROL STRUCTURE

Key processes that the Board has established in reviewing the adequacy and effectiveness of the system of internal controls include the following:

• RiskManagementFramework

The Board has established an organisation structure and charter with clearly defined lines of responsibility, authority limits and accountability in association with BHB Group’s business and operational requirements in order to maintain a sound control environment.

BOARD

AEC

Group Risk Management Committee

Group Chief Executive Officer

Group Management Committee

Risk management is considered an integral part of BHB Group’s day-to-day operations to ensure BHB achieves its business objectives as well as to protect its shareholders and stakeholders value. In line with Recommendation 6.1 of the Malaysian Code on Corporate Governance (“MCCG 2012”), risk management is embedded in the Group’s key processes and monitored through a RMD reporting tool. The Group’s major operating subsidiaries, namely Bank Islam Malaysia Berhad (“Bank Islam”), Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”) and BIMB Securities Sdn Bhd (“BIMB Securities”), report their risks via the RMD on a quarterly basis.

Major operating subsidiaries, each have respectively appointed a qualified risk officer who is responsible to monitor, assess and manage the risks associated with the business and operations of the subsidiaries. To ensure effective conduct of risk management, based on its Risk Management Framework, both Bank Islam and Takaful Malaysia tabled their risk reporting to their BRC whilst for BIMB Securities to its AEC.

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Accountability

STATEMENT ONRISK MANAGEMENT AND INTERNAL CONTROL

Risk management practices are inculcated and embedded in the activities of the Group’s major operating subsidiaries. These include the establishment of risk tolerance thresholds and Risk Appetite Statement that identifies, assesses and monitors the risks associated with the business of the subsidiaries.

The BRC or the AEC (as the case may be) at the major operating subsidiaries will escalate and update the Board on any new regulatory or statutory requirement that could impact the Risk Management principles, policies, procedures and practices of the Company and subsidiaries.

The GRMC would present and discuss the issues relating to amongst others, the operational and market risk, emerging risk, to discuss on the tolerance level for each of the operational business and ensuring that they are within accepted parameter by the relevant regulatory bodies. The minutes of GRMC meeting is subsequently tabled at the GMC for their notification.

• AuditandExaminationCommittee(“AEC”)

The AEC of BHB reviews the adequacy of internal controls within the companies based on the assessment performed by the internal auditors. In addition, relevant matters pertaining to internal accounting controls are also reported to the respective AEC on a quarterly basis. The AEC also review and assess the adequacy of the scope and effectiveness of the internal as well as external audit functions. For the external auditors, the AEC also assess their independence and the quality of their resources. The risk responses and internal controls that the Management has initiated are documented and recorded in the minutes.

Pursuant to Paragraph 15.17(f) of the Listing Requirements of Bursa Malaysia Securities Berhad, BHB’s AEC had two (2) separate meetings with the external auditors, without the presence of any executive members of the Company, to discuss on any issues relating to BHB Group during the financial year ended 31 December 2015.

• GroupManagementCommittee(“GMC”)

The GMC was established to facilitate BHB in fulfilling its obligation as a financial holding company pursuant to the Islamic Financial Services Act 2013. The GMC serves as a platform to discuss strategic issues, strengthen coordination and create Group synergies in order to meet the Group’s objectives and create shareholder’s value.

The GMC is chaired by the Group Chief Executive Officer (“Group CEO”) of BHB and the members comprise the Managing Director or Chief Executive Officer of the respective major subsidiaries.

• GroupRiskManagementCommittee(“GRMC”)

The GRMC has been established to effectively manage the key risk areas of BHB Group and to ensure that an appropriate risk management system and internal controls are in place and functioning effectively. The GRMC is also responsible for assessing the adequacy of infrastructure, resources and systems for effective risk management, and where necessary to embark on the Group’s initiative to share facilities, mobilise resources, etc. In addition, the GRMC reviews the Management’s periodic reports on risk exposure, risk portfolio composition and risk management activities.

The GRMC comprises the Group Chief Strategy Officer and Group Chief Financial Officer of BHB together with the Risk Officer of each major operating subsidiary.

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• InternalAudit

The internal audit function of BHB and its subsidiaries (save for Takaful subsidiaries) is carried out by the Internal Audit Division of Bank Islam (“Internal Audit”). The internal audit function, assesses compliance with policies and procedures and the effectiveness of the Group’s internal control systems. Internal Audit undertakes regular reviews of BHB and its subsidiaries’ operations and business processes, examining and evaluating the adequacy and efficiency of financial and operating controls, and highlighting significant risks and non-compliance. Where applicable, Internal Audit will provide recommendations to improve the management of risks, control and governance processes. The AEC regularly reviews the status of rectification actions on the findings or recommendations by the internal auditors. Further details on the activities of the internal audit function are provided in BHB’s AEC report.

Internal audit is performed on all key divisions in BHB Group, providing the respective AECs an independent assurance on the operational, financial, compliance and risk related activities within the Group. The risk-based internal audit plan is reviewed and approved by the respective AECs of the key subsidiaries. The respective AECs review the internal audit observations highlighted in the internal audit reports.

For Islamic Banking and Takaful subsidiaries, the internal audit function is carried out by its own independent internal audit department. The internal auditors reports directly to the respective AECs.

• ShariahAdvisory

A fundamental requirement of an Islamic financial institution is that its entire business practices and operations are based on Shariah rules and principles. Islamic finance derives its value proposition from the application of Shariah contracts in financial transactions that provide for different risks and return profiles. Adherence to Shariah principles under such distinct contracts preserves the validity and sanctity of any Islamic financial transactions. As such, BHB is committed to upholding these principles via strict observance of the Shariah Governance Framework outlined by BNM.

The Shariah advisory function of BHB and its subsidiaries (save for Takaful and stockbroking subsidiaries) is carried out by the Shariah Supervisory Council of Bank Islam (“SSC”).

A key responsibility of the SSC is to advise the Board on Shariah matters in relation to business operations, compliance with Shariah principles at all times as well as auditing the operational aspect of BHB and endorsing the zakat computation and distribution.

For Takaful and stockbroking subsidiaries, the Shariah advisory function is carried out by its own independent Shariah committee. The Shariah committees reports directly to the respective Board.

OTHER KEY ELEMENTS OF INTERNAL CONTROL

In addition to the policies and standard operating procedures and processes, BHB and its subsidiaries have also adopted a Code of Ethics and a Whistle Blowing Policy. The latter serves as an avenue for employees to report actual or suspected malpractice, misconduct or violation of policies or regulations.

The other key elements of the internal control systems are described below:

• StandardOperatingProcedures

Documented Standard Operating Procedures (“SOPs”) for all departments of BHB were approved by the respective Head of Department. The SOPs serves as a day-to-day operational guide to ensure compliance with financial and operational controls as well as the applicable laws and regulations. All SOPs are reviewed and updated regularly to reflect current risks, new regulatory requirements and current operations.

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Accountability

STATEMENT ONRISK MANAGEMENT AND INTERNAL CONTROL

• HumanResourcesPoliciesandProcedures

The Human Resources SOP of BHB encompasses areas of human resources management such as the recruitment of new employees based on “fit and proper” criteria, performance appraisals, training and development.

• AnnualBusinessPlanandBudgetingProcess

The Group’s annual budget is prepared based on the annual business plans of BHB’s operating subsidiaries. The budget and business plan are approved by the subsidiaries’ respective Boards and subsequently endorsed by BHB Board. Actual performances of the subsidiaries are reviewed against the targeted results on a quarterly basis allowing for timely response and corrective actions to be taken to ensure the business targets are met.

The subsidiaries’ performances are assessed against the budget, business plans and key financial indicators.

• InformationTechnology(“IT”)System

IT is key in supporting the service efficiency and delivery systems of the Group. The IT Risk Framework was developed to ensure that risks are correctly identified and mitigated accordingly. BHB’s Banking and Takaful subsidiaries also have develop their IT policies to address issues of security and risk related to IT. The subsidiaries continue to upgrade their IT systems to enhance efficiency of their business operations and to facilitate the implementation of their risk-based capital frameworks. During the period under review, the subsidiaries also undertook a number of IT system upgrades in view of new regulatory requirements, including the Personal Data Protection Act 2010, Islamic Financial Services Act 2013 and the Goods and Services Tax Act 2014.

• PerformanceReview

The Board receives and reviews reports from the Management on the Group’s financial and operational performance, risk management as well as legal and regulatory matters on a quarterly basis. The financial performance presented highlights the key financial indicators of which include amongst others the ratio on profitability, capital adequacy and asset quality.

The actual performance of BHB and its operating subsidiaries are assessed against approved budgets and business plans, key financial indicators as well as industry averages to identify significant deviations and gaps, for the respective Managements to take remedial measures where necessary.

ASSURANCE FROM MANAGEMENT

The Board has received assurance from BHB’s Group CEO and the Group Chief Financial Officer that the Group’s risk management and internal control systems are operating adequately and effectively, in all material aspects, during the financial year under review and up to the date of this Statement.

Taking into consideration the assurance from Management and the input from the relevant assurance providers, the Board is of the view that the systems of risk management and internal control are performing satisfactorily and are adequate to safeguard the shareholders’ investments, customers’ interest and the Group’s assets as well as there were no significant problems. The Group will continue to implement new measures to strengthen the internal control and risk management environment.

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REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Recommended Practice Guide (“RPG”) 5 (Revised 2015), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants (“MIA”) for inclusion in the Annual Report of the Group for the financial year ended 31 December 2015. Based on the review conducted, the external auditors have reported to the Board that nothing has come to their attention that cause them to believe that the statement intended to be included in the Annual Report of the Group, in all material respects:

(a) has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, or

(b) is factually inaccurate.

RPG 5 (Revised 2015) does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Board of Directors and Management thereon. The auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the Annual Report will, in fact, remedy the problems.


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Accountability

1. SHARE BUYBACKS

BHB did not purchase any of its own shares during the financial year ended 31 December 2015.

2. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES

BHB had on 11 December 2013 issues 426,715,958 Free Detachable Warrants pursuant to the Renounceable Rights Issue of 426,715,958 new ordinary shares of RM1.00 each in BHB in respect of the financial year ended 31 December 2013. Details of the warrant holdings is set out on pages 265 to 268 of the Annual Report.

BHB did not issue any options, warrants or convertible securities in respect of the financial year ended 31 December 2015.

3. AMERICAN DEPOSITORY RECEIPT (“ADR”) OR GLOBAL DEPOSITORY RECEIPT (“GDR”)

BHB did not sponsor any ADR or GDR programme in the financial year ended 31 December 2015.

4. NON-AUDIT FEES

The amount of non-audit fees paid/payable by BHB to its external auditors and their affiliated companies for the financial year ended 31 December 2015 is set out on page 95 of the Annual Report.

5. PROFIT GUARANTEE

BHB did not give out any profit guarantee during the financial year under review.

6. LIST OF PROPERTIES

The list of BHB’s properties is set out on pages 254 to 260 of the Annual Report.

7. MATERIAL CONTRACTS INVOLVING DIRECTORS AND MAJOR SHAREHOLDERS

Save as disclosed below and the related party transactions disclosed in Note 44 of the Financial Statements, no other material contract entered into by BHB or its subsidiary companies involving Directors and/or major shareholders’ interest was still subsisting at the end of the financial year or entered into since the end of the previous financial year.

(a) A Deed Poll dated 25 October 2013 was executed by BHB constituting the issuance of 426,715,958 free detachable warrants pursuant to the renounceable rights issue of 426,715,958 new ordinary shares of RM1.00 each in BHB together with 426,715,958 free detachable warrants.

8. IMPOSITION OF SANCTIONS AND/OR PENALTIES

There were no public sanctions and/or penalties imposed on the Company or its subsidiaries, Directors or Management arising from any significant breach of rules/guidelines/legislations by the relevant regulatory bodies during the financial year under review.

9. VARIATION ON RESULTS

There was no variation in results (differing by 10% or more) from any profit estimated forecast or projection of unaudited results announced.

ADDITIONALCOMPLIANCE INFORMATION

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10. GENERAL MANDATE

BHB Group had at the last AGM obtained a general mandate from its shareholders to allow BHB and/or its subsidiaries, in their normal course of business, to enter into recurrent transactions of a revenue or trading nature with related parties (“RRPTs”) which are necessary for its day-to-day operations, on terms not more favourable to the related party than those available in the general public and not to the detriment of the minority shareholders. The RRPTs Mandate is valid until the conclusion of the forthcoming AGM of the Company. The Board proposes to seek the renewal of the existing RRPTs Mandate at the forthcoming 19th AGM of the Company which will be held on 1 June 2016 at 10.00 a.m. This Mandate, if approved by shareholders, will be valid until the conclusion of the next AGM of the Company in the year 2017.

NATURE OF TRANSACTIONS

RELATED PARTY/PRINCIPAL ACTIVITIES

INTERESTED DIRECTOR AND/ OR MAJOR SHAREHOLDERS1

ACTUAL VALUE TRANSACTED FROM 14 MAY 2015 (BEING THE DATE OF THE LAST AGM) TO 31 MARCH 20162

• 3Rental of office premises payable by Bank Islam Malaysia Berhad (“Bank Islam”) to Lembaga Tabung Haji (“TH”).

THTH is principally involved in providing pilgrimage management services, saving and depository services, investment holding and rental of buildings.

Interested major shareholderTH is a major shareholder of BHB with 53.63% shareholding.

Interested Directors(1) Tan Sri Ismee Ismail, the Group Managing

Director and Chief Executive Officer of TH, was also a Director of BHB and Bank Islam up to 9 October 2015. He has no direct/indirect shareholding in TH, BHB and Bank Islam.

(2) Dato’ Johan Abdullah, the Deputy Group Managing Director and Chief Executive Officer of TH, was also a Director of BHB and Bank Islam up to 17 February 2016. He has no direct/indirect shareholding in TH, BHB and Bank Islam.

(3) Tan Sri Samsudin Osman, Datuk Rozaida Omar and Puan Rifina Md Ariff are nominee directors of TH in BHB. They have no direct/indirect shareholding in TH and BHB.

(4) Encik Zahari @ Mohd Zin Idris and Datuk Zaiton Mohd Hassan are Directors of Bank Islam and BHB. They have no direct/indirect shareholding in Bank Islam and BHB.

(5) Dato’ Sri Zukri Samat, the Group Chief Executive Officer of BHB, is also the Managing Director of Bank Islam. He has no direct/indirect shareholding in BHB and Bank Islam.

19,848

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Accountability





• 3Rental of office premises payable by Bank Islam to Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”).

Takaful MalaysiaTakaful Malaysia is principally involved in family and general takaful business.

Interested Directors(1) Tan Sri Ismee Ismail was a Chairman/

Director of Takaful Malaysia up to 15 December 2015, and a Director of Bank Islam and BHB up to 9 October 2015. He has no direct/indirect shareholding in Takaful Malaysia, Bank Islam and BHB.

(2) Dato’ Johan Abdullah was a Director of Takaful Malaysia up to 17 February 2016, and a Director of BHB and Bank Islam up to 17 February 2016. He has no direct/indirect shareholding in Takaful Malaysia, BHB and Bank Islam.

(3) Datuk Rozaida Omar is a Director of Takaful Malaysia and BHB. She has no direct/indirect shareholding in Takaful Malaysia and BHB.

(4) Encik Zahari @ Mohd Zin Idris and Datuk Zaiton Mohd Hassan are Directors of Bank Islam and BHB. They have no direct/indirect shareholding in Bank Islam and BHB.

5) Dato’ Sri Zukri Samat, the Group Chief Executive Officer of BHB, is also the Managing Director of Bank Islam. Dato’ Sri Zukri Samat has no direct/indirect shareholding in BHB and Bank Islam.

2,209

ADDITIONALCOMPLIANCE INFORMATION

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• 3Rental of office premise payable by BHB to Bank Islam.

• 3Rental of office premise payable by Bank Islam to Syarikat Al-Ijarah Sdn Bhd (“SAISB”).

Bank IslamBank Islam is principally involved in the provision of Islamic banking and related activities based on the principles of Shariah.

Interested Directors(1) Tan Sri Ismee Ismail and Dato’ Johan

Abdullah were Directors of BHB and Bank Islam up to 9 October 2015 and 17 February 2016 respectively; Datuk Zaiton Mohd Hassan and Encik Zahari @ Mohd Zin Idris are Directors of BHB and Bank Islam. They have no direct/indirect shareholding in BHB and Bank Islam.

(2) Dato’ Sri Zukri Samat, the Group Chief Executive Officer of BHB, is also the Managing Director of Bank Islam. He has no direct/indirect shareholding in BHB and Bank Islam.

862 155

There is no amount due and owing to BHB by its related parties pursuant to the RRPTs.

Notes

1 The direct and indirect shareholdings of the related parties in BHB above are set out in Section 6 of the Circular to Shareholders dated 28 April 2016.

2 The last practicable date before printing of the Circular is 31 March 2016.

3 The rental sum of the properties was arrived at or estimated based on the ongoing or expected market rate at the time the tenancy agreement was or to be executed. Details of the rental of office premises are set out in the Circular to Shareholders dated 28 April 2016.

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Accountability

This statement is prepared pursuant to the Companies Act, 1965 and the Listing Requirements of Bursa Securities. The Directors are required to prepare financial statements which give a true and fair view of the state of affairs of the Group and the Company as at the end of each financial year and of their cash flows for that year then ended.

In preparing the financial statements for the year ended 31 December 2015, the Directors have:

• adoptedsuitableaccountingpoliciesandappliedthemconsistently;

•madejudgmentsandestimatesthatarereasonableandprudent;

• ensuredapplicableFinancialReportingStandardshavebeenfollowed;and

• preparedthefinancialstatementsonagoingconcernbasis.

The Board has the overall responsibility to take all steps as are reasonably necessary to safeguard the assets of the Group to prevent and detect fraud and other irregularities.


STATEMENT ONDIRECTORS’ RESPONSIBILITY

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milestones and overview leadership perspectives achievements

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