CORPORATE GOVERNANCE OVERVIEW STATEMENT · management processes of the Company and Group. Set the...

CORPORATE GOVERNANCEOVERVIEW STATEMENT

CHAIRMAN’S CORPORATE GOVERNANCE (“CG”) OVERVIEW REPORT

OurCG is a reflectionofour value, systemand compassingourculture, policies and relationship with our stakeholders. Integrity and transparencyarekey toourCGpractices toensure thatwegain and retain the trust of our stakeholder at all times. BHB is subjecttoanextensiverangeoflegal,regulatoryandgovernancerequirements and is committed to observing the requirementsapplicable to publicly listed companies in Malaysia. The Board is conscious that best practice in the area of CG is evolvingcontinuouslyandwillthereforecontinuetoresponsetofurtherCGdevelopment.

The Board is responsible for the leadership, oversight, control, development and long-term success of BHB and Group and also for instilling the appropriate culture, values and behaviour throughout the organisation.

Our Board is satisfied that our current Board composition provides theappropriatebalanceintermsofskills,knowledgeandexperienceto promote the interests of all stakeholders and to govern our Companyeffectively.Ourgovernanceprocesses,cultureofintegrityand openness, and a diversity of perspective continue to support the Board in delivering a sustainable and successful BHB Group. TheBoardCommitteescontinuetoplayavitalroleinsupportingthe Board. The Company’s governance framework is shown onpage92.

The Board is receptive to Bursa Malaysia Securities Berhad’senhancedcorporategovernancedisclosurerequirementswhicharesetoutinPara15.25andPracticeNote9oftheMainMarketListingRequirements, which was introduced in line with theMalaysianCodeofCorporateGovernance2017 (“MCCG 2017”). Pursuant tothesedisclosurerequirements,theBoardhastakenthenecessarystepstosetoutasummaryoftheCompany’scorporategovernancepracticesduring FY2017 in thisCorporateGovernanceOverviewStatement(CGOverviewStatement).Inaddition,theapplicationofeachofthePracticessetoutintheMCCG2017isdisclosedinourCorporateGovernanceReport(CGReport).

TAN SRI HAJI AMBRIN BUANGChairman

TAN SRI HAJI AMBRIN BUANGChairman/IndependentNon-ExecutiveDirector

The Board is conscious that best practice intheareaofCGisevolvingcontinuouslyand will therefore continue to response to furtherCGdevelopment.

This CGOverviewStatementispreparedincompliancewithBursa Malaysia Securities Berhad Main Market ListingRequirementsandistobereadtogetherwiththeCGReport2017ofthe CompanywhichisavailableonBIMBHoldingsBerhad’swebsite:

http://www.bimbholdings.com/sites/default/files cgreport-2017.pdf

The CG Report 2017 provides the details on how theCompanyhaveappliedeachPracticeassetoutintheMCCG2017duringthefinancialyear2017.

This CGOverview Statement summarises themain corporategovernance practices and policies in place during the 2017financial year and at the date of this statement relating to the consolidated entity comprising BHB and its subsidiaries. The Company’s corporate governance practices are reviewedregularly and will continue to be developed and refined to meettheneedsoftheCompanyandtakingintoaccountbestpractices and guidelines.

The regulatory environment continues to evolve with majorchanges in 2017 in particular the amendments to the BursaSecuritiesMainMarket Listing Requirement on 29 November2017andMCCG2017whichcameintoeffecton26April2017.

BHB’s corporate governance framework is consistent andcomplieswiththefollowingrequirementsandguidelines:-

(a) CompaniesAct2016.

(b) Bank Negara Malaysia’s (“BNM”) Corporate GovernancePolicy(“BNM CG Policy”);

(c) MCCG2017;

(d) BursaMalaysiaSecuritiesBerhad(“Bursa Securities”) Main MarketListingRequirements(“Listing Requirements”);

(e) Corporate Governance Guide (“CG Guide”): TowardsBoardroomExcellence2ndEditionbyBursaSecurities;

(f) Green Book on Enhancing Board Effectiveness (“GreenBook”) by the Putrajaya Committee on GovernmentLinked-CompaniesHighPerformance;and

(g) MSWG’s Malaysia – ASEAN Corporate GovernanceScorecard.

The application of the respective principles and best practices on corporate governance are highlighted in the various sections of thisCGOverviewStatement.

BHB’s established structures, processes and policies help toensure compliance with laws and regulations and provide clear lines of sight for decision-making and accountability.

The Board of Directors of BIMB Holdings Berhad (“BHB” or “the Company”) is committed to upholding high standards of corporategovernancetopreservestakeholders’trust,safeguardtheirinterestandenhancetheirvalueinlinewithBHBGroup’sobjective to be the premier Islamic financial services provider.TheBoardofDirectors(“Board”) acknowledges the importance of governance and has given full commitment to ensure the adoption of high standards of practices in both the Group’sbusinesses and operations.

A midst an increasingly challenging business environment, the Board continuously strives to refine the company’s corporategovernance practices and processes to meet the challenges head-on, to ensure that the group competitive edge remains undiminished.TestamenttotheBoard’sunwaveringcommitmentin the area of corporate governance, BHB has received the following awards:-

2017MALAYSIANNATIONAL ANNUALCORPORATEREPORT AWARDS(NACRA)• CertificateofMeritrecipients

in Annual Report

MINORITYSHAREHOLDER WATCHDOGGROUP(MSWG)• Top20MeritawardforoverallCorporate

Governance and Performance• Top20MeritawardforCorporateGovernanceDisclosures

ASIASUSTAINABILITYEXCELLENTAWARD2017• BestSustainabilityStrategies• BestSustainabilityReport

THEEDGEBILLIONRINGGITCLUBCORPORATEAWARDS2017• Silver,HighestGrowthinProfitafterTaxin3years–FinanceSector(belowRM10BillionMarketCap)


BHB’S GOVERNANCE FRAMEWORK

Shareholders

BoardofDirectors

Audit& ExaminationCommittee (“AEC”)

MFRS9 Committee

Independent Assurance

Internal andExternal

Auditors

Nomination& Remuneration Committee (“NRC”)

Chief ExecutiveOfficer

(“CEO”)

Board Risk Committee (“BRC”)

Group Risk Management Committee

Management

Authority Matrix

Policies

Shariah Supervisory Council

SustainabilitySteering Committee

Vision,Mission, Value

Standard Operation

Procedure(SOP)

GroupCompanySecretaryand

Regulatory Compliance

BHB has corporate governance in place and is committed to fostering a culture of compliance that values personal and corporate integrity, accountability and continuous improvement.

Shareholders and theBoardofDirectors jointly provideoversight of the control andmanagement of BHB. TheultimatedecisionmakingauthoritiesrestwiththeshareholdersattheAnnualGeneralMeetingwherethere-appointmentoftheBoardofDirectorsand re-appointmentofExternalAuditorsareapprovedamongstothers.

TheBoardisaccountabletotheshareholdersfortheperformanceoftheCompany.ItdirectsandmonitorsthebusinessandaffairsoftheCompanyonbehalfofshareholdersandisresponsiblefortheCompany’soverallcorporategovernance.ItoverseesandappraisesBHB’soverallstrategyobjectives,directionandperformancesomeofwhicharedelegatedtotheBoardCommittees.

Subsidiary Governance

TheBoardoperatesonthebasisthateachsubsidiariesisaseparateanddistinctlegalentity,whichisrequiredtocomplywiththelocallaws and regulation that it operates within.

The Board plays the role of a shareholder and maintains control and oversight through the appointment and removal of the directors ontheboardofthesubsidiaries.TheBoardmayappointamemberoftheBoardasadirectoroneachmajorsubsidiary,whichensurescontinuousflowofinformationandpromotesalignmenttotheGroup’sstrategicdirections.Whilelinesofreportingaremaintainedtothe Group, the Boards of each entity remained as the final approving authority.

PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

BOARD OF DIRECTORS

The operations and affairs of the Group are managed under the direction and oversight of BHB Board, which also has the responsibility to periodically review and approve the overall strategies, business, organisation and significant policies of BHB. The Board also sets the Company’scorevalues,adoptsproperstandardstoensurethattheCompanyoperateswithintegrityandcomplieswiththerelevantrules and regulations.

Board Charter

BHBhasdeveloped itsBoardCharter,which setout thekey corporategovernanceprincipals adoptedby theCompany. It clearlydefinedtherolesandresponsibilitiesoftheBoard,Chairperson,SeniorIndependentNon-ExecutiveDirectorandChiefExecutiveOfficer(“CEO”) in the areas of strategies setting, management of company, succession planning, risk management, integrity of internal controls and communication plan.

TheBoardCharterservedasafocalreferenceongovernanceandprovidesguidancetotheBoardintheassessmentofitsperformance.TheBoardChartercontainsbroadprinciplesandrequirementsontheBoard’sgovernanceinaccordancewiththeprinciplesofgoodcorporategovernanceassetoutintherecommendationandguidelinesissuedbytherelevantregulatoryauthorities.TheBoardCharteraddresses the following pertinent matters:-

Board Conduct • CodeofConduct• ConflictofInterest• ShareholdersCommunication• DealingsinSecurities• WhistleBlowing

Duties & Responsibilities • FiduciaryDuties• Roles&ResponsibilitiesoftheBoard,BoardCommittees,Chairman,IndependentDirector,NomineeDirector,CEO&ManagementandCompanySecretary

Powers of the Board • Authority&delegation• MattersReservedfortheBoard

Board Effectiveness • BoardComposition• Appointment/Removal/SuccessionPlanning• Director’sTraining• Director’sEvaluation• Director’sRemuneration

InadditiontotheBoardCharter,indischargingitsduties,theBoardisalsoguidedbyitsTermsofReference(“TOR”), a document whichspecifiestheBoard’srole,power,dutiesandfunctions.


The Board Charter and the TOR are dynamic documentsthat are 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 and Board Charteraresubjecttoreviewonceeverytwo(2)years,orwhenthere are material changes to the governance structure, process or procedures.

The TOR and Board Charter are available on the Company’swebsite www.bimbholdings.com.

Director’s Handbook

InadditiontotheBoardCharter,BHBhasinplacetheDirector’sHandbook which acts as a guidance to the Board in discharging its duties effectively. The Director’s Handbook highlights theguiding principles and matters relating to Board organisation, responsibilities, relevant policies and procedures which are applicable to the Board including those mentioned in the Board Charter.

Board Roles and Responsibility

The Board has the fiduciary duties to exercise their authorityfor a proper purpose, in good faith and in the best interest of theCompany.Indischargingtheirduties,theDirectorsofBHBexercisereasonablecare,skillanddiligencewiththeknowledge, proficiencyandexperiencewhichisexpectedofaDirector.

The Board has the overall responsibility for promoting the sustainable growth and financial soundness of BHB and for ensuring reasonable standards of fair dealing, without undue influence from any party. This includes a consideration of the long-termstrategyanddirectionoftheBoard’sdecisiononBHB,its stakeholders and the general public.

The role of the Board is contained in its TOR as well as the Board Charter. The TOR also prescribed matters specificallyreserved for the Board amongst others covering areas such as strategy, business planning and budget, financial management, investment, divestment, corporate restructuring, risk and control, human capital including succession planning, related party transaction and capital financing.

ThekeyobjectivesoftheBoardareto:

✔ Oversee the conduct of the Company’sbusiness including the formulation of strategyand performance objectives, control andaccountability systems, corporate governanceframework, risk management practices andhuman capital management.

✔ Approve and monitor the progress of majorcapital expenditure, fund-raising, acquisitionsand divestitures.

✔ Fulfil statutory and fiduciary responsibilities bymonitoring the operational, financial and riskmanagement processes of the Company andGroup.

✔ Set the risk appetite within which the Boardexpects Management to operate and ensurethat there is an appropriate risk managementframework to manage and monitor significantfinancial and non-financial risks.

✔ Review the efficiency and quality of theCompany and the Group’s financial reportingprocess and systems of accounting and internalcontrols.

✔ Ascertain the independence of the internal andexternalauditorfunction.

✔ Monitor compliance with established policiesand procedures.

✔ Evaluate the performance of the Board andBoardCommittees.TheBoardsetsthestrategicdirection and oversees that the conduct of thebusinessesoftheCompanyandtheGroupisincompliance with the law and ethical values.

TherolesoftheChairmanandtheCEOareseparatedandclearlydefinedintheBoardCharter.OverviewoftherolesandresponsibilitiesoftheChairman,Non-ExecutiveDirectors,CEO,GroupChiefFinancialOfficerandGroupCompanySecretaryincludebutnotlimitedto the following:

ROLE KEY RESPONSIBILITIES

CHAIRMANTanSriAmbrinBuang

TheroleoftheChairman:-

• Leadership,operationandgovernanceoftheBoard;• SettingtheagendaforBoardmeetingsensuringthattheyoperate

effectively, and provide appropriate opportunity for challenge and debatetosupportsounddecision-making;

• EnsuringconstructiverelationsexistbetweentheExecutiveandNon-ExecutiveDirectors;

• OverseeingtheperformanceevaluationoftheBoardanditsCommittees;• Meetingwithshareholders,analystsandotherrepresentativesofinstitutionalinvestors;

• MeetingwithmanagersandemployeesatvariouslocationsthroughouttheGroup;

• LeadingBoardmeetingsanddiscussions;• Ensuringappropriatestepsaretakentoprovideeffectivecommunication

with stakeholders and that their views are communicated to the Board asawhole;and

• LeadingtheBoardinestablishingandmonitoringgoodcorporategovernance practices.

SENIOR INDEPENDENT NON-EXECUTIVE DIRECTORTanSriIsmailAdam

TheroleoftheSeniorIndependentNon-ExecutiveDirector:-

• ProvidingasoundingboardfortheChairman;• AnintermediaryforotherDirectorswhennecessaryandspecificallyservesastheprincipalconduitbetweentheIndependentNon-ExecutiveDirectorsandChairmanonsensitiveissues;

• PromotehighstandardsofcorporategovernanceandensurethattheCompany’sobligationstoshareholdersareunderstoodandcompliedwith;

• EnsurethecompositionoftheBoardinregardstothenumberofIndependentDirectorsisinadherencetorelevantrequirementsandregulations;

• BeingavailableforconfidentialdiscussionswithotherNon-ExecutiveDirectorswhomayhaveconcernswhichtheybelievehavenotbeenproperlyconsideredbytheBoardasawhole;

• BeingavailabletoshareholdersiftheyhaveanyconcernswhichareunabletoberesolvedthroughthenormalchannelsofChairman,ChiefExecutiveOfficerandGroupChiefFinancialOfficer,orifcontactthroughthesechannelsaredeemedinappropriate;and

• Ifnecessary,theSeniorIndependentNon-ExecutiveDirectorcanbeemailedat [email protected]


ROLE KEY RESPONSIBILITIES

NON-EXECUTIVE DIRECTORS(both Independent and Non-Independent)EncikMohdTarmidziAhmadNordinPuanNorainiCheDanDatukRozaidaOmarPuan Rifina Md Ariff

TheroleoftheNon-ExecutiveDirectors:-

• Scrutinising,measuringandreviewingtheperformanceofManagement;• Constructivelychallengingandassistinginthedevelopmentofstrategy;• ReviewingtheGroupfinancialinformation,ensuringsystemsofinternalcontrolandriskmanagementareappropriateandeffective;and

• ReviewingthesuccessionplansfortheBoard/keySeniorManagement.

CHIEF EXECUTIVE OFFICEREncikKhairulKamarudin

TheCEOisresponsiblefor:-

• DeliveringstrategyasagreedbytheBoard;• LeadingtheManagementCommitteeswhichoverseetheoperationalandfinancialperformanceof,andissuesfacingtheGroup;

• LeadingandsupportingeachofBHB’sbusinessesandthefunctionsofHumanResource,StrategyandDevelopmentandCorporateAffairs;and

• RepresentingBHBexternallytostakeholders,shareholders,customers,suppliers, regulatory and government authorities and the community.

GROUP CHIEF FINANCIAL OFFICERMr.MalkitSinghMaan

TheGroupChiefFinancialOfficerisresponsiblefor:-

• ProvidingstrategicfinancialleadershipoftheCompanyandday-to-daymanagementofthefinancefunction;

• Leadingthefinancemanagementteams;and• RepresentingBHBexternallytostakeholders,shareholders,customers,

suppliers, regulatory and government authorities and the community.

GROUP COMPANY SECRETARYPuanMariaMatSaid

TheGroupCompanySecretaryisresponsibletotheBoardfor:

• ManagingallBoardandBoardCommitteemeetinglogistics,attendingandrecordingminutesofallBoardandCommitteemeetingsandfacilitatingBoardcommunications;

• AdvisingtheBoardonitsrolesandresponsibilities;• FacilitatingtheorientationofnewDirectorsandassistinginDirectors’traininganddevelopment;

• AdvisingtheBoardoncorporatedisclosuresandcompliancewithCompanyregulationandotherregulatorybodiesi.e.,BankNegaraMalaysia,BursaSecuritiesListingRequirementsandSecuritiesCommission;

• Managingprocessespertainingtothegeneralmeetings;• MonitoringcorporategovernancedevelopmentsandassistingtheBoardinapplyinggovernancepracticestomeettheBoard’sneedsandstakeholders’expectations;

• Servingasafocalpointforstakeholders’communicationandengagementoncorporategovernanceissues;and

• TheBoardMembershaveunlimitedaccesstotheprofessionaladviceandservicesoftheGroupCompanySecretary.

TheBoardCharteralsoincludeasectionontheroleoftheCEOwhoisresponsibleforimplementingactionplanstoachieveBHB’sgoalsandvisionsinaccordancewiththestrategy,riskappetite,policiesandperformancerequirementapprovedbytheBoard.TheCEOleadstheManagementteamincarryingoutthestrategyandvisionoftheCompanyandisaccountabletotheBoardfortheday-to-daymanagementandoperationsoftheCompany.

Whilst the Board has delegated the day-to-day responsibilities to the Management, there are matters that are formally reserved fortheBoard’scollectivedecision.ThereisaclearsegregationoftheManagementandtheBoard’sroles&responsibilities.Thisisto ensure that the Board and Management are clearly aware of where the limit of responsibilities lies and that due consideration is given to issues at the appropriate level. Matters reserved for theBoardcomprisesamongstothers,acquisitionanddisposalof assets, related party transactions, financial results and declaration of dividends.

Other than the above, the Board also represents the interests of theShareholders.Therefore,theDirectorsarerequiredtoexhibithigh standards of integrity, commitment and independence of thoughtandjudgment.TheBoard’sdecisionsarefreefromanyundue influence and interference from any specific group or interest.

Board Code of Conduct and Ethics

BHBadoptstheCodeofEthicinaccordancewiththefollowing:

• BNM/GP7-Part1CodeofEthics:GuidelinesontheCodeofConductforDirectors,Officers,andEmployeesintheBankingIndustry;

• Company Directors’ Code of Ethics established by theCompaniesCommissionofMalaysia;and

• Code of Ethics for the Financial Services Industry issued byFinancialServicesProfessionalBoard.

TheCodeofEthicsprovidesguidanceforproperstandardsofconduct with sound and prudent business practices as well as standards of ethical behaviour for the Board, based on the principles of integrity, responsibility, sincerity and corporate social responsibility.

BHB’sBoard’sCodeofConductandEthicsencompassesthree(3) majorareas,namely:

• CorporateGovernance;• Relationship with shareholders, employees, creditors andcustomers;and

• Socialresponsibilityandtheenvironment.

Basedontheaforesaid,BHB’sDirectorsarerequiredtodischargetheir duties and deal with various stakeholders with utmost integrity.This is in linewith theCompany’scorevalueswhichplace emphasis on ethical dealings with third parties and employees.

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 dealtwith inaccordancewith theCompany’sestablisheddueprocess.Awhistle-blowingpolicyreflectsBHB’scommitmenttobe 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 havethereforebeenintegratedintoBHB’spracticesandcultureto help to deter fraud, corruption and mismanagement. Through the effective implementation of this policy, BHB is able to preserve its integrity and transparency.

Authority Matrix

The Authority Matrix outlines principles to govern decision-makingwithintheCompany,includingappropriateescalationand reportingtotheBoard.TheBoardhasalsodelegatedtotheChiefExecutiveOfficerandotherManagement,theresponsibilitytomanagetheCompany’sday-to-dayactivities.TheAuthorityMatrixencompass both monetary and non-monetary limits of authority for recommending and approving operational and management decision-makingactivitiespriortoitsexecution.Thisallowsfora balanced and effective oversight with appropriate empowerment and accountability of the Management.


Indemnification of Directors and Officers

Directors and Officers are indemnified under Directors andOfficersLiabilityInsuranceagainstanyliabilityincurredbytheminthedischargeoftheirdutieswhileholdingofficeasDirectorsandOfficersof theCompany.TheDirectorsandOfficers shallnot be indemnified where there is any negligence, fraud, breach of duty or breach of trust proven against them.

The existing policy period of insurance is from 31 August2017 to 30 August 2018withworldwide coverage of up to RM50.0millionforeachandeveryclaim.ItprotectstheDirectorsand Officers from loss resulting from claims made against them alleging a wrongful act in the discharge of their duties on behalf of BHB. This insurance does not, however, provide coverage in the event of any negligence, fraud, breach of duty, breach of trust or fine upon conviction.

Based on the analysis of the risk factors and previous trends, the Board agreed that the existing coverage is adequate to covertheDirectorsandOfficersagainstclaims.Duringtheyearunderreview,theDirectorsjointlycontributedaportionofthepremiumforthispolicy.Movingforward,pursuanttotheCompaniesAct2016,premiumpaymentforthepolicywillbefullycoveredbytheCompany.

Access to Information

The Board of Directors has full and unrestricted access to allinformation pertaining to BHB’s affairs including, inter alia,theGroup’s financial results, annual budgets, reviews againstbusiness 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 disseminatedtotheDirectorsatleastfive(5)dayspriortotheBoardmeetingtoallowsufficienttimefortheDirectorstostudyand review the issues and, where necessary, to obtain further informationandexplanationtofacilitateaninformeddecision.AttheBoardmeeting,theDirectorsdeliberateatlengthontheagenda prior to making decisions.

TheManagementand theexternaladvisersmaybe invited toattend the Board meetings when necessary, to furnish the Board withexplanationsonitemstabledortoprovideclarificationonissue(s)thatmayberaisedbyanyDirector(s).

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

TheCompanySecretaryalso regularlyupdates theBoardand/or Management on any changes to regulations and guidelines as issued by BNM, Bursa Securities, Securities Commission,Companies Commission of Malaysia or other regulatoryauthorities.

In addition, the Board has direct and unlimited access to the advice and services of the Management and has the right to seek independent advice on specific matters that in their opinion requires unbiased evaluation, at the expense of BHB.A procedure is in place to facilitate the Board in seeking independent professional advice as follows:

(a) ADirectormayrequestforindependentprofessionaladviseby providing the following details:

• Thenatureoftheindependentadvice;• Thelikelycostofseekingtheindependentadvice;• Detailsoftheindependentadviserproposed;

(b) TheChairmanwillconsulttheCompanySecretarywhetherthe request shouldgodirectly to theBoardorwhether itwarrants a thorough feasibility study in accordance withrelevantBHBpolicies;

(c) Dependingonthecomplexityoftherequest,theCompanySecretarywill initiate the process to engage the requiredadvisors;

(d) A copy of the report or independent advice will be madeavailabletotheBoardfordeliberation;and

(e) All documentation seeking the independent advice mustclearly state that advice is sought for the benefit of BHB andmust not concern matters of a personal or private nature totheDirectororanyotherindividual.

Conflict of Interest

PursuanttoBNMCGPolicy,theListingRequirementandtheCompaniesAct2016,theDirectorsarerequiredtodeclaretheirinterest,including whether such interest arises through close family members.

TheBoardisattentivetothepossibilityofpotentialconflictofinterestsituationsinvolvingtheDirectorsandtheCompanyandaffirmsitscommitmenttoensurethatsuchsituationofconflictisavoided.TheBoardCharteraccentuatesthatintheeventwheretheremaybeaconflictofinterest,theinterestedDirectorshalldeclareatthebeginningoftheBoardmeetingthefactsandnatureoftheconflictandtoabstainfromparticipatingindiscussionsanddecisionsonthematterswhichdirectlyinvolvedthesaidDirector.IncircumstanceswhereaDirectorisunsureastowhetherornotaconflictofinterestexistsorismaterial,he/shewoulddiscussthematterwiththeChairmanpriortothemeeting.

WhereaconflictofinterestexistsandtheDirectordoesnotdeclarehisorherinterestand/oroffertowithdraw,theChairmanshould,if he is aware, takes appropriate action to highlight the conflict.

Intheeventofanynon-compliancewithanyrequirementonconflictofinterest,theBoardmayorimposesuchactionsasitconsidersappropriateinthebestinterestoftheCompany.

Directors Trading During Closed Period

DirectorsofBHBareprohibitedfromtradinginanyaffectedsecuritiesbasedonpricesensitiveinformationand/orknowledgewhichhavenotbeenpubliclyannounced.InaccordancewithParagraph14.04oftheListingRequirements,theDirectorsoftheCompanyareremindedthattheymustnotengageindealingsoftheCompany’ssharesorofotherlistedissuersaslongastheDirectorsareinpossession of price-sensitive information relating to such listed issuers.

However,Directorswhoarenotinpossessionofprice-sensitiveinformationrelatingtotheCompanymayengageindealingswithsuchlistedsecuritiesduringa‘closedperiod’(i.e.theperiodcommencing30calendardaysbeforethetargeteddateofannouncementtotheBursaSecuritiesofthequarterlyresults,uptoonefullmarketdayaftertheannouncementoftheCompany’sresultsforthefinancialquarter)providedthattheDirectorscomplywithParagraph14.08oftheListingRequirements.

TheBoardofDirectorsareremindedonquarterlybasistorefrainfromdealingintheCompany’ssharesone(1)monthpriortothereleaseofBHB’squarterlyfinancialresults.

BHBhasinplaceaprocessthatmustbecompliedwithifanyoftheDirectorswishestodealintheCompany’ssharesasfollows:

(a) Priortotheproposeddealing,theDirectormustgivewrittennoticetoBHBofhis/herintentiontodeal;

(b) Uponreceiptofsuchnotice,BHBwillmakeanimmediateannouncementtoBursaSecuritiesstatingthefollowing:-

(i) theDirector’scurrentshareholdingsintheCompany;and(ii) theDirector’sintentiontodealinthesharesoftheCompanyduringaclosedperiod;

(c) TheproposeddealcanonlybeeffectedafteronefullmarketdayoftheannouncementbeingmadetoBursaSecurities;

(d) Subsequently,theDirectormustgivenoticeofthedealinwritingtotheCompanySecretarywithinonefullmarketdayafterthedealhasoccurred.BHBwillimmediatelyannouncesuchnoticetoBursaSecuritiesstatingthefollowing:-

(i) thedateonwhichthedealoccurred;(ii) theconsiderationforthedeal;and(iii) the number of shares involved in the deal, both in absolute terms and as a percentage of all issued shares of that class in the

Company;

(e) TheCompanySecretarywillthentableattheforthcomingmeetingoftheBoardofDirectors,asummaryofdealingsnotifiedbytheDirectorfornotificationpurposes.


IntheeventwhereaDirectordealsintheCompany’ssharesoutsidetheclosedperiod,theDirectormustgivewrittennoticeofthesaiddealtotheCompanySecretarywithin3marketdaysafterthedealhasoccurred.BHBwillthenimmediatelyannouncethenoticetoBursaSecurities.

Duringtheyearunderreview,therewerenotransactionsbyanyoftheDirectorsinthesharesoftheCompany.

BOARD ACTIVITIES AND MEETINGS

Board Activities

Someoftheactivitiesin2017/2018consideredbytheBoardinrelationtostrategicprioritiesaresetoutbelow:-

ACTIVITIES MATTERS CONSIDERED BY THE BOARD

Reviewing and adopting a strategic plan

TheBoardplaysapivotalroleinreviewingtheCompany’sstrategicdirectionandapprovingcorporate strategic initiatives developed by the Management. The Board deliberates annually ontheCompany’sstrategyandbusinessplansasproposedbytheManagement, includingthe annual capital and revenue budget for the ensuing year as well as the Key Performance Indicators (“KPIs”). This will ensure that the KPIs correspondwith the Company’s annualstrategicandbusinessplan.TheBoardreviewsanddeliberatesontheManagement’sviews/assumptions in ensuring the best decisions are reached after considering all relevant aspects.

Based on the annual evaluation for the financial year under review, the Board collectively concursthatithasreviewedtheCompany’sstrategicandfinancialplanaswellasmonitoreditsimplementation,includingthesettingofsuitableKPIsinachievingtheCompany’sobjectives.

Oversee and Evaluate the Conduct of the Company’s business

The CEO is responsible for managing the day-to-day operations of the Company andimplementingtheCompanystrategiesandpoliciesasagreedbytheBoard.Indoingsoheiswell supported by the Management.

The performance of the Management is measured through the Company’s and Group’squarterlyfinancialreports.TheBoard,onacontinuousbasis,iswellinformedoftheprogressoftheCompany’sstrategicinitiativesandcriticaloperationalissuesaswellasoftheGroup’sperformance.

Identify and Manage Principal Risk

The Board Risk Committee (“BRC”) assists the Board in overseeing the establishment, implementation and effectiveness of the riskmanagement system. The BRC on behalf oftheBoardalsoapprovesriskmanagementpolicies/practices, reviewperiodicreportsonriskmanagementandmakesrelevantrecommendationstotheBoardforitsapproval.DetailsoftheBRCandtheriskmanagementdashboardaresetoutintheBRCReportandStatementofRiskManagementandInternalControlofthisIntegratedAnnualReport.

Basedon the annual evaluation for the FinancialYearunder review, theBoard collectivelyagrees that it has discharged its roles in identifying principal risks and in ensuring that the Grouphasputinplaceanadequateriskmanagementframeworktoeffectivelymonitorandmanage the risk of its operational business.

ACTIVITIES MATTERS CONSIDERED BY THE BOARD

Succession Planning TheBoard, through theNomination andRemunerationCommittee (“NRC”) is required toreview potential candidates for Management positions and establish their remuneration. The Company’snomination,selectionandsuccessionpoliciesareformulatedbytheNRC.

During the Financial Year under review, the Board/NRC had reviewed and appointed EncikKhairulKamarudinasthenewCEOon8August2017replacingtheformerGroupCEO,i.e.,Dato’SriZukriSamatwhoretiredon8June2017.

The Board/NRC had also considered and approved the proposed appointment of Tan SriAmbrin Buang as the newChairman, to replace Tan Sri SamsudinOsmanwho retired on 31January2018.

Themixofskills,experience,expertiseandqualificationwereanalysedpriortotheirrespectiveappointments.

The Board is satisfied that the NRC has effectively discharged its duties pertaining to thenomination, remuneration and succession management functions as sets out in its TOR.

Basedon the annual evaluation for the FinancialYearunder review, theBoard collectivelyconcurthatthesuccessionplanfortheCEOandManagementaswellasfortheCompany’sfuture leaders has been appropriately developed.

Development and implementation of shareholder communication policy

BHB continuously maintains its commitment to pursue the highest standards of corporate disclosure by disseminating accurate, consistent, transparent and timely information to its stakeholders.BHB’sInvestorRelations(“IR”) Policy acts as the guiding principle for IR functions, assisting effective communication between the Management and the financial community, locally and abroad. During the period under review, three (3) analysts briefing sessions were held.

Basedon the annual evaluation for the FinancialYearunder review, theBoard collectivelyagrees that the Management has successfully conducted the IR programmes.

Review the adequacy and integrity of the Company’s information and internal control system

The Board is responsible for ensuring that a sound reporting framework of internal controls and regulatorycomplianceisinplacethroughouttheCompany.BasedontheannualevaluationfortheFinancialYearunderreview,theBoardcollectivelyconcurthatithasdischargeditsrolesthroughtheBRC/AuditandExaminationCommittee(“AEC”) whereby regular meetings were heldinreviewingtheeffectivenessoftheCompany’sinternalcontrolsystem.

Details of theCompany’s internal control system and its effectiveness are provided in theStatementofRiskManagementandInternalControlinthisIntegratedAnnualReport.


Board Meeting

BHBhasahighlyengagedBoardwithdiverseperspectives.TheBoardandBoardCommitteemeetingsareheldregularlytodiscusskeymatters such as strategic, governance and operational issues.

TheBoardandBoardCommittees’procedureswereasfollows:-

BEFORE MEETING AT EVERY MEETINGFREQUENT AND EFFECTIVE ENGAGEMENT WITH THE BOARD

• AllBoardandBoardCommitteemeetings are planned and scheduledwell in advance in consultation withtheDirectors

• TheChairmanoverseesthesettingof the agenda of Board meetings inconsultationwiththeCEOtoensurethat there is sufficient information andtime to address all agenda items

• TheagendaoftheBoardmeetingsis carefully thought out and well-managed. At the same time, theagendaallowsforflexibilitywhenitisneeded

• Directorsareprovidedwithcompleteinformation related to the agendaatimelymanner.Forexample,Management provides Board memberswithdetailedreportsontheGroup’sfinancial performance prior to theBoard meeting

• AcomprehensiveBoardpapercomprisingtheobjectives,background, purposes, implications,risk,appropriateanalysis/statistic,recommendations and other relevantinformation is prepared to enable theBoard to make informed and effectivedecisions

• TheChairmanpromotesopenandfrankdebatesbyallDirectorsatBoardmeetings. The Board members comewell prepared and engage in robustdiscussions on key matters pertainingtotheCompanyandGroup

• Ifthereareanysituationswherethereisaconflictofinterest,theDirectorinquestionwillexcusehimselforherselffrom the discussions and abstain fromparticipating in the deliberation of thesaid matter

• ChairpersonofeachBoardCommitteesprovideathoroughupdate on significant mattersdiscussedattheBoardCommitteemeetings which are typically scheduledbefore the Board meeting

• TheCEOgivesacompleteandcomprehensiveupdateontheGroup’sbusiness and operations as well as amacro perspective on industry trendsand development

• TheGroupChiefFinancialOfficer(“GCFO”) presents the financialperformance and significant financialhighlights

• KeySeniorManagementandexternaladvisors may be invited to attendBoard meeting to advise the Boardwhen matters under their purview arebeing considered to enable informeddecision-making

• TheBoardisregularlyupdatedontheperformance of BHB and Group

• WherethereisnoscheduledBoardmeetings,Board’sapprovalsformatters in the ordinary course ofbusiness can be obtained through thecirculation of written resolutions

• Ad-hocmeetingsareheldwhennecessary.Therewerefour(4)ad-hocspecialBoardmeetingsheldin2017

• TheGCFOprovidestheBoardwithdetailed financial performance reportseverytwo(2)months

• DirectorshavedirectaccesstotheManagementandmayrequestfrom Management any additionalinformation to make informed andtimely decisions

• Throughouttheyear,theDirectorsalso have various opportunities tointeract with members of the GroupManagementCommittee(forinstanceat Hari Raya gathering or Induction)

BEFORE MEETING AT EVERY MEETINGFREQUENT AND EFFECTIVE ENGAGEMENT WITH THE BOARD

• AllmaterialsforBoardandBoardCommitteemeetingsarecirculatedto Board members electronically andinhardcopiesatleastfive(5)daysprior to the meetings. This permitspriorreviewbytheDirectorsandifnecessary, the provision of furtherinformation for deliberation at themeeting to ensure informed decision-making

• AnyDirectormayrequestmatterstobe included in the agenda

• WhenexigenciespreventaDirectorfrom attending a Board or BoardCommitteemeetinginperson,thatDirectorcanparticipatebytelephoneor video-conference

• Directorshavethediscretiontoengageexternaladvisers

• AsmembersofthekeySeniorManagement are present at allBoardmeetings,Directorshavetheopportunity to discuss specific areaswith them and give constructivechallenge to ideas

• IncompliancewiththeBNMCGPolicyandListingRequirements,disclosuresoftheindividualDirectorsandtheirrespective related concerns are tabled

• Externalprofessionalsorin-housesubjectmatterexpertsarealsoinvitedto present key topics identified bythe Board as well as updates oncorporate restructuring, corporategovernance, risk management, capital,tax,accounting,listingandotherregulations, which may have an impactonBHB’affairs

• DecisionsoftheBoardandBoardCommitteesaremadeunanimouslyor by consensus. These decisions andconclusions are recorded in the Boardminutes

• MinutesofthemeetingsarecirculatedearliertoallDirectorsfortheirperusalpriortothemeetings.TheDirectorsmayrequestforclarificationorraisecomments on the minutes prior totheirconfirmation.AftertheDirectors’confirmation,theChairmanofthemeeting signs the minutes as acorrect record of the proceedings.TheDirectorsarealsoinformedof announcements made to BursaSecuritiesfortheirnotification

• Directorshaveongoinginteractionsacross various levels, functions withinBHBandGroup.ThisallowsDirectorsto have a better understanding of thebusiness and operations of BHB andGroup.Inaddition,someDirectorsalsosit on the Boards of the subsidiaries intheGroup;thisarrangementgivestheBoard access to first hand insight onthe activities of these subsidiaries

• Directorshaveseparateandindependent access to the GroupCompanySecretaryatalltimes.TheGroupCompanySecretaryattendsallBoardandBoardCommitteesmeetingsandgenerallyassistsDirectorsinthe discharge of their duties. TheGroupCompanySecretaryfacilitatescommunication between the Board, itsBoardCommitteesandManagement.TheGroupCompanySecretaryhelpswiththeinductionofnewDirectors.The appointment and removal of theGroupCompanySecretaryrequiretheapproval of the Board


Board Attendance

In FY2017, theBoardheld10Boardmeetings, six (6)ofwhichwere scheduledand four (4)unscheduled.The fourunscheduledmeetingswereheldtodiscuss,amongothers,thestrategicdirectionandleadershipofthecorporaterestructuringexercise.

AllDirectorshas compliedwith theListingRequirementsofattendingnot less than50%of theBoardmeetingsheldduring theFinancialYear.ThisreflectsBoardmembers’commitmentanddedicationinfulfillingtheirdutiesandresponsibilities.InrelationtoBNMCGPolicy,allDirectorshadattendedatleast75%oftheBoardmeetingsheldexceptforTanSriIsmailAdamandPuanNorainiCheDanwhoattended70%oftheBoardmeetings.DirectorswhowereunabletoattendameetingwereencouragedtogivetheChairmantheir views and comments on matters to be discussed in advance.

ThebreakdownofBoard,BoardCommitteesandGeneralMeetingsheldandDirectors’attendancesaresetoutbelow.

Directors’ attendance at Board meetings and General meetings

DIRECTORS DESIGNATION

BOARD MEETINGS ANNUAL GENERAL MEETINGATTENDANCE %

Current Directors

TanSriIsmailAdam SeniorIndependent 07/10 70 01/01

DatukRozaidaOmar Non-Independent 09/10 90 01/01

MohdTarmidziAhmadNordin Independent 10/10 100 01/01

Rifina Md Ariff Non-Independent 09/10 90 01/01

NorainiCheDan Independent 07/10 70 01/01

TanSriAmbrinBuang (appointedw.e.f.2February2018)

Chairman/Independent n/a n/a n/a

Former Directors

TanSriSamsudinOsman (retiredw.e.f.31January2018)

Chairman/Independent 10/10* 100 01/01

DatukZaitonMohdHassan (retiredw.e.f.1February2018)

Independent 10/10* 100 01/01

Zahari@MohdZinIdris (retiredw.e.f.17May2017)

Non-Independent 04/04* 100 01/01

Notes:* ReflectsthenumberofmeetingsheldduringthetimetheDirectorsheldoffice.

ALLMEMBERSHAVECOMPLIEDWITHTHEMINIMUMATTENDANCEASSTIPULATEDINTHELISTINGREQUIREMENTSOFNOTLESSTHAN50%

ANDSIXMEMBERSHAVECOMPLIEDWITHBNMCGPOLICYOFNOTLESSTHAN75%

OVERALLPERCENTAGEOFTHEBOARDMEETINGSATTENDEDBYTHEMEMBERS

90%

AVERAGENUMBEROFHOURSSPENDONEACHBOARDOFDIRECTORS’MEETINGWAS 2HOURSAND28MINS

TOTALHOURSOFBOARDANDBOARDCOMMITTEEMEETINGS

WAS43.05HOURS

TOTALBOARDMEETINGSHOURS

23.15HOURS

BOARD DIVERSITY AND COMPOSITION

Board Composition

Currently,theBoardcomprisedsix(6)Directorsofwhich:-

(a) Two(2)areNon-IndependentNon-ExecutiveDirectors;and

(b) Four(4)areIndependentNon-ExecutiveDirectors.

The present composition of the Boardmeets theminimum1/3 requirement of independent directors as stipulated in the ListingRequirementsaswellastherequirementofhavingamajorityofIndependentDirectorsontheboardassetoutinBNMCGPolicy. ThemajorityIndependentNon-ExecutiveDirectorsassureeffectivechecksandbalancesinthefunctionoftheBoard.

The two (2) Non-Independent Non-Executive Directors namely Datuk Rozaida Omar and Puan RifinaMd Ariff are nominees ofLembagaTabungHaji.ThecompositionalsoreflectstheinterestofBHB’smajorityshareholderwhichisadequatelyrepresentedbytheappointmentofitsNominee’sDirector.

ANomineeDirectorhas thefiduciaryduty toact in thebest interestof theCompany. In theeventofanyconflict suchNominee Directorshallnotsubordinatehis/herdutytoactinthebestinterestoftheCompanytohis/herdutytothenominator.Theconduct/manneroftheNomineeDirector inexertingthe influenceoftheshareholder isassessedviatheannualBoardevaluationexercise. ThisisarequirementunderBNM’sShareholdersSuitabilityPolicy.

In2017and2018,therewerechangestotheBoardcompositionasfollows:-

• EncikZahari@MohdZinIdrisretiredasaNon-IndependentNon-ExecutiveDirectoron17May2017;• TanSriSamsudinOsmanretiredasanIndependentNon-ExecutiveChairmanon31January2018;• DatukZaitonMohdHassanretiredasanIndependentNon-ExecutiveDirectoron1February2018;and• TanSriAmbrinBuangappointedasanIndependentNon-ExecutiveDirectoron2February2018.

The Board is committed to ensuring diversity and inclusiveness in its composition and deliberations and theCompany embracesthepropositionthathavingadiverseBoardwouldhaveapositive,value-relevantimpactontheCompany.Inthisregard,theBoardconsidersdiversityfromanumberofdifferentaspects,includinggender,age,educationalbackground,professionalexperience,skills,knowledge and length of service.

Intermofgender,theBoardhassurpassedthe30%womenonBoardinPublicListedCompaniesaschampionbytheMinisterofWoman,FamilyandCommunityDevelopmentassetoutundertheCorporateGovernanceBlueprint.

BOARD TENURE

BOARD SKILLS

BOARD COMPOSITION


GENDER

DIRECTORSHIP IN LISTED COMPANY (INCLUDING BHB)

Non-Independent

Female

9+ years

4ListedCompany

Banking

Independent

Male

4–8years

3ListedCompany

Governance&Integrity

0–3years

2ListedCompany

Economic&Finance

1ListedCompany

Takaful

Investment&FundManagement

Accounting&Audit

Management,Leadership&Strategy

2

3

2

3

1

1

1

4

3

3

1

6

3

3

3

4

3

2

Theage,ethnicityandtenureoftheexistingBHB’sDirectorsasthedateofthisstatementaredepictedbelow:-

NO. DIRECTOR’S NAME AGENATIONALITY/

ETHNICITYDATE OF

APPOINTMENTTENURE YEAR (YR)/

MONTH (MTH)

Independent Non-Executive Directors

1 TanSriAmbrinBuang 69 Malaysian/Malay 2February2018 3 mths

2 TanSriIsmailAdam 67 Malaysian/Malay 3January2011 7yrs3mths

3 EncikMohdTarmidziAhmadNordin 63 Malaysian/Malay 29June2015 2yrs10mths

4 PuanNorainiCheDan 62 Malaysian/Malay 1April2016 2yrs

Non-Independent Non-Executive Directors

5 DatukRozaidaOmar 55 Malaysian/Malay 1December2009 8yrs4mths

6 Puan Rifina Md Ariff 51 Malaysian/Malay 1April2014 4yrs

The IndependentNon-ExecutiveDirectors continue to be independent ofManagement and free from any undue influence frominterestedpartieswhichcouldmateriallyinterferewiththeexerciseoftheirindependentjudgement.IndischargingtheirresponsibilitiesduringeachBoardandCommitteemeeting,theIndependentNon-ExecutiveDirectorswerethoroughindeliberatingissuesofconcern,inquisitive,frankandjudiciousineverydecision-makingprocess.Theywereimpartialintheirviewsandliberalwiththeiradvicebasedontheirexpertise,safeguardingtheCompany’sandstakeholders’bestinterestsineverymajordecision.TheIndependentNon-ExecutiveDirectorsparticipatedactivelyintheBoard’sdeliberationsanddecision-making,challengingtheManagementtoperformbetterandmoreefficiently.ThesevaluesaremostclearlyillustratedinthemainBoardCommitteeschairedbytheIndependentNon-ExecutiveDirectorsnamelytheAudit&ExaminationCommittee,theBoardRiskCommitteeandtheNomination&RemunerationCommittee.

SpecificdisclosureontheactivitiesoftheNRCinrelationtoPractice4.4oftheMCCG2017areprovidedatpages124to134ofthisIntegratedAnnualReportandintheCGReport.

Board Commitment

Each Director has devoted his/her time sufficiently to carry out his/her responsibilities. The Board Charter states that a Director, uponacceptanceofhis/herappointment,mustcommitsufficienttimetocarryouthisdutiesanddeclaretotheBoarddetailsofallothersignificant business and interests, indicating broadly the time spent on such commitments. Prior to accepting any new directorship, theDirectorshouldnotifytheChairmanonthenewdirectorship.TheDirectormustadvisetheBoardandtheGroupCompanySecretaryofanysubsequentchangestothesecommitmentsandtheGroupCompanySecretaryistomonitorthenumberofdirectorshipsandthechanges,ifany,ofeachDirectorontheBoard.

The Board also took note of the expectation on Directors’ time commitment to carry out their responsibilities. In this regard, BHB’sBoardCharter,stipulatesthatthemaximumnumberofexternalprofessionalcommitmentsofeachDirectormustnotbemorethanten(10)unlesswithpriorapprovaloftheBoard.

Todate,theDirectorsofBHBhavecompliedwiththeListingRequirementsofnotholdingmorethanfive(5)directorshipsinlistedcompanies. The Board is satisfied that the current number of directorships held by the Board Members does not impair their ability or judgementindischargingtheirrolesandresponsibilities.


BOARD COMMITTEES

Three(3)BoardCommitteesareestablishedtoassisttheBoardinthedischargeofitsstatutoryandfiduciaryresponsibilities.TheBoardCommitteesrolesandtheirattendanceareasfollows:

BOARD COMMITTEE

AUDIT AND EXAMINATION COMMITTEE (“AEC”)

MEETING

ATTENDANCE %

Chairman:

PuanNorainiCheDan(redesignatedfromMembertoChairmanw.e.f.2February2018)

07/07 100

DatukZaitonMohdHassan*(retiredw.e.f.1February2018) 07/07 100

Members:

TanSriIsmailAdam 06/07 86

MohdTarmidziAhmadNordin 07/07 100

Zahari@MohdZinIdris*(retiredw.e.f.17May2017) 03/03 100

AllcurrentmembersareanIndependentNon-ExecutiveDirectors

Role and Responsibilities:

ProvidereviewandindependentoversightofBHB’sfinancialreporting,internalaswellasexternalauditprogramme,scopeandplanandinternalcontrolsystemaswellasensuringcheckandbalancewithintheCompany.

NOMINATION AND REMUNERATION COMMITTEE (“NRC”)

MEETING

ATTENDANCE %

Chairman:

TanSriIsmailAdam 04/05 80

Members:

MohdTarmidziAhmadNordin 05/05 100

DatukZaitonMohdHassan*(retiredw.e.f.1February2018) 05/05 100


NorainiCheDan*(appointedw.e.f.2February2018) n/a n/a


BOARD COMMITTEE


✔ Establish a formal and transparent procedure for the appointment of directors, Chief Executive Officer, Board Committeemembers and key senior management personnel.

✔ Assess and evaluate the performance and effectiveness of the individual directors, independence of independent directors andmembersoftheBoardCommitteesasawhole.

✔ RecommendingaframeworkofremunerationfordirectorsandBoardCommittees.✔ EnsurethatthecompensationstructureiscompetitiveandconsistentwiththeCompany’sculture,objectivesandstrategy.

BOARD RISK COMMITTEE (“BRC”)

MEETING

ATTENDANCE %

Chairman:

EncikMohdTarmidziAhmadNordin 06/06 100

Members:

TanSriIsmailAdam*(appointedw.e.f.31May2017) 04/04 100

NorainiCheDan*(appointedw.e.f.2February2018) 06/06 100




✔ OverseetheGroupactivitiesinmanagingCreditrisk,Marketrisk,Liquidityrisk,Operationalrisk,Legalrisk,Shariahriskandotherrisks.

✔ Ensurethattheriskmanagementprocessisinplaceandfunctioningeffectively.

Notes:* Reflects the number of meetings during the time the Member held office

Details of activities of the BoardCommittees are set outwithin the relevant Committee reports from pages 114 to 138 of thisIntegrated Annual Report.

Eachcommittee’sTORsetsoutitsrole,responsibilities,compositionandstructure.AlthoughtheBoardhasgrantedsuchdiscretionaryauthoritytotheseBoardCommitteestodeliberateanddecideoncertainkeyandoperationalmatters,theultimateresponsibilityandthefinaldecisiononspecificmatterslieswiththeBoard.TheAEC,theBRCandtheNRCarechairedbyIndependentDirectors.TheChairmanoftherespectiveCommitteesisresponsiblefortheeffectiveoperationsofthatCommitteeandthefulfilmentoftheirdutieswhichareclearlyoutlinedintheTORapprovedbytheBoard.TheTORoftheBoardCommitteesareregularlyreviewedtoensurethattheyremainrelevantandalignedwithBHB’scorporatemissionandvision.

Board Committeemembers are appointed by the Board on the recommendation of the NRC. The Committeememberships arestructuredtospreadresponsibilityandoptimisetherangeofskillsacrosstheBoard.MembershipofthevariousCommitteesisreviewedregularly and is structured to provide the appropriate overlap of membership to ensure cohesive information flow between the Committees.TheCommitteemembersareexpectedtoattendeachCommitteemeeting,unlessthereareexceptionalcircumstancesthatpreventthemfromdoingso.EachBoardCommitteeisentitledtoseekinformationfromanyemployeeoftheCompanyandtoobtainprofessionaladviceastheBoardCommitteedeemsappropriateinitsdiscretion.


DuringeachBoardmeeting,theChairmanofeachBoardCommitteeshallthenpresenttotheBoarditsrecommendationsforthe Board’s approval accordingly. This permits the Board to raise any comments/views on all deliberations. All deliberations andrecommendationsmustbeminutedandapprovedbyeachBoardCommitteeandconfirmedbytheChairmanofeachBoardCommitteeattheirrespectiveBoardCommitteemeetings.

TheChairmanoftheCommitteesaswellasShariahSupervisoryCouncilreportsonmattersdealtwithattheirrespectivemeetings totheBoard.MinutesoftheAEC,BRCandNRCmeetingsarealsopresentedatBoardmeetingsforfurtherdiscussionanddirection,if any.

BasedontheannualevaluationofeachstandingBoardCommitteeforthisFinancialYearunderreview,theBoardunanimouslyresolvesthateachBoardCommitteehasdischargeditsrolesandresponsibilitieseffectivelyasguidedbyitsrespectiveTOR.

TheBoardCommitteesactivitiesfortheyearunderreviewareasfollows:-

BOARD COMMITTEE MAIN AREAS OF OVERSIGHT NUMBER OF MEETINGS IN 2017

AEC• Comprises3members,

all of whom areIndependentDirectors

• Financialreporting• Internalcontrols• Internalauditreport• Internalauditfunction• Externalaudit• Relatedpartytransactions• Compliancereporting

7meetingsheldtodiscussthefollowing:

• MattersrelatingtoBHB• Mattersrelatingtoquarterlyfinancialperformance• MattersrelatingtoInternalAuditreportofBHBandits

wholly-owned subsidiaries• AnnualperformancereviewforInternalAudit• Mattersrelatingtocomplianceandinternalguidelines• 2 meetings with the External Auditors without thepresenceofSeniorManagement

NRC• Comprises3members,


• MembershipandperformanceofBoardandBoardCommittee

• IndependenceofDirectors• SuccessionplanningofCEOandSeniorManagement

• RemunerationofDirectorsandSeniorManagement

• Appointmentandre-appointmentofDirectors


• BoardComposition• BoardNominationatGrouplevel• BoardEffectivenessAssessment• BoardandBoardCommitteesRemuneration• CEOandSeniorManagementRemuneration• MaterialRiskTaker

BRC• Comprises3members,


• Riskappetite• Riskgovernance• Riskframework• Riskmanagementpractices

and policies• Compliancerisk• Riskstrategy


• RiskManagementPolicies• RiskAppetite• RiskProfile• RiskStrategy• RiskManagementObjectives

Notes:FurtherinformationontheBoardCommitteescanbefoundintheirrespectiveTOR,availableatwww.bimbholdings.com; About Us – Corporate Governance – Board Committees

ThemembersoftheBoardCommitteestogetherwiththeirattendancecanbefoundonpages108to109ofthisIntegratedAnnualReport.

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

Audit and Examination Committee

The AEC of BHB comprises three (3) Independent Non-ExecutiveDirector.TheAECischairedbyanIndependentNon-ExecutiveDirector,PuanNorainiCheDan,whoisamemberoftheMalaysian InstituteofAccountant (“MIA”) as well as the MalaysianInstituteofCertifiedPublicAccountants(MICPA).Thisisinlinewiththerequirementsunderparagraph15.09(1)(c)oftheListingRequirementsandBNMCGPolicythatatleastonememberof theCommitteemustbeamemberof theMIAorequivalentexpertiseorexperienceinthefieldoffinance.

The composition of the AEC is reviewed by the NRC andrecommended to the Board for its approval. With the view to maintain anindependentandeffectiveAEC,theNRCensuresthatonlyanIndependentNon-ExecutiveDirectorwhopossesstheappropriate levelofexpertiseandexperience,andhasstrongunderstandingof the Company’s business would be considered for AEC’s membership.

The AEC also separately assessed KPMG as BHB’s ExternalAuditors.TheAECisguidedbythefactorsasprescribedunderParagraph 15.21 of the Listing Requirements as well as theAuditorIndependenceguidedbyBNMCGPolicy,intheannualassessmenton the suitability,objectivity and independenceoftheExternalAuditors.

The composition of theAEC, its duties and responsibilities aswell as details of meetings attended by each member can be foundinpages114to123ofthisIntegratedAnnualReportandSectionBoftheCGReport.

Risk Management and Internal Control Framework

The Board has established an organisation structure and charter with clear defined lines of responsibility, authority limits and accountability in association with BHB’s Group business andoperationalrequirements inordertomaintainasoundcontrolenvironment.

The effectiveness of risk management and internal controls is ensuredby theestablishmentof theBRCand theGroupRisk ManagementCommittee(“GRMC”).TheBRCregularlyevaluatestheadequacyandeffectivenessoftheGroup’sriskmanagementbyreviewingtheactionstakenonlapses/deficienciesidentifiedinreportspresentedbytherespectivesubsidiariesattheGRMC.

Board Risk Committee

The BRC consists exclusively of Independent Non-ExecutiveDirectorandischairedbyEncikMohdTarmidziAhmadNordinwhoisanAssociatememberoftheCharteredInsuranceInstitute(UK)andFellowofMalaysianInsuranceInstitute.

The composition of the BRC, its duties and responsibilities aswell as details of meetings attended by each member can be foundinpages135to138ofthisIntegratedAnnualReportandSectionBoftheCGReport.

TheBRCassiststheBoardinensuringthattheriskexposuresandoutcomes affecting BHB and the Group are effectively managed andaddressedbytheBoard.Specifically,theBRCisresponsiblefor formulating policies and frameworks to identify, monitor, manage and control material risks impacting the Group.

TheBRCissupportedbytheGRMCwherethemembersconsistoftheGroupChiefStrategyOfficerandGCFOofBHBtogetherwiththeRiskOfficerofeachmajorkeyoperatingsubsidiary.TheGRMCassiststheBRCtooverseetheriskmanagementmattersrelating to the activities of the Group.


Internal Audit

Internalauditisindependentoftheactivitiesofitsaudit.TheInternalAuditorsofBHBanditssubsidiaries(saveforSyarikatTakafulMalaysiaBerhad)iscarriedoutbytheInternalAuditDivisionofBankIslam(“Internal Audit”).Itsobjectives,scopeofactivitiesandresponsibilitiesaredefinedintheInternalAuditCharter.InternalAuditreportsfunctionallytotheAEC.InternalAuditadoptsarisk-based approach in its auditing activities. An annual audit plan is developed using a structured risk and control assessment framework through which the inherent risk and control effectiveness of each auditable entity in BHB is assessed.

DisclosureontheactivitiesoftheInternalAuditareprovidedatpages122to123ofthisIntegratedAnnualReportandintheCGReport.

PRINCIPLE C: INTERGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

TheBoardhasdirectcontrolovertheCompany,andthereforeowesfiduciarydutiestotheStakeholders.ThedutyofcarerequiresDirectorstoexercisegoodbusinessjudgementwhenmakingdecisionstosafeguardtheinterestoftheCompanyanditsStakeholders.TheBoardrecognisestheimportanceoftimely,complete,accurateandequaldisseminationofinformationwithregardtotheCompanyanditsGroup’sperformanceandothermattersaffectingStakeholders’interest.

Corporate Disclosure Policy (“CDP”)

ACDPhasbeenformulatedtoenhanceBHB’scorporategovernance,particularlyintheareaoftransparentdisclosuretothepublic.ThepurposeoftheCDPistoenableShareholdersandstakeholderstoaccessbusinessinformationbeyondtheCompany’sfinancialdisclosure. In addition, it ensures that both the Board and Management are able to communicate effectively with stakeholders on a timely basis.

Investor Relations/Stakeholders Policy

TheCompanyhasinplaceanIRPolicytoensurethatstakeholders,investorsandtheinvestmentcommunity,bothlocalandinternational,aswellasthegeneralpublicareprovidedwithrelevant,timelyandcomprehensiveinformationaboutBHB.TheCompanyiscommittedtoprovidingeffectiveandopencommunicationinordertoimprovedisclosureandtransparency.TheobjectiveoftheIRPolicyistolaydown the principles and practices to be adopted by BHB in handling its communication so that investors and potential investors could makeaninformedinvestmentdecisionandforthepublicatlargetohaveaclearunderstandingoftheGroupanditsobjectives.Ourinvestors relations activities promote regular, effective and fair communication with shareholders. Briefing sessions for the media and analystsareconductedwhenquarterlyresultsarereleased.

BHB and its major subsidiaries have been keeping a high standard of dissemination of relevant and material information through various channels in order to maintain a close relationship with our institutional investors, fund managers and research analysts. These channels include:

• QuarterlyandFullYearFinancialResultsAnnouncements

• AnalystsBriefingPresentations

• ConferenceandRoadshows

• MediaCoverage

• IRsectionofthewebsite

DisclosureontheactivitiesoftheInvestorRelationsareprovidedintheCGReport.

General Meetings

TheAnnualGeneralMeeting(“AGM”)andExtraordinaryGeneralMeeting(“EGM”) represent the primary platforms for direct two-wayinteractionbetweentheshareholders,theBoardandManagementofBHBanditsmajorsubsidiaries.Inrespecttoshareholderdemocracy and as stipulated in the Listing Requirements and theCompaniesAct 2016, shareholder’s approval is required on allmaterialissuesincluding,butnotlimitedto,majormergers,acquisitionsanddivestmentsexercises,dividendpayments,increaseofDirectors’fees,election/re-electionandappointment/reappointmentofDirectorsaswellastheappointmentofauditors.

AsummarypresentationoffinancialresultsisgivenbeforetheChairmandealswiththeformalbusinessofthemeeting.ShareholdersareencouragedtoattendtheAGMandtousetheopportunitytoaskquestionsontheCompany’sperformanceunderreviewandthereaftertoreceivetheauditedfinancialstatementsandthereportsofDirectorsandAuditors.TheNoticeofthe21st AGM of the CompanywasissuedtotheshareholdersoftheCompanymorethan21dayspriortothedateofthesaidmeeting.

BHBconductsitsAGMbypoll/e-votinginaccordancewithParagraph8.29AoftheListingRequirements(votingbypoll).TheoutcomesofvotingontheproposedresolutionsaredisclosedtothemarketandpostedontheCompany’swebsiteaftertheAGM.TheExternalAuditorsandChiefExecutiveOfficerof therespectivemajorsubsidiariesattendtheAGMtoanswershareholders’questions.BHBfurtherencouragesshareholderstoaccesstheIntegratedAnnualReportonlinetocomplementtheCompany’scommitmenttotheenvironment,aswellastoachievegreatercostefficiencies.Nevertheless,shareholdersarestillprovidedwiththeIntegratedAnnualReportinCD-ROMformattogetherwithasummarisedversionoftheFinancialStatements,NoticeofAGMandProxyForm.

CONCLUSION

The Board is fully satisfied that in the year under review, BHB has taken additional steps and observed good governance practices inaccordancewiththeMCCG2017,ListingRequirements,BNMCGPolicy,theGreenBook,MSWG’sMalaysianASEANCorporateGovernanceScorecardandBursaSecurities’2ndEditionCorporateGovernanceGuideandtheCompaniesAct2016.

ThisCorporateGovernanceOverviewStatementwasapprovedbytheBoardofDirectorsofBHBon28March2018.


AUDIT & EXAMINATION COMMITTEE CHAIRMAN’S REPORT

OnbehalfoftheAudit&ExaminationCommittee,IampleasedtopresenttheAudit&ExaminationCommittee’sreportfortheperiodunder review to the shareholders of BHB.

The purpose of this report is to apprise the shareholders and other stakeholders on the responsibilities and the performance of the Audit&ExaminationCommitteeduringtheperiodunderreview.TheAudit& ExaminationCommittee’s duties and responsibilitiesarecarriedoutinaccordancewithitsTermsofReference(“TOR”). Discussions with the Internal Auditors, External Auditors andrelevant members of the Management are held to ensure that the financial statements of the Company and the Group areappropriately prepared in compliance with the Malaysian Financial Reporting Standards (“MFRS”) and fairly present the financial position of the Group together with the results of its operations.

The Audit & Examination Committee facilitates and assists theBoard of Directors by reviewing the financial information, thesystem of internal controls which Management and the Board haveestablishedandreportingrequirementtoensurecompliancewiththerelevant lawsandregulations.TheAudit&ExaminationCommitteealsoevaluatestheperformanceoftheInternalAuditorswhichisoutsourcetoBankIslamMalaysiaBerhad(“Bank Islam”) as wellastheExternalAuditors.TheAudit&ExaminationCommitteeis primarily responsible for recommending the appointment, re-appointmentandtheremovaloftheExternalAuditors.

In2017,seven(7)Audit&ExaminationCommitteemeetingswereheld where we discussed numerous topics focusing on key issues ontheeffectivenessofinternalcontrolandreportingrequirementsintheGroup’sbusinessactivitiesaswellastheimpactofthenewMFRS9.

IamconfidentthattheAudit&ExaminationCommittee,supportedbytheManagementandtheExternalAuditors,hasremainedfocuson its responsibilities and has carried out its duties in the year under review, effectively in accordance with its mandate and TOR.

OnbehalfoftheAudit&ExaminationCommitteemembers,Iwouldlike to take this opportunity to express our sincere appreciationtoDatukZaitonMohdHassanforherunconditionalcontributionand guidance during her tenure from 10 December 2014 until1 February 2018 as the Chairman of the Audit & ExaminationCommittee.

PUAN NORAINI CHE DANChairman

TheAudit&ExaminationCommitteefacilitates and assists the Board of Directorsbyreviewingthefinancialinformation, the system of internal controls which Management and the Board have established and reporting requirementtoensurecompliancewiththe relevant laws and regulations.

PUAN NORAINI CHE DANChairman/IndependentNon-ExecutiveDirector

AUDIT & EXAMINATION COMMITTEE (“AEC”) REPORT

ThemembersoftheAECareasfollows:

ALLMEMBERSHAVECOMPLIEDWITHTHEMINIMUMATTENDANCEASSTIPULATEDINTHELISTINGREQUIREMENTSOFNOTLESSTHAN50%ANDBNMCGPOLICYOFNOTLESSTHAN75%

OVERALLPERCENTAGE OFTHEAECMEETINGS

ATTENDEDBYTHEMEMBERS

97%

TOTALAEC MEETINGSHOURS

8.15HOURS

1. Noraini Che DanChairman/IndependentNon-ExecutiveDirector(appointedw.e.f.2February2018)

2. Datuk Zaiton Mohd HassanChairman/IndependentNon-ExecutiveDirector(retiredw.e.f.1February2018)

3. Mohd Tarmidzi Ahmad NordinMember/IndependentNon-ExecutiveDirector

4. Tan Sri Ismail AdamMember/SeniorIndependentNon-ExecutiveDirector

5. Zahari @ Mohd Zin IdrisMember/Non-IndependentNon-ExecutiveDirector(retiredw.e.f.17May2017)

Notes:DetailsBoardofDirectors’ProfilesectionandbackgroundoftheAECmembers canbe foundonpages71 to75of theIntegrated Annual Report.Further information on the AEC’s Terms of Reference isavailable at www.bimbholdings.com,About Us – Corporate Governance – Board Committees – Audit & Examination Committee

3

5

1 2

4


MEMBERSHIP & ATTENDANCE

The AEC members and details of their attendance of theAEC meetings held during the Financial Year can be foundon page 108 of this IntegratedAnnual Report. Presently, theAECconsistsofthree(3)IndependentNon-ExecutiveDirectors.Allmembersof theAEChave sufficientunderstandingof theCompany’sbusiness,whilst theChairman isamemberof theMalaysianInstituteofAccountants(“MIA”).TheAECprovidesan independent oversight of the internal and external auditfunctions, internalcontrolsandreportingrequirementsaswellaschecksandbalanceswithintheCompany.

The Board has established a transparent and appropriate relationship with its external auditors through the AEC. TherepresentativesoftheExternalAuditors,werepresentattheAECmeeting during deliberations which require their inputand advice. In addition, the AEC had met twice with theExternal Auditors without thepresence of Management in compliance with Main Market Listing Requirements (“Listing Requirements”). During suchsession without the presence of the Management, the External Auditors will discusswiththeAEConanyissuesandconcerns, arising from the audit and any other relevant matters the External Auditors wish tohighlight. Other Officers of the Company were also invited tothe AEC meetings during thedeliberation of matters related to them.

The Chairman of the AECregularly provides updates to the Board on key matters deliberated attheAECmeetings.Inaddition, minutes of theAECmeetings are circulated to the Board fornotification.Anymembers of the Boardmay enquire or seekclarificationonthemattersdeliberatedbytheAECasrecordedin the minutes.

OVERVIEW OF 2017

TheAECfacilitatesandassiststheBoardinfulfillingitsstatutory,oversight and fiduciary responsibilities to its stakeholders. The AEC’ssalientresponsibilitiesincludethereviewofthefollowing:

(a) integrityofthefinancialstatements;

(b) performanceoftheExternalAuditors;

(c) effectivenessofinternalcontrols;

(d) performanceoftheInternalAudit;and

(e) compliancewithlegalandregulatoryrequirements.

Financial Reporting

TheAECassiststheBoardinensuringthefinancialstatementsofthe Company and its Groupis prepared in accordance with the applicable financial reportingstandards.TheAECwill review and determine whether in the preparation of the financial statements appropriate accounting policies have been adopted and supported by reasonable and prudent judgment andestimates. The Group ChiefFinancial Officer (“GCFO”) is responsible for the financial managementoftheCompany.

Mr.MalkitSinghMaan(“Mr. Malkit”), the GCFO, has25 years of banking relatedexperienceandwaspreviouslythe CFO of Bank Islam. Mr.MalkitisaCertifiedPractisingAccountant (“CPA”), a member of the Australian SocietyofCPAsandCharteredAccountant of MIA.

Detailsofhisprofileareavailableonpage86ofthisIntegratedAnnual Report.

Witheffectfrom2February2018,PuanNorainibintiCheDanwasappointedastheAECChairman,replacingDatukZaitonMohdHassanwhoretiredon1February2018.WhilsttheAECTORrequirestheAECtomeetsix(6)timesayear,duringtheyearunderreview,theAECmetseven(7)times.AsidefromtheAECmembers,theChiefExecutiveOfficer,theGroupChiefFinancialOfficerandtheGroupCompanySecretaryareinattendanceatalltheAECmeetings.

The AEC key responsibilities on financial reporting for 2017were as follows:

(a) Reviewed the unaudited quarterly financial reports andtheauditedfinancialreportforsubmissiontoBankNegaraMalaysia (“BNM”), Bursa Malaysia Securities Berhad(“Bursa Securities”) as well as Securities Commissionwith the Management before recommending to theBoard ofDirectors for its approval prior to submission tothe relevant regulatory authorities. When reviewing thereport, the AEC would seek for the assurance that thecondensed consolidated interim financial statementshave been prepared in accordance with the MalaysianFinancial Reporting Standards 134: Interim FinancialReporting,Paragraph9.22oftheListingRequirementsandInternational Accounting Standards 34: Interim FinancialReportingissuedbytheInternationalAccountingStandardsBoard;

(b) ReviewedtheauditedstatutoryaccountsoftheCompanyand of the Group, raised issues and concerns, if any, arisingfromthestatutoryauditwiththeExternalAuditors,priortorecommending to theBoardofDirectors for its approval.TheAEC’sreviewincludedacriticalscrutinyofthestatutoryaccounts based on an analytical approach. At the same time, the AEC seek assurance from the Management and theExternalAuditors that thefinancial statementsdisclosuresare in compliance with relevant and applicable statutoryrequirements and the Malaysian Financial ReportingStandards. The AEC’s scrutiny of the statutory accountsalso included a review of the reasonableness of accountingpolicies and estimates applied by the Group, and reportingongoingconcerns,asconcurredbytheExternalAuditorsinitsReporttotheAEC.TheAECalsoreviewedpertinentauditmattershighlightedbytheExternalAuditorsintheirreporttotheAECwhichwarranttheAEC’sattention;

(c) ReviewedandapprovedtheReportoftheAECpursuanttoListingRequirementsforinclusionintheCompany’sAnnualReport;

(d) Reviewed the disclosures forming the contents of theCompany’sAnnualReportasrequiredinPartAofAppendix9CoftheListingRequirements;

(e) Reviewed the updates on the internal accounting controlin accounting and auditing process to achieve operationaleffectiveness and efficiency, reliable financial reporting andcompliancewithregulationsandpolicies;

(f) During the year under review, the GCFO and theExternal Auditors have highlighted on the new/revisedrequirements on financial reporting standards. This is toenable the Management and the Board to understand therequirementsofthenew/revisedstandardsandtofacilitateactionstoaddressandmeetthenewrequirementswithinthestipulateddeadline;and

(g) For the key audit matters, the External Auditors havefocused particularly on credit and valuation. The AEChas also received reports and updates from the ExternalAuditors.TheAECisthereforemadeawareofallmateriallyrelevant issues of concern during the year.

Inparticular,theExternalAuditorshavebroughttheAEC’sattention to the following matters:

1. Allowance for impaired financing and advancesand others

Throughout the year, Management had continuouslymonitored the financing and advances portfolios andassessedtheadequacyofallowances for impairment.Specific names and industries were monitoredbased on economic and sectoral assessment.TheAECwasalso regularlyupdatedon thestatusofthese financing accounts and portfolios.

The Credit Management Division of Bank Islamidentified portfolios that were susceptible to emergingevents in the external environment and focused itseffort to manage the risk. The team continuouslymonitored the Group’s exposure to the various highrisk sectors. Reviews done during the year on high risksectors include exposure to Commercial Property aswellastheSmallandMediumEnterpriseportfolio.

TheAECalso requestedand received informationonpotential risks, their impact as well as the measurestaken to manage the risks so that impairment allowance estimates incorporated timely recognition of potentialrisk.

The Group also performed regular stress testing on thefinancing portfolios to assess the impact on the capitaland profitability of Bank Islam under the various stressscenarios.

ForthefinancialyearendedDecember2017,thenetallowances for impairment in respect of financingandadvancesandotherswasawritebackofRM15.6million compared to an amount charged of RM92.1millionin2016.


As atDecember 2017, theGroup’s allowance for impairment was more than adequate. However, the implementation of MFRS9,whichcameintoeffectfrom1January2018isexpectedto have an adverse impact on the entire banking industry and the Group is no exception. The impact on Bank Islam’s TotalCapitalRatiois30basispointsduetoDayOneadjustmentofMFRS9.Tomaintaintheexistingstrongcapitalratios,BankIslamissuedthethirdtrancheofthesubordinatedSukukMurabahahamountingtoRM300millionon13November2017.

Malaysian Financial Reporting Standards 9

MFRS9hadreplacedtheguidanceinMFRS139.

TheStandardrequireschangesinthewayimpairmentallowancesare computed. Impairment allowances are to be computed in anticipation of future losses rather than the previous practice of recognising impairment only when the financing has been classified as impaired. This means impairment allowances have to be provided even for new financing as well as undrawn facilities.

In preparation for the MFRS 9implementation, the AEC hasbeen briefed on the proposed approach to be adopted and methodology to be applied in the implementation. Bank Islam and Syarikat TakafulMalaysia Berhad (“Takaful Malaysia”) have appointed the same external consultants toassist in the implementation of MFRS9.AspartofitsoversightroleovertheimplementationofMFRS9,AEChasreviewedtheprogress update reports as well as the financial impact reported toBNM.

Collective Impairment Allowances

As at endDecember 2017, theGroup’s collective impairmentallowancesmadeup78%(2016:81%)ofthetotalallowancesfor impairment.

IncomputingtheBHBGroup’scollectiveimpairmentallowances,there is in place a process to appropriately group the lending exposures based on similar risk characteristics. The basis ofgrouping lending exposures into portfolios with similar creditrisk characteristics include asset type, industry, geographical location, collateral type, past-due status and other relevant

factors. These characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative ofthecounterparty’sabilitytopayallamountsdueaccordingtothe contractual terms of the assets being evaluated.

A multi-dimensional vintage analysis is done on each of the asset portfolios and the historical loss experience is adjustedbased on current observable data to reflect the effects of current conditions. Also removed are the effects of conditions inthehistoricalperiodthatdonotcurrentlyexist. Impairmentallowancesareprovidedbasedontherevisedlossexperience.

Individual Impairment Allowances

Significant financing, that is, total financing outstanding ofRM1millionormoreareassessedindividually.Afinancingassetis impaired and impairment losses are incurred if, and only if,

there is objective evidence ofimpairment. For individually assessed financing, objectiveevidenceof impairmentexistsif the borrower has significant financial difficulty, if there is a breach of contract, if it becomes probable that the borrower will enter bankruptcy or other financial reorganisation or if there is consecutive downgrade of two notches for externalratings.

Ifanysuchobjectiveevidenceexists, then the impairmentloss of the financing asset is estimated. The amount of impairment loss is measured

asthedifferencebetweentheasset’scarryingamountandthepresent value of estimated future cash flows discounted at the asset’soriginaleffectiveprofitrate.Inestimatingthefuturecashflows, judgementsaremadeabout the realisablevalueof thecollateralpledgedandtheborrower’sfinancialposition.

The BHB Group also proactively monitors and identifies financing that show signs of stress and could potentially become impaired. The account management officers engage with such customers to advise, restructure and reschedule these accounts based on economic viability. The estimated future cash flows of these accounts are also reassessed and any shortfalls in impairment allowances are immediately provided for.

AsatDecember2017,theGroup’scollective

impairmentprovisionof1.2%wasinline

withBNMrequirement.TheGroupalso

has sufficient financing loss buffers with

financinglossreservesat160.0%against

industryaverageof82.9%,reflectingits

prudent provisioning practices. In addition,

theGroup’simpairedfinancingratioasat

endof2017wasat0.93%againstthe

bankingindustry’sgrossimpairedratioof

1.53%.

TheGroup’sAECisalsoupdatedonthestatusoftheselargeindividualfinancingaccountsandthefactorstakenintoaccountinexercisingjudgementaroundtheindividualimpairmentprovisions.

2. Valuation of Financial Instruments

Thevaluationofthefinancialinstrumentswasanotheroneofthekeyfocusareasduetothecomplexityinvolvedinvaluingtheinstrumentsandtheapplicationofvaluationtechniqueswhichinvolvetheexerciseofjudgementandtheuseofassumptionsandestimates.

Quotedandobservablemarketprices,whereapplicable,wereusedasthemeasureoffairvalueoffinancialinstruments.ThesewereforvaluationofLevel1instruments.

Where such quoted or observablemarket priceswere not available, fair valueswere estimated based onmodels that use asignificantdegreeofnon-marketbasedunobservableinputs.ThesevaluationtechniqueswereusedinthevaluationofLevel2andLevel3financialinstruments.

For Level 2 financial instruments, valuation techniques are based on observable inputs for which pricing is obtained fromindependentsources.InputparametersincludepricingfromBondPricingAgencyorBNMindicativeyields.

However,significantvaluationjudgementisonlyusedinrespectofLevel3financial instruments.Judgementinrelationtothevaluationoffinancialinstrumentsaremoresubjective,wherethevalueisbasedonmodelsthatuseunobservablemarketdata,i.e.,reflecttheGroup’sjudgementandassumptions.

For the Group, the quantum of Level 3 financial instruments as at 31 December 2017 is not significant. It only represents RM256.4millionor0.4%ofthefinancialassetsheldatfairvalue.AsfortheLevel3Sukuk–liabilities,thecarryingamountisRM2.280billionagainstthefairvalueofRM2.236billion.

The valuation is undertaken by a unit independent of the business.

3. Valuation of takaful contract liabilities

Thetakafulcontractliabilitiesforfamilytakafulbusinesscompriseprovisionforoutstandingclaimsandparticipants’funds,whiletakaful contract liabilities for general takaful business comprise provision for outstanding claims and provision for unearnedcontributionandparticipants’funds.

The two key components in deriving to the takaful contract liabilities are the valuation of actuarial liabilities for the family takafulbusiness and the provision for outstanding claims for both family and general takaful businesses.

Reports on valuation of liabilities in respect of family and general business were presented and approved by the Board of TakafulMalaysiaonanannualbasisbasedonBNMguidelines.

i. Actuarial liabilities – family takaful contract liabilities

Actuarialliabilitiesforlong-termfamilytakafulbusinessrequireactuarialsignificantjudgementovertheestimationoffutureexpectedbenefitspayabletoparticipants.Actuarialliabilitiesforyearlyrenewalshort-termfamilytakafulbusinessiscalculatedbasedonthehigherofitsunexpiredriskreservesforexpectedbenefitspayabletoparticipantsandunearnedcontributionreserves.Theseestimationsaremadethroughtheselectionofbestestimateassumptionssuchasmortalityratesandmorbidity/lossincidencerates,surrenderratesanddiscountrates.ThebestestimateassumptionswerederivedusingTakafulMalaysia’sactual past experience.An appropriate allowance for Provisionof RiskMargin forAdverseDeviation frombest estimateassumption ismade in thevaluationof liabilities such that theoverall levelof sufficiencyofactuarial liabilitiesata75%confidence level is secured.

Themethodologyusedforcalculatingtheactuarialliabilitiescompriseprospectiveactuarialvaluation,cashflowprojectionvaluation and unearned contribution valuation.

Although judgements are made about determining the appropriateness of discount, mortality, morbidity and surrenderrate assumptions used in calculation of actuarial liabilities, there is update to the Board on an annual basis to ensure theassumptionsusedareinlinewithactualexperienceandarereasonable.


ii. Provision for outstanding claims – family andgeneral takaful contract liabilities

The provision for outstanding claims is made ofcost of claims (together with related expenses)andIncurredButNotReportedClaims(“IBNR”) atthe end of the reporting period by the appointedactuary.

A liability for outstanding claims is recognized when a claimable event occurs and Takaful Malaysia isnotified. An explicit provision for IBNR is set upto cover delays in claims reporting. However, theultimate cost of these claims cannot be known with certaintyatreportingdate.TheIBNRiscalculatedusingarangeofstandardactuarialclaimprojectiontechniques based on empirical data and currentassumptions with a margin for adverse deviationtoensuretheoveralllevelofsufficiencyata75%confidence level is secured.

Forfamilytakafulbusiness,theIBNRiscalculatedusing theChain Ladder and Expected Loss Ratiomethods, the same methods used in prior years.Duringtheyear,theappointedactuaryhasrevisedtheLossDevelopmentFactors(“LDF”) downwardtoalignthefactorswithlatestactualexperience.

The appointed actuary will continue to closely monitor the LDF assumptions and will consideradopting a more realistic approach when the experience becomes more credible. TheManagement of Takaful Malaysia and the appointed actuary have reviewed the treatment for casereservesamountinthecalculationofIBNRforfamily takafulproducts in2017.Theactuarywillhighlight and update the Board on any significant change to the assumptions used on a quarterlybasis.

For general takaful business, the provision for IBNR was estimated using the Chain Ladder,Bornhuetter-Ferguson and Expected Loss Ratiomethods.

The AEC of Takaful Malaysia acknowledged themethodologies and assumptions used and are satisfied that they are reasonable and in line with therequirementsofRisk-BasedCapitalFrameworkfor Takaful Operators and the Guidelines on ValuationBasisforLiabilitiesofFamilyandGeneralBusinessesissuedbyBNM.

Internal Audit

• ReviewedtheeffectivenessoftheinternalauditfunctionswhichareoutsourcedtoBankIslamwhichinclude:

~Reviewedandapprovedtheinternalauditplan,proceduresandfrequency;~ Reviewed internal audit reports for BHB and its wholly owned subsidiaries issued by the Internal Auditors on the effectiveness andadequacyofgovernance,riskmanagement,operationalandcomplianceprocess;and

~ Reviewed key audit reports and ensure appropriate necessary corrective actions have been taken by the Management in a timely manner to address control weaknesses, policies and other problems identified by the Internal Auditors and other control functions.

• AssessedtheperformanceoftheInternalAuditors,determineandrecommendtheauditfeefortheyearunderreview.

External Audit

• ReviewedtheauditplanoftheCompanyfortheyear(inclusiveofauditapproachandscopeofwork)withtheExternalAuditorspriortothecommencementoftheannualaudit.TheExternalAuditorsbriefedtheAEContheirauditplanpertainingtothestatutoryauditoftheCompany,highlightingareasofauditemphasis,keyregulatorydevelopments, involvementof InternalAuditorsandotherexperts;

• Reviewedtheresultsoftheannualaudit,theExternalAuditor’sReportandtheManagementRepresentationLettertogetherwiththeManagement’scorrectiveactiontoaddressthefindingsoftheExternalAuditors;

• MetwiththeExternalAuditorswithoutthepresenceoftheManagementtodiscussissuesandconcernsifany,arisingfromthestatutoryauditandothermatterstheExternalAuditorsmaywishtohighlight,amongstothersthelevelofassistanceprovidedbytheCompany’semployeestotheExternalAuditors,andanydifficultiesencounterinthecourseoftheauditwork,includinganyrestrictiononthescopeofactivitiesoraccesstorequiredinformation;

• Evaluated theperformance, independenceandsuitabilityof theExternalAuditorsandmade recommendations to theBoardofDirectorsontheirre-appointmentandremuneration.Inreviewingtheperformance,independenceandsuitabilityoftheExternalAuditors,theAECreviewedthequalificationsandtheexperiencesoftheauditteamaswellasconductedanassessmentontheeffectivenessandtheperformanceoftheExternalAuditorsandotherareassuchasthescopeoftheaudit,theirindependenceandobjectivity,auditfeesandauditexperience;and

• Reviewed thenature, scope and fees for non-audit servicesprovidedby the ExternalAuditors and ensured theywere fair andreasonableandinlinewiththelaiddownpracticesonnon-auditservicesinordertosafeguardtheindependenceandobjectivityoftheExternalAuditorsandreducepotentialconflictofinterest.

Detailsofthestatutoryaudit,audit-relatedandnon-auditfeespaid/payableintheyearunderreviewstotheauditorsaresetoutbelow:

FEES PAID/PAYABLE TO AUDITOR FY2017

GROUP RM’000

COMPANY RM’000

Fees paid/payable to KPMG Desa Megat PLT (KPMG)Statutory AuditRegulatory-related

1,553287

13532

– Validation of Perbadanan Insurans Deposit Malaysia Returns– Verification of adoption of MFRS 9– Statement of Risk Management and Internal Control– Review of Statement of Realised and Unrealised Profit & Losses– Verification of motor contribution income

1638028142

––1814

–

Non-audit– Limited review & other non-audit expenses 647 24

2,487 191

Fees paid/payable to overseas affiliates of KPMGStatutory audit 345 –

2,832 191

Related Party Transactions

• Reviewed,with theassistanceof theGCFO, relatedparty transactions entered intoby theCompanyand theGroup toensurethatthetransactionsenteredintowereincompliancewithParagraphs10.08and10.09oftheListingRequirements(Chapter10PartE–RelatedPartyTransactions);

• Reviewed the adequacy of the Company’s and the Group’s procedures to ensure that recurrent related party transactions arenot more favorable to the related party than those generally available to the public and are not to the detriment of the minorityshareholders.ThereviewdonebytheAECistoensurethattherelatedpartytransactionswereconductedinthebestinterestoftheCompanyandtheGroup;

• ReviewedandreportedtotheBoardallrelatedpartytransactionsenteredintobytheCompanyandtheGroup;and

• MonitoredanypotentialconflictofinterestsituationsinvolvingDirectorsandensuredthatsuchsituationsofconflictwereavoidedandthattherequirementsundertheDirectors’CodeofEthicswereadheredto.


Other Activities

• Reviewed the reportsof recurrent relatedparty transactionsandtheCirculartoShareholderswithregardtotheproposedrenewal of shareholders’ mandate for existing recurrentrelatedpartytransactionsofarevenueortradingnature;

• ReviewedandendorsedtheStatementofRiskManagementandInternalControlfortheBoard’sapprovalandinclusionintheAnnualReport;

• Reviewed the ZakatComputation for theCompany and itswhollyownedsubsidiariesfortheyearunderreview;

• Consideredandreviewedtheproposal for interimdividendsandDividendReinvestmentPlanforrecommendationtotheBoard;

• Reviewed the report on the Company’s status ofcompliancewith regulatory requirementsnamely theListingRequirements, Islamic Financial Services Act 2013, BNM’sGuidelines, Companies Act 2016 and Capital Market andServices Act 2007. The report also highlighted any newregulatoryrequirementsaswellasconsultationpapersissuedby the relevant regulators and the deadline for compliance.Whererelevant,theCommitteewouldreviewtheactionplanproposed by the Management in meeting the regulatoryrequirements and discussed the implications of any latestchanges and pronouncements on the Company and theGroup;

• Reported to the Board any significant issues and concernsdiscussedduringtheAECmeetingstogetherwiththerelevantrecommendations;and

• ReviewedtheassuranceprovidedbytheCEOandGFCOonthe scope and performance of the risk management andinternal control system established by the Group prior torecommendation to the Board for acceptance.

INTERNAL AUDIT ACTIVITIES REPORT

The Internal Audit functions of BHB and its wholly-owned subsidiaries,namelySyarikatAl-IjarahSdnBhd,BIMBSecuritiesSdn Bhd and BIMB Securities (Holdings) Sdn Bhd have beenoutsourcedtotheInternalAuditDivision(“IAD”) of Bank Islam since December 2008. The IAD is led by the Acting Head ofInternalAuditors,EncikZalfitriAbdMutalip(“Encik Zalfitri”). EncikZalfitrijoinedBankIslam’sIADinOctober2007andwasappointed as theActingHeadof InternalAuditors on1 June2017.EncikZalfitriisaCertifiedPublicAccountantandaFellowmemberoftheACCA,heisalsoaCertifiedInternalAuditorforfinancialinstitution(CIAFIN).

The Internal Audit functions report directly to the AEC andis independent of the activities of its auditees. The primary responsibilitiesoftheIADaretoundertakeregularandsystemicreviews of the risk management process, internal control and governance practices of BHB and its wholly-owned subsidiaries. The reviews are done in compliance with the International ProfessionalPracticesFrameworkandtheInternalAuditCharterto provide a reasonable assurance that the risk management process, internal controls and governance practices are operating satisfactorilyandeffectively,inlinewiththeGroup’sgoalsandobjectives.

The scope of the Internal audit reports covers improvement opportunities, audit findings, management responses and corrective actions in areas with significant risks and internal controldeficiencies.AllInternalAuditReportsontheCompanyand itswholly-ownedsubsidiarieswere tabled to theAEC fordeliberation.Managementwerepresent at theAECmeetingsto respond and provide feedback on the progress of business process improvementopportunities identifiedby IAD.MinutesoftheAECmeetingsaresubsequentlytabledtotheBoardfornotation.

TheAEC reviewed the adequacy and relevance of the scope,functions, resources, procedures, risk based internal audit plans andresultsoftheinternalauditprocesses,withtheIAD.

The Internal Audit would submit the Internal Audit Plan to be reviewed by the AEC. The audit planwhich covers the auditscope, methodology and practices, timing and resources, assessment of risk, comparison of actual versus budgeted time spent on assignments and audit fee.

DuringtheFinancialYearunderreview,IADissuedfour(4)reportsand one (1) follow-up audits on corrective actions. The areasreviewed include procurement, finance, corporate governance, human resources, operations, information technology, investments, corporate strategy, media and communication and risk management.

The internal audit functions of Bank Islam and Takaful Malaysia are carried out by their respective internal audit divisions.

Mission and Practices

IAD is committed to provide independent, risk based andobjective assuranceon the areas of operations reviewed, andgives insight and advice on best practices that will enhance, protect and add value to BHB and its wholly-owned subsidiaries.

This is accomplished through the following:

i. Formulating a comprehensive and detailed Audit Plan using appropriate and structured risk-based methodology that is aligned toBHB’sstrategicobjectives;

ii. AdoptingasystematicanddisciplinedapproachinevaluatingriskexposuresandtheadequacyandeffectivenessofcontrolstomanagetheriskswithinBHB’sgovernance,operationsandinformationsystems;

iii. EmbracinginternationalstandardsandbestpracticessuchasCommitteeofSponsoringOrganisations(COSO)tofurtherenhancetherelevanceandeffectivenessoftheinternalauditactivities;

iv. Reviewing existing internal control systems and reporting on whether these provide reasonable assurance against materialmisstatement,lossandfraud;

v. Reporting any significant issues that affect the processes of controlling the activities of, and managing the risks faced by thedivisions/companiesaudited;and

vi. SeekingtheManagement’sagreedcourseofactionstorectifyweaknessesidentifiedandperformfollow-upauditstoconfirmifthe actions have been correctly implemented, and are adhered to consistently.

Scope and Coverage

ThesummaryoftheactivitiesoftheInternalAuditforthefinancialyearended31December2017wereasfollows:-

i. PreparedtheAuditPlanforapprovaloftheAEC.TheAuditPlanwasdevelopedbasedonassessmentofthesignificantpotentialriskexposureoftheauditableareas;

ii. IssuedAuditReportstotheAECandManagement,identifyingweaknessesandissuesaswellashighlightingrecommendationsforimprovement.SuchrecommendationswereacteduponbyManagementwithagreedtimelines;

iii. FollowedupontheManagementcorrectiveactionsonauditissuesraisedbytheIAD.Determinewhethercorrectiveactionstakenhadgenerallyachievedthedesiredresults;

iv. Reported to the AEC, review on the adequacy, appropriateness and compliance of risk management, internal controls andgovernanceprocesses;

v. Reported to theAECon the reliability, integrityandcontinuityof InformationTechnology in compliancewith theCompany’sInformation Technology Policy together with the effectiveness and robustness of stress testing procedures and practices and thenecessaryback-upsystemtocoverforcontingenciesanddisaster;

vi. Reviewed the reliability (including accuracy and comprehensiveness), integrity and timeliness of regulatory reporting, accountingrecords,financialreportsandmanagementinformation;and

vii. Reviewedcompliancewithrelevantlegal,regulatoryandinternalpoliciesaswellasincompliancewithShariahrulesandprinciplesasdeterminedbytheShariahCommittee.

Performance Review of the Committee

Duringthefinancialyear,theTORoftheCommitteewasreviewedtoreflecttheregulatoryrequirementsarisingfromthecompanybeingapprovedanddesignatedasaFinancialHoldingCompany.TheevaluationontheeffectivenessoftheBoard, itscommitteesandthemembersoftheBoardrevealedthattheBoardissatisfiedwiththeperformanceoftheAECanditsmembers.TheAEChasdischargeditsdutiesinaccordancewithitsTORandinlinewiththerequirementsofBNMandBursaSecurities.

ThisreportismadeinaccordancewitharesolutionoftheBoarddated28March2018.


NOMINATION & REMUNERATION COMMITTEE CHAIRMAN’S OVERVIEW REPORT

TheNRCispleasedtopresentitsreportfortheperiodunderreviewto the shareholders of BHB.

On13October2016,theNominationandAssessmentCommitteeandRemunerationCommitteeweremergedand later knownastheNominationandRemunerationCommittee.Themergerofthetwo(2)committeeswasfor thepurposeofexpediencysincethecomposition of the committees was the same. The responsibilities of the Nomination and Remuneration Committee are to ensurethereisaformalandappropriateprocedureontheappointment/re-appointmentofDirectors and SeniorManagement, theBoardand Senior Management’s remuneration, Board evaluation andeffectiveness, review on the Board composition and succession planning for the Board and Management.

Indischargingitsdutiesashighlightedintheabove,theNominationandRemunerationCommitteehadheldfive(5)meetingsin2017.

TheNominationandRemunerationCommittee is satisfiedthat ithas discharged its responsibilities in accordance with the mandate givenbytheBoardanditsTermsofReference(“TOR”).

TAN SRI ISMAIL ADAMChairman

TAN SRI ISMAIL ADAMChairman/SeniorIndependentNon-ExecutiveDirector

TheresponsibilitiesoftheNominationandRemunerationCommitteeare to ensure there is a formal and appropriate procedure on the appointment/re-appointmentofDirectorsandSeniorManagement,theBoardandSeniorManagement’sremuneration, Board evaluation and effectiveness, review on the Board composition and succession planning for the Board and Management.

NOMINATION & REMUNERATION COMMITTEE (“NRC”) REPORT

ThemembersoftheNRCareasfollows:


OVERALLPERCENTAGE OFTHENRCMEETINGS


95%

TOTALNRC MEETINGSHOURS

2.50HOURS

1. Tan Sri Ismail AdamChairman/SeniorIndependentNon-ExecutiveDirector

2. Noraini Che DanMember/IndependentNon-ExecutiveDirector(appointedw.e.f.2February2018)

3. Mohd Tarmidzi Ahmad NordinMember/IndependentNon-ExecutiveDirector

4. Datuk Zaiton Mohd HassanMember/IndependentNon-ExecutiveDirector(retiredw.e.f.1February2018)

5. Zahari @ Mohd Zin IdrisMember/IndependentNon-ExecutiveDirector(retiredw.e.f.17May2017)

Notes:DetailsBoardofDirectors’ProfilesectionandbackgroundoftheNRCmembers canbe foundonpages71 to75of theIntegrated Annual Report.FurtherinformationontheNRC’sTermsofReferencecanbefound at www.bimbholdings.com, About Us – Corporate Governance – Board Committees – Nomination & Remuneration Committee

1

3

2

4

5


MEMBERSHIP & ATTENDANCE

TheNRCmembersanddetailsoftheirattendanceatNRCmeetingsheldduringtheFinancialYearcanbefoundonpages108to109ofthisIntegratedAnnualReport.TheNRCconsistsofthree(3)IndependentNon-ExecutiveDirectorsandchairedbyTanSriIsmailAdam (“Tan Sri Ismail”),aSenior IndependentNon-ExecutiveDirector.TanSri Ismailwas the formerDirectorGeneralofPublicServiceMalaysiaandhasservedasapublicservantformorethan38years.

WhilsttheNRCTORrequirestheNRCtomeetatleastonceayear,duringtheyearunderreview,theNRChadmetfive(5)times. AsidefromtheNRCmembers,theChiefExecutiveOfficer(“CEO”)andtheGroupCompanySecretaryareinattendanceatallthemeetings.

ROLE OF THE COMMITTEE

TheCommitteeensuresthereisaformalandappropriateprocedurefortheappointment/re-appointmentofDirectorstotheBoard andofkeySeniorManagement.TheCommitteeisresponsibleforleadingthisprocessandmakingrecommendationstotheBoard. The Committee makes recommendations to the Board on the Company’s framework and policy for the remuneration of the Non-ExecutiveDirectorsandkeySeniorManagement.

ThemainresponsibilitiesoftheNRCareasfollows:

Nomination

• Review the structure, size and composition of theBoard and make recommendations to the Board onanyadjustmentsthataredeemednecessaryincludingin terms of the appropriate size and skills, genderdiversityandthebalancebetweenExecutiveDirectors,Non-Executive Directors and Independent Directorsregularly;

• Review and recommend to the Board the fit andpropercriteriaofadirector, theCEOandkeySeniorManagement;

• Performthefitandproperassessmentonthenomineesfor directorship, membership in Board committees,the CEO and key Senior Management and makeappropriaterecommendationtotheBoard;

• RecommendtotheBoardtheremovalofanydirectors,theCEOandkeySeniorManagementfromtheBoard/Committee/Managementiftheyareineffective,errantandnegligentindischargingtheirresponsibilities;

• In consultation with the Chairman, regularly or atleast once a year, review the performance of individualdirectors, CEO and key Senior Management andevaluate the effectiveness of the Board as a whole andreporttotheBoardasmaybenecessary;

Remuneration

• Review and recommend to the Board the overallremuneration policy for Directors, CEO, key SeniorManagement personnel and such function asdetermined by the Board. The remuneration policyshould:

(i) Be documented and approved by the full Boardand any changes thereto should be subject toendorsementofthefullBoard;

(ii) Support the Company’s culture, objectives andstrategy;

(iii) Reflect the level of responsibility and commitmentbornebytheindividualdirectors,theCEOandkeySeniorManagementpersonnel;and

(iv) Be sufficient to attract and retain Directors, theCEO and key SeniorManagement personnel ofcalibrethatareneededtomanagetheCompanysmoothly and effectively.

• Review and recommend to the Board specificremuneration packages for Directors, the CEO andkeySeniorManagementpersonnel.Theremunerationpackages should:

(i) Be based on an objective consideration andapprovedbythefullBoard;

OVERVIEW OF 2017

DuringtheFinancialYearunderreview,theNRCheldfive(5)meetingsonthefollowingmatters:

• AppointmentofnewChairman/IndependentNon-ExecutiveDirectors;

• Re-electionandre-appointmentofIndependentNon-ExecutiveDirectors;

• ReviewedthestatusofindependenceoftheIndependentNon-ExecutiveDirectors;

• AnnualAssessmentoftheBoardanditsCommittees;

• ReviewedthecompositionoftheBoardandBoardCommittees;

• ProposednominationofNomineeDirectoroftheCompany’skeyoperatingsubsidiary;

• ReviewedandmaderecommendationtotheBoardwithregardtoDirectorswhosoughtre-electionandre-appointmentattheAGM;

• AssessedandrecommendedtotheBoardtherenewalofcontractofserviceandremunerationofkeySeniorManagement;

• ReviewedtheresultsoftheannualBoardevaluation;

• ReviewedtheBoardCharterandTORofBoardandBoardCommittees;and

• ReviewedtheremunerationofNon-ExecutiveDirectors.

• MakerecommendationstotheBoardon:

(i) review to the organisation structure of theCompany;

(ii) successionplanforDirectors,CEOandkeySeniorManagementpersonnel;

(iii) re-appointment of any Directors, CEO at theconclusion of his specified term of office asapprovedbyBNM;

(iv) re-appointmentofIndependentDirectorwhohasservedacumulativeperiodofnine(9)years;

(v) anypoliciesrelatedtoDirectorsincludingpoliciesonTenureofDirectorshipandDirectors’Training;

(vi) Assess the conduct/manner of the NomineeDirectors in exerting the influence of theshareholder before making any recommendationtotheBoardonhis/herre-appointment;and

(vii) Approve any request for Directors to attendtraining overseas.

(ii) Notbedecidedbytheexerciseofsolediscretionof any one individual or restricted group ofindividuals;and

(iii) BecompetitiveandconsistentwiththeCompany’sculture,objectivesandstrategy.

• ReviewandrecommendtotheBoard,theremunerationoftheCEOoftheCompany;

• ReviewandrecommendtotheBoardtheremunerationof Senior Vice President and above within theCompany;

• Review and recommend to the Board, the quantumand basis of bonus payments to the Management andstaffoftheCompany;and

• To review and recommend to the Board, policiespertaining to staff salary, remuneration scheme andbenefits.


TheNRCreviewedthesize,compositionanddiversityoftheBoardaswellasthemixofexistinganddesiredcompetenciesofmembersin its succession planning.

BasedontherecommendationsoftheNRC,theBoardconcurredthatthecurrentsizeandcompositionoftheBoardisconducivetofacilitateeffectivedecision-makingbasedonadiversityofperspectivesandskills,inthebestinterestsoftheCompany.

In view of the need to ensure proper processes are in place to manage succession issues at the Board level, an appropriate process for the selection, nomination and appointment of suitable candidates to the Board has been put in place.

TheNRCisentrustedwiththeresponsibilityofassessingandconsideringthecapabilities,commitmentandqualitiesofcandidatestobeappointedasBoardMembersaswellasBoardCommittees’Members.Initsassessment,theNRCwilltakeintoaccounttherequiredmixofskills,background,experience/expertise/knowledgerelevanttoCompany’sbusiness,existingcommitmentandpotentialconflictof interest.

Followingeachappointment,aletterofappointmentwillbeissuedandtheGroupCompanySecretaryshallundertakethenecessaryasauthorisedbytheBoard,soastoensuretheappointmentisinaccordancewiththestatutoryrequirementsasprescribedbytheListingRequirementsandBNMCGPolicy.AllnecessaryinformationwillbeobtainedfromthenewlyappointedDirectorfortheCompany’srecordsandformeetingthestatutoryrequirementsandotherapplicablerulesandregulations.

SUCCESSION PLANNING

TheBoardassistedby theNRC is responsible fordevelopingplans to identify thenecessaryanddesirablecompetenciesandskills ofDirectorsandsuccessionplanstoensurethereisanappropriatedynamicofskills,experience,expertiseanddiversityontheBoard.TheNRCalsoperformanoversightfunctionfortheappointmentaswellasthesuccessionplanningforkeySeniorManagement.

Duringtheperiodunderreview,therewerethree(3)membersoftheBoardwhoretired.TheywereEncikZahari@MohdZinIdris(retiredon17May2017),TanSriSamsudinOsman(retiredon31January2018)andDatukZaitonMohdHassan(retiredon1February2018).

Consequently,thecompositionoftheBoardCommitteeswasrevisedandTanSriAmbrinBuangwasappointedasthenewChairmanoftheBoardon2February2018.Duringtheperiodunderreview,thefollowingchangesweremadetotheBoardCommittees:-

COMMITTEE PREVIOUS COMPOSITION NEW COMPOSITION

AEC Chairman:DatukZaitonMohdHassan

Members:NorainiCheDanTanSriIsmailAdamMohdTarmidziAhmadNordinZahari@MohdZinIdris

Chairman:NorainiCheDan

Members:TanSriIsmailAdamMohdTarmidziAhmadNordin

NRC Chairman:TanSriIsmailAdam

Members:DatukZaitonMohdHassanMohdTarmidziAhmadNordin

Chairman:TanSriIsmailAdam

Members:NorainiCheDanMohdTarmidziAhmadNordin

BRC Chairman:MohdTarmidziAhmadNordin

Members:Zahari@MohdZinIdrisNorainiCheDan

Chairman:MohdTarmidziAhmadNordin

Members:TanSriIsmailAdamNorainiCheDan

Thechangesthatweremade,took intoaccounttherequirementsunderBNMCGPolicy.ThemembersoftheBoardCommitteescomprisedsolelyIndependentNon-ExecutiveDirectors.

COMPOSITION OF THE BOARD

TheBoardofBHBcurrentlyconsistsofsix(6)Non-ExecutiveDirectors.

Four(4)areIndependentNon-ExecutiveDirectors,includingtheChairman,whilsttwo(2)areNon-IndependentNon-ExecutiveDirectorswhomare nomineesofLembagaTabungHaji.

TheIndependentDirectorsmakeupmorethanhalfoftheBoard,asrecommendedbytheMCCG2017and incompliancewiththeListingRequirementsandBNMCGPolicy.TheIndependentNon-ExecutiveDirectorsare independentofManagementandfree of any business or other relationship or circumstances that could materially interfere with, or could reasonably be perceived tomateriallyinterferewith,theexerciseoftheirunfetteredandindependentjudgement.

TheCompany’sConstitutionprovides that theCompanymusthaveatleastfive(5)Directorsbutnotmorethan15Directors.

The Board is satisfied that it currently has an appropriate balance of skills, experience, knowledge and independence to deliverthe Group’s strategy, to enable the Non-Executive Directorsto effectively challenge the views of the Management and to satisfytherequirementsofgoodgovernance.

Within the Board there is diversity and a wealth of knowledge, experienceandskillsintheareaofaccountancy,banking,takaful,public administration and fund management, human resources management, corporate finance and risk management. A brief profileofeachmemberoftheBoard isprovidedonpages70to75ofthisIntegratedAnnualReport.Thediversebackgroundand expertise of the Directors brings new perspective tothe Company and its Group’s operations and enhances theeffectiveness of the Board.

APPOINTMENT OF A DIRECTOR

There is a formal and transparent process for the appointment ofanewDirector.TheNRC,whichhasbeendelegatedbytheBoard to oversee the process, will consider all proposals for the appointment of new Directors. The procedure is in linewith the Company’s Policy on Fit and Proper Criteria for KeyResponsible Persons (“KRP Policy”). The KRP Policy outlines the attributes/qualifications required by a candidate to bedeemed‘fitandproper’fortheappointmentasaDirectorandhasbeenimplementedsinceAugust2011.TheNRCmakesthe

recommendation to the Board on the suitability of candidates forappointmentasDirectorsandthatthecandidatessatisfytherequisite skills and core competencies in accordancewith theKRPPolicyoftheCompany,ListingRequirements,MCCG2017, BNMCGPolicyandBNM’sGuidelineonFit&Proper.Inassessingthesuitabilityofacandidate,theNRCalsoconductsaninterviewwiththecandidate.BasedontheNRC’srecommendation,theBoard will decide on the proposed appointment based on the merit and the KRP Policy.

Indeterminingifanindividualis‘fitandproper’toholdthepositionofaDirector,thefollowingshallbe taken into consideration:

• His/her probity, diligence, competence andsoundnessofjudgment;

• His/herreputation,character,integrity(includingfinancialintegrity)andhonesty;

• His/her history of offence(s) involving fraud/dishonesty/violence;

• Whetherhe/shehasbeenengagedindeceitful/oppressive/improper business practices or anypracticeswhichwoulddiscredithim/her;

• Whether he/she has been engaged/associated/hadconductedhimself/herselfinamannerwhichmay cast doubt on his/her fitness, competenceandsoundnessofjudgment;

• Whether he/she has contravened any provisionmade by or under any written law designedfor protecting members of the public againstfinancial loss due to dishonesty, incompetence ormalpractice;and

• Whetherhe/shehasbeendeclaredabankrupt.


Upon the Board’s concurrence, an application for the appointment of a director would be submitted to BNM for its approval. The selection criteria and process for the appointments of Directors to the Board are detailed in the Board Charter available at www.bimbholdings.com About Us – Corporate Governance – Board Charter

TheprocessflowfortheappointmentofanewDirectorisasfollows:

RE-ELECTION AND RE-APPOINTMENT OF DIRECTORS

TheDirectors’performanceisusedasthebasisinrecommendingto the shareholders their re-election and re-appointment. An annualevaluationandindependenceassessmentoftheDirectorsare conducted and the results are assessed by the NRC andcommunicated to the Board. Where relevant, recommendations are made to the Board for certain actions to be taken to address issuesorconcernsontheBoard’seffectivenessandcomposition.

The annual evaluation and independence assessment of the DirectorscoverstheassessmentontheDirectors’professionalism,experience,materialrelationship,competencyandcommitmentinperforming their respectiveduties. TheNRChas concludedthatallDirectorswhoareseekingre-electionattheforthcomingAGM have met the Board’s expectation by continuouslydischargingtheirdutiesdiligentlyasDirectorsoftheCompany.

For the re-appointment of Directors to BNM, the NRC willfirstassess theDirectorswhoareduefor re-appointmentandthen submit its recommendation to the Board for deliberation and approval. Upon obtaining the Board’s endorsement, therelevantsubmission,supportedbythejustificationsforsuchre-appointment,ismadetoBNMforitsapprovalthree(3)monthspriortotheexpiryoftheDirector’stenure.

Details of the Directors who are due for re-election at theforthcomingAGMaredisclosedonpage332ofthisIntegratedAnnual Report.

Identification of candidates

Evaluation of suitability on Fit and Proper

Interview session byNRC

Board Approval

Deliberationby NRCand

recommendation to the Board

In February 2018, following the retirement

of the former Chairman, Tan Sri Samsudin

Osman, BHB had appointed Tan Sri Ambrin

BuangasitsnewChairman,witheffectfrom

2 February 2018. At the forthcoming AGM,

TanSriAmrinBuangisretiringinaccordance

withArticle66oftheCompany’sConstitution,

and being eligible, has offered himself for re-

election.

EncikMohdTarmidzibinAhmadNordinand

Puan Noraini Che Dan, being Directorswho

are retiring by rotation in accordance with

Article61oftheCompany’sConstitutionand

being eligible, have also offered themselves

for re-election.

INDEPENDENCE ASSESSMENT OF INDEPENDENT DIRECTORS

BHBrecognisestheimportantcontributionoftheIndependentDirectorsinlinewiththerequirementsundertheBNMCGPolicywhereamajorityofitsDirectorsmustbeindependent.ThepresenceofmajorityIndependentDirectorswithinthecurrentBoardfacilitatesaneffectiveandindependentoversightovertheManagementprovidingthenecessarychecksandbalancesinensuringtheCompanyoperatesinasafeandsoundmanner.ToensuretheindependenceoftheIndependentDirectorsaremaintainatalltime,allIndependentDirectorsarerequiredtodeclaretheirindependenceonamonthlybasis.ThroughtheannualevaluationandindependenceassessmentoftheDirectors,theIndependentNon-ExecutiveDirectorsarealsoassessedontheirabilitytoprovidestrong,valuablecontributionstotheBoard’sdeliberations,withoutinterferenceandactinginthebestinterestofBHB.

Fortheperiodunderreview,theNRChasconsideredtheindependenceofeachIndependentDirectorinofficeandhasconcludedthateachIndependentDirectorhasmettheindependencecriteriaassetoutintheListingRequirementsaswellasBNMCGPolicy.Thishasbeen concurred by the Board.

ThetenureoftheDirectorisalsotakenintoaccountwhenassessingtheindependenceoftheIndependentDirector.AdditionalcriteriathatareassessedtodeterminesuchindividualDirectors’abilitytoexerciseindependentjudgementare:

• TheDirectorisfreefromanybusinessorotherrelationshipwhichcanmateriallyposeanyconflictofinterestorinterferewiththeexerciseoftheDirector’sjudgementorwillbedisadvantageoustoBHBorBHB’sinterest;

• TheDirector’sabilitytoprovideobjectivechallengesandconstructivefeedbacktoManagement,focusingonrootcauseofissuesandpotentialactionsrequiredtorectifytheissuesdiscussed;

• TheDirector’sreadinesstochallengeotherDirectors’assumptions,believesorviewpointsforthegoodofBHB;

• The ability to challenge the assumptions, beliefs or viewpoints of others with the objective of questioning and challengingconstructivelyintheinterestoftheCompany;

• Willingnesstostandupanddefendhis/herviews,beliefsandopinionsfortheultimategoodoftheCompany;and

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

TheeffectiveparticipationofIndependentDirectorsenhancesaccountabilityintheBoard’sdecisionmakingprocess.TheresponsibilitiesofanIndependentDirectorincludebutnotlimitedtothefollowing:-

• ProvideandenhancethenecessaryindependenceandobjectivitytotheBoard;

• EnsureeffectivechecksandbalancesontheBoard;

• Mitigateanypossibleconflictofinterestbetweenthepolicymakingprocessandtheday-to-daymanagementoftheCompany;

• ConstructivelychallengeandcontributetothedevelopmentofbusinessstrategyanddirectionoftheCompany;and

• EnsurethatadequatesystemsandcontrolstosafeguardtheinterestsoftheCompanyareinplace.

InlinewiththeaboveandbasedontheNRC’srecommendation,duringtheperiodunderreview,theBoardhasagreedthatthetenureofanIndependentNon-ExecutiveDirectorshouldnotexceedacumulativetermofnine(9)years.ThisdecisionwasmadepursuanttothenewPractice4.2ofMCCG2017.TheCompanynowhasapolicythatlimitsanIndependentDirectortoamaximumtenureofnine(9) years.However,anIndependentDirectorwhohasservedfornine(9)years,may,subjecttotheShareholder’sandBNM’sapproval,continuetoservetheCompanyasanIndependentNon-ExecutiveDirector.Inanyevent,noIndependentDirectorwillcontinuetoservetheBoardformorethan12years.


BOARD TRAINING & DEVELOPMENT

TheCompanyrecognisesthevalueofenhancingtheskillsandknowledgeofitsDirectorsonrelevantnewlawsandregulations, the changing business environment and risk profile, as well as the latest developments and key challenges in the financial sector. Duringtheperiodunderreview,apartfromtheexternaltrainingsthatwereattendedbytheDirectors,theManagementhasalsoorganisedin-housetrainingsontheNewCompaniesAct2016,MasterclassShariahTraining,FundTransferPricingTrainingandbriefingonimpactofIFRS17onTakafulIndustryaspartoftheBoard’sContinuingDevelopment,toenablethemtodischargetheir responsibilities.

BasedonthesaidDirectors’Trainingpolicy,thelistoftrainingsattendedbytheDirectorsiscirculatedtotheBoard.

Detailsoftheconferences,seminarsandtrainingprogrammesattendedbyeachDirectorsin2017aredisclosedinSectionBoftheCGReport.

During the year under review, Puan Noraini Che Dan hadcompleted her FIDE Core Programme within the stipulatedperiodundertheDirectors’TrainingPolicy.

The Company Secretary organised an induction programmefornewlyappointedDirectorsontheCompanyanditsGroup’sbusiness and operations, corporate governance and reporting procedures. The Directors are briefed on the policies andprocedures of the Board, as well as their rights and responsibilities asDirectors.

In addition, the Directors will receive a comprehensiveinformation pack containing the BoardCharter, the TOR, theCompany’sConstitution,relevantActsaffectingtheCompany,thelatestAnnualReport,CodeofConductandCodeofEthicsin order to facilitate the discharge of their duties.

New Board Members are provided with the opportunity toexperience the Company’s operations first-hand and tomeetand discuss all aspects of this with the Management.

TheinductionsessionisalsoattendedbykeySeniorManagement,namely,theCEO,theGroupChiefFinancialOfficer,theGroupChief Strategy Officer and the Group Company Secretary toassistnewlyappointedDirectors tohaveanunderstandingontheCompany’scorebusinessesanditswholeoperation.Apartfrom the operational briefing, the Management also organised separatebriefingsessionswiththeBoardofmajorsubsidiariesto have an understanding of the business operation as well as challenges faced by them.

TheCompanyhasapolicyonDirectors’Training.The Directors’ Training Policy provides, amongstothers,thefollowingrequirements:-

(a) Newly appointed Director to undergo aninduction programme by the Managementwhere the Company’s governance structure,the key business and operations and importantregulations and laws are highlighted. Theinduction programme is to be held as soonas practicable, no later than three (3) monthsupontheappointmentoftheDirector;

(b) To undergo and complete the Director’sMandatory Accreditation Programme by BursaSecurities within four (4) months of his/herappointment;

(c) To complete a core training programme underthe Financial Institutions Directors’ EducationProgramme (“FIDE”)withinone (1) yearandthesametobecompletedwithintwo(2)yearsupontheDirector’sappointmenttotheBoard;and

(d) To attend at least two (2) trainings in thecalendar year.

BOARD EVALUATION

Anobjectiveandwell-managedboardevaluationprocesscanleadtosubstantialimprovementintheBoard’seffectivenesswhichwilleventuallybringsignificantbenefitstotheCompany.

Through a Board and PeerAnnualAssessment (“Board Evaluation”), theNRCundertakes a formal and transparent process toassesstheeffectivenessofindividualDirectors,BoardCommitteesandtheBoardasawhole.Thefactorsconsidered,amongstothers, include the following:

PEERS/INDIVIDUAL DIRECTOR

• ContributionoftheDirectorinmeetings,whenconfrontedwiththeconflictandhis/herwillingnesstochallengeprevailingopinion;

• QualityofinputprovidedbytheDirector;

• ContributiontointeractionandtheDirector’sunderstandingofhis/herrolesandresponsibilitiesi.e.,inhis/hercapacityasaDirectoringeneral,ChairmanofBoardandBoardCommitteesaswellasanIndependentDirector.

BOARD COMMITTEE

• TermsofReference;• Skillandcompetency;• Meetingandadministration;• Conductofmeeting;• CommunicationtotheBoard;

• AreaoffocusspecifictoeachBoardCommittee;• EffectiveroleinsupportingandfacilitatingtheBoard’seffectivenessindischargingitsresponsibilities;

• Sufficientaccesstoreviewmattersdeliberated.

BOARD

• TheresponsibilitiesoftheBoardinrelationtostrategicplanning, risk management, performance management,financialreportingandsuccessionplanning;

• Boardcommunicationandcorporategovernance;

• Boardoperationandinteraction;• TheBoard’scomposition,sizeandbackground;• ThecontributionsofeachmemberattheBoardmeetings,

decision-making and output.

Wherenecessary,anexternalconsultant/expertwillbeengagedtoassistinandlendobjectivitytotheannualassessment.

Duringtheperiodunderreview,theprocesswasinternallyfacilitatedandconductedthroughquestionnairescirculatedtotheBoardcovering a variety of aspects associatedwith the board effectiveness such as Board Structure, BoardOperations and Interaction, BoardRolesandResponsibilities,UnderstandingtheCommittees’Roles,MixofSkillsandKnowledgeandCommitmentofMembers.ThesequestionnairesweredesignedtorecognisetheBoard’sstrengthsandtoidentifygapsorareasforimprovementfortheBoardanditsCommittees.

Uponcompletionoftheevaluation,theGroupCompanySecretarywouldcompiletheresultsfortheBoard’sdeliberationandapprovalofanyactionplanrequired.TheChairmanwillengageanddiscussthepeerassessmentresultswithindividualmembersifnecessary.

Havingconsidered the resultsof theannualevaluation for theFinancialYearunder review, theNRCconcludedthat theDirectorsandrespectiveBoardCommitteesasawholehaveremainedeffectiveandhaveconsistentlymethighperformancestandardsandallexpectations.ThisindicatesthattheDirectorshavecontinuouslyfulfilledtheirresponsibilitiesasMembersoftheBoardandBoardCommittees.

ThekeyoperatingsubsidiariesalsoperformedindividualassessmentofitsDirectors,CEOaswellasotherkeyresponsiblepersonsanditsShariahCommitteemembersannually.Theassessmentcoversamongstothertheperson’sprobity,personalintegrityandreputation,competence and capability, and financial integrity.


DIRECTORS’ REMUNERATION

AmongsttheobjectivesoftheNRCistodetermineanappropriateremuneration policy that aligns remuneration with strategy to drivethe long-termsuccessoftheCompanyandensuresthatthe Company can continue to attract, retain and motivatequalityleaders.

Duringtheperiodunderreview,the NRC implemented a newremuneration framework for the Directors, taking intoaccount the FIDE Director’sRemunerationReport2015(FIDEReport) and BNMCG Policy onRemuneration. In view of the above,theCompany’spolicyonthe remuneration for Directors’was revised as follows:

(a) FeesandOtherEmoluments

Non-Executive Directorsare remunerated by wayof monthly fees, a sittingallowance and otheremoluments. Fees payable to Non-ExecutiveDirectors aresubject to Shareholders’approval at the AnnualGeneral Meeting.

(b) Benefits in Kind

Other benefits such asDirectors’ Health andMedical Benefit togetherwithDirectors’andOfficers’(“D&O”) liability insuranceand travelling allowance arealso provided.

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

DetailsofeachDirector’sandCEOremunerationforthefinancialyear ended 31 December 2017 are disclosed in Note 38 onpages240to242ofthisIntegratedAnnualReportandintheCGReport.

KEY SENIOR MANAGEMENT REMUNERATION

The remunerationpackage for thekeySeniorManagement isstructured to link rewards to corporate and individual performance. It comprises salary, allowances, bonuses and other benefits alignedwithprudentrisk-taking.ThekeySeniorManagement’s

compensation package is determined by performance during the year against individual KPIs in a scorecard in consensus with the corporate objectivesas approved by the Board. The NRC reviews the performanceof the key SeniorManagementannually and submits views/recommendations to the Board on the remuneration and/orrewardstoreflectthekeySeniorManagement’s contributionstowards the Company’sachievements for the year.

Bands of the senior management’s remunerationfor the financial year ended 31December2017aredisclosedintheCGReport.

The NRC is satisfied that it hasdischarged its responsibilities in accordance with the mandate given by the Board and its TOR.

This report was made in accordance with the resolution of theBoardofDirectorsdated28March2018.

The six (6) key considerations in the setting of Non-ExecutiveDirectorsremunerationtoensuretherewasequitable remuneration for role,effortand riskhighlightedintheFIDEReportwereasfollows:-

1. The number of meetings attended to be usedas an indicator of a Non-Executive Director’scontributions;

2. A meeting fee rate should be based on acomparable rate that the market pays for a talentwithsimilarcaliberandexpectedcontributions;

3. The fixed fee (retainer fee) component tobe reduced and the meeting fee (sittingfee) component to be increased so that theNon-Executive Directorswere better recognisedfor their preparation and contributions atmeetingsincludingmeetingswithBNM.Fixedfeewould be determined by taking into account theNon-ExecutiveDirector’sexpectedtimespentonBoard’seducation,networkingandengagementwithstakeholders;

4. Rateforallmeetingfeesshouldbestandardizedfor all Board and Board Committee meetingsto recognize the value of each member’scontributions;

5. The Chairman of the Board and the BoardCommittees to be remunerated at a premiumgiven the additional role that they play inguiding and managing the Board and the BoardCommittees;and

6. The remuneration to be paid on a timely andperiodic basis.

TheBoardRiskCommitteeispleasedtopresentitsreportfortheperiod under review to the shareholders of BHB.

TheBoardRiskCommitteewasestablishedinthelaterpartofyear2016 inaccordancewithBNM’sCorporateGovernancePolicy tofulfiltheobligationofBHBasaFinancialHoldingsCompany.TheBoardRiskCommittee’sprimaryresponsibilitiesinclude,identifyingcritical risks area and key trends and deliberation of strategic action plans to mitigate the impact of such risks. In discharging its responsibilities, the Board Risk Committee is assisted by theGroupRiskManagementCommittee,consistingofthekeyseniormanagementofBHBanditsmajorsubsidiaries.

The Company recognises that effective risk management iscritical to the achievement of strategic objectives and the long-term sustainable growth of the business. In 2017, six (6) BoardRiskCommitteemeetingswereheld to identifyandmitigate therisks that would compromise the interest of the Group and its stakeholders at large.

The Board Risk Committee is satisfied that it has discharged itsresponsibilities in accordance with its mandate and Terms of Reference(“TOR”).

ENCIK MOHD TARMIDZI AHMAD NORDINChairman

BOARD RISK COMMITTEE CHAIRMAN’S OVERVIEW REPORT

MOHD TARMIDZI AHMAD NORDINChairman/IndependentNon-ExecutiveDirector

TheBoardRiskCommittee’sprimary responsibilities include, identifying critical risks area and key trends and deliberation of strategic action plans to mitigate the impact of such risks.



OVERALLPERCENTAGE OFTHEBRCMEETINGS


100%

TOTALBRC MEETINGSHOURS

9.25HOURS

1. Mohd Tarmidzi Ahmad NordinChairman/IndependentNon-ExecutiveDirector

2. Tan Sri Ismail AdamMember/SeniorIndependentNon-ExecutiveDirector(appointedw.e.f.31May2017)

3. Noraini Che DanMember/IndependentNon-ExecutiveDirector

4. Zahari @ Mohd Zin IdrisMember/Non-IndependentNon-ExecutiveDirector(retiredw.e.f.17May2017)

Notes:DetailsBoardofDirectors’ProfilessectionandbackgroundoftheBRCmembers canbe foundonpages71 to75of theIntegrated Annual Report.FurtherinformationontheBRC’sTermsofReferencecanbefound at www.bimbholdings.com, About Us – Corporate Governance – Board Committees –BoardRiskCommittee

3

2

4

BOARD RISK COMMITTEE (“BRC”) REPORT

ThemembersoftheBRCareasfollows:

1

MEMBERSHIP AND ATTENDANCE

TheBRCmembersanddetailsof theirattendanceof theBRCmeetings held during the Financial Year can be found onpage109of this IntegratedAnnual Report. TheBRC consistsof three (3) IndependentNon-ExecutiveDirectors and chairedby Encik Mohd Tarmidzi Ahmad Nordin (“Encik Mohd Tarmidzi”). EncikMohd Tarmidzi is an Associatemember oftheCharteredInsuranceInstitute(UK)(ACII)andFellowoftheMalaysian Insurance Institute (AMII). EncikMohdTarmidzihasmore than30yearsofexperience in takafulandfinance.TheBRC is supported by the GroupRisk Management Committee(“GRMC”) which is chaired by the GroupChief StrategyOfficer. Theothermembers of theGRMC arethe Group Chief Financial Officerof BHB together, the Risk Officer of each key operating subsidiaries. The GRMC assists the BRC toeffectively manage the key risk areasoftheCompanyandGroupand to ensure that an appropriate risk management system and internal controls are in place and functioning effectively.

TheBRCmembershavevastexperienceinfieldssuchasfinance,accounting, audit and procurement to enable them to discharge theirresponsibilitiesasmembersoftheCommittee.

ROLE OF THE COMMITTEE

The BRC was established on 11 October 2016 by the Boardto assist the Board to carry out its responsibilities. Whilst the BoardisultimatelyresponsiblefortheCompanyanditsGroup’srisk management framework, the BRC, facilitates and assiststhe Board to perform the oversight on the implementation of the Group’s risk management framework, to safeguardshareholders’ investments and the Group’s assets. This is inlinewiththerequirementsoftheMCCG2017andtheListingRequirementsaswellasBNM’sCGpolicy.

ThepurposeoftheBRCistoassisttheBoardinensuringthatthe Group has in place a sound and robust risk management framework and such framework has been effectively implemented to enhance the Group’s ability to achieve itsstrategicobjectives.

The Committee facilitates and assists the Board in fulfillingits statutory, oversight and fiduciary responsibilities to its stakeholders. The BRC’s salient responsibilities include thefollowing:

• Reviewand recommend to theBoard the riskmanagementpolicy statement and framework for the Company and itsGroup including the strategies, policies, the risk tolerancelevels,governanceandreportingstructure;

• Review and assess the adequacy of the risk managementpolicies and framework in identifying, measuring, monitoring

and controlling risks and the extentto which these risks are operating effectively;

• Review and assess the adequacyof infrastructure, resources andsystems at the subsidiaries and attheCompanyanditsGroupforaneffectiveriskmanagement;

• Review the adequacy of relevantpolicies at the subsidiaries andthe Company in meeting therelevant regulatory requirementsas a Financial Holding Companyincluding capital plan, dividend

policy, investment and financing policy, single customer limit, businesscontinuityplan,etc.;

• Review and assess risk methodologies for measuringand managing risks arising from the subsidiaries’ overallmanagement of all risks covering market, credit andoperationalthroughidentifiedtools;

• Regularlyreviewtheriskprofilingreportsbythesubsidiariesto ensure all risks at the subsidiaries are effectively managedand assess the potential impact of those risks to the Group asawhole;

• Review issues or findings by the relevant authorities thatregulate the business and activities of the subsidiaries and theCompanyandassess theadequacyandeffectivenessof therectificationmeasures;and

• Oversee the functions of the Group Risk ManagementCommittee.

Witheffectfrom31May2017,TanSriIsmailAdamwas appointed as a member replacingEncikZahari@MohdZinIdriswhoretiredon17May2017.


OVERVIEW OF 2017

Duringtheyearunderreview,six(6)BRCmeetingswereheld.ApartfromthemembersoftheBRC,theBRCisalsoattendedbytheChiefExecutiveOfficer,theChiefStrategyOfficer,theGroupChiefFinancialOfficerandtheGroupCompanySecretaryaswellastheChiefRiskOfficerofeachkeyoperatingsubsidiaries.

TheChairmanoftheBRCupdatestheBoardonkeymattersdeliberatedattheBRC’smeetings.Inaddition,minutesoftheBRCmeetingsaretabledtotheBoardfornotification.AnymembersoftheBoardmayenquireorseekclarificationonthemattersdeliberatedbytheBRCasrecordedintheminutes.

TheBRCactivitiesintheyearunderreviewaresummarisedbelow:

• DeliberatedtheGroup’sstrategicrisksandthecorrespondingkeyoperationalrisksaswellaskeycontrolstakentomanagetherisks.FurthermitigationstostrengthenthemanagementofexistingandemergingriskswererecommendedforManagement’saction;

• Deliberatedtheriskmanagementdashboard/stressteststabledbythekeyoperatingsubsidiaries;and

• Reviewedreportsonriskincidentswhichoccurredinthefinancialyearanddeliberatedtheadequacyandeffectivenessofpreventiveand corrective actions taken.

RISK MANAGEMENT

In order to support the BRC, the GRMC is responsible for the ongoing development and co-ordination of the Company’s riskmanagementframeworkintheGroup.GRMCisalsoresponsibletoconsolidate,assessandreportriskinformationfromacrosstheGroup.ItensurestheimplementationoftheriskmanagementprocessacrosstheGroup.TheCompanyriskmanagementprocessisastep-by-stepprocessofriskassessment(riskidentification,riskanalysisandriskevaluation)andrisktreatmentinthecontextoftheinternalandexternalenvironments.

TheGRMC,whichmeets six (6) times a year, collates and reports theGroup’s credit,market aswell as operational risk profiles.Emergingissuesandrisksarealsodeliberatedinthemeetingsandfurtheractionistakenbytherelevantkeyoperatingsubsidiaries.

TheBRC continues todiligently exercise its riskoversight responsibilitiesby ensuring that riskmanagement is an integral part ofstrategicplanninganddecision-makingfortheachievementoftheGroup’sstrategicoutcomesandlong-termobjectives.

TheBRCissatisfiedthatithasdischargeditsresponsibilitiesinaccordancewithitsmandateandTOR.

ThisreportwasmadeinaccordancewiththeresolutionoftheBoardofDirectorsdated28March2018.

CORPORATE GOVERNANCE OVERVIEW STATEMENT · management processes of the Company and Group. Set the...

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