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Extracted from Annual Report 2015

The Board of Directors ("Board") of Malaysia Building Society Berhad strongly believes in the importance of corporate governance and is fully committed to ensure that the highest standards of corporate governance and integrity are applied throughout the Group.

In addition, the Board also considers and adopts where appropriate, the principles and best practices of corporate governance as prescribed in the Malaysian Code of Corporate Governance 2012 ("Code") and those outlined by other regulatory bodies such as Bank Negara Malaysia's guidelines on Corporate Governance save for one of the recommendations that the tenure of an Independent Director should not exceed a cumulative tenure of 9 years.

The Board is pleased to report to shareholders the manner in which it has applied the Principles of the Code and the extent to which it has complied with the Best Practices of the Code, pursuant to Paragraph 15.25 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ("Bursa Malaysia") and Corporate Governance Guide : Towards Boardroom Excellence, throughout the Financial Year 2015.

A.Board of Directors
  Board Charter

The Directors are guided by the Board Charter which clearly identifi es the Board's role, duties and responsibilities. The Board Charter also outlines the processes and procedures to ensure the effectiveness and effi ciency of the Board and its Committees.

The Board Charter is a dynamic document and will be updated from time to time to refl ect changes to the Company's policies, procedures and processes as well as amended rules and regulations of the relevant authorities.

The Board Charter also includes the terms of reference and the authority limits for the Board and its Committees and the various relevant internal policies.


Duties and Responsibilities of the Board

The Board's statutory and fiduciary duties include responsibilities to approve and periodically review the overall business strategies and significant policies of the Company and the Group.

The primary responsibilities of the Board are, amongst others, the following:-

i) Review and approve strategies, business plans and signifi cant policies and monitor management's performance in implementing them;
ii) Oversee the conduct of the Company's business;
iii) Set corporate values and clear lines of responsibility and accountability that are communicated throughout the organization;
iv) Identify principal risks and ensuring the implementation of appropriate internal controls and mitigation measures;
v) Succession planning;
vi) Ensure competent management;
vii) Ensure that the operations of the Company are conducted prudently, and within the framework of relevant laws and policies;
viii) Ensure that the Company establishes comprehensive risk management policies, processes and infrastructure, to manage the various types of risks;
ix) Set up an effective internal audit department, staffed with qualifi ed internal audit personnel to perform internal audit functions, covering the fi nancial and management audit;
x) Establish procedures to avoid self-serving practices and confl icts of interest including dealings of any form with related entities;
xi) Review the adequacy and the integrity of the management information and internal controls system of the Company;
xii) Establish and ensure the effective functioning of various board committees;
xiii) Oversee the development and implementation of a shareholder communications policy for the Company; and
xiv) Ensure that the Company has a benefi cial infl uence on the economic well-being of its community.

Directors' Code of Ethics

The Company has established the Directors' Code of Ethics which was adopted from the recommended Code of Ethics for Directors issued by the Companies Commission of Malaysia. The Directors observe the Code of Ethics in performance of their duties and they fully subscribe to highly ethical standards and take into account the interest of all stakeholders.


Composition of the Board/Board Balance

The Board currently comprise of eight (8) Directors of whom fi ve (5) are Independent Non-Executive Directors and three (3) are Non–Independent Non-Executive Directors.

The Independent Non-Executive Directors are independent of Management and free from any business or other relationship with the Company and the Group which could materially affect the exercise of their independent judgement. The number of Independent Directors not only fulfill the requirement of Bursa Malaysia for one-third of Board membership to be independent but also contributes towards greater impartiality and objectivity in the Board's decision making process.

The Chairman of the Board is YBhg Tan Sri Abdul Halim bin Ali, a Non-Independent Non-Executive Director. Although the Chairman is a Non-Independent Director, the Board composition comprising a majority of Independent Directors can bring expertise and objectivity which will assure that the Company is effectively managed and in the best interest of stakeholders.

The diversity of skill, experience and knowledge of its members in various disciplines and profession allows the Board to address and/or to resolve the various issues in an effective and effi cient manner. The brief description of the background and experience of each of the Board member is contained in the Directors' Profi le section of this Annual Report.

The Board recognises the challenges in achieving the right balance of diversity on the Board to form a highly effective Board in today’s competitive business environment. Diversity is not limited only to gender, but includes ethnicity and age.

The Board is committed to Board diversity and will ensure that all appointments to the Board will be made based on merit while taking into account the Company's needs and circumstances, present size of the Board, suitability for the role, skills, experience, knowledge, experience and diversity.

The Board has not set a specific gender diversity target at this time. Nonetheless, the presence of a female director to the Board of MBSB reflects that the Board recognises the value of gender diversity in the Board and was an initial step taken by the Board towards achieving a more gender diversified Board.

In respect of ethnic diversity, the ethnicity of the Board members is reflective with the three major ethnic groups in Malaysia. The Board is also composed of Directors in varying ages, ranging from 45 to 72 years old.


Board Meetings

Board meetings for the ensuing financial year are scheduled in advance before the end of each financial year to enable Directors to plan ahead and fit the year's Board meetings into their own schedule.

The Board has at least four (4) scheduled quarterly meetings with additional meetings being convened as and when necessary.

Prior to each meeting, every Director is given the complete agenda and a set of Board papers well in advance so that the Directors have ample time to review matters to be deliberated at the meeting and to facilitate informed decision making.

The Board met twenty-fi ve (25) times during the fi nancial year ended 31 December 2015.

The details of each of the Directors' attendance are given as below:

Note:
1 Ir. Moslim was appointed as Director on 21 September 2015.

All Directors have complied with the minimum requirements of 50% on attendance at Board meetings during the fi nancial year as stipulated in the Main Market Listing Requirements of Bursa Malaysia.


Training and Development of Directors

The Board members are encouraged to attend continuous training to enable the directors to effectively discharge their duties. The Board continuously evaluates and determines its' training needs.

During the year, all Directors have attended various training programmes, seminars, conferences and talks conducted by Regulatory Authorities, professional bodies and professional trainers and speakers, in order to stay abreast with the latest developments in the industry and business environment as well as on changes to statutory requirements and regulatory guidelines, so as to enhance their skills and knowledge to enable them to carry out their roles effectively.

The training programmes/conferences/seminars/dialogues attended by the Directors in 2015 focus on Corporate Governance, Directors Responsibilities, Finance (Conventional & Islamic), Accounting, Investment, Business Sustainability and Risk Management:-


YBhg Tan Sri Abdul Halim bin Ali
1. Introduction to Zarith Sofi ah Center for Global Islamic Studies Islam Beyond Media-Driven Narratives: Muslim and Non-Muslims in Search for Common Ground
Yayasan Raja Zarith Sofiah Negeri Johor
2. Dinner address by Frank Gardner OBE - Overcoming Adversity
Khazanah Nasional Berhad
3. Corporate Governance Breakfast Series with Directors - Bringing the best out in Boardrooms
Bursa Malaysia Berhad
4. IJM Senior Management Forum 2015: "Focused Execution, Enhancing Capabilities"
IJM
5. A-LCS C012: Governance Institute for Malaysia University Board Chairs and Vice Chancellors/Presidents
Akademi Kepimpinan Pendidikan Tinggi (AKEPT)
6. Board of Directors, Shariah Advisory Committee & Management Committee Session - Salient features of Islamic Banks and its role to socio-economic development; updates on MCSN resolution 2015; updates on Muzakarah Cendekiawan Syariah Nusantara 2015
Malaysia Building Society Berhad
7. Khazanah Megatrends Forum 2015
Khazanah Nasional Berhad

YBhg Datuk Syed Zaid bin Syed Jaffar Albar
1. Shaking Things Up: Technology that Transforms and How to Keep Pace
Asia Policy Partners
2. Board of Directors, Shariah Advisory Committee & Management Committee Session - Salient features of Islamic Banks and its role to socio-economic development; updates on MCSN resolution 2015; updates on Muzakarah Cendekiawan Syariah Nusantara 2015
Malaysia Building Society Berhad

YBhg Datuk Shahril Ridza bin Ridzuan
1. World Capital Markets Symposium 2015
Securities Commission Malaysia
2. HSBC Dinner Talk (Panel Speaker)
HSBC Bank
3. Invest Malaysia Conference 2015 - EPF's Investment Directions for the Future (Panel Speaker)
CIMB Group & Bursa Malaysia Berhad
4. International Social Security Conference (ISSC) 2015 - Sustainable Social Security Eco-System Within An Ageing Society (Panel Speaker)
EPF & JP Morgan
5. Amundi World Investment Forum 2015 - Looking Beyond The Horizon
Amundi Group
6. In The Spotlight - Value Proposition of ESG Investment (Panel Speaker)
Bursa Malaysia Berhad & Malaysian Investor Relations Assoc. (MIRA)
7. GLC Open Day - The GLCT Story (Panel Speaker)
Khazanah Nasional Berhad
8. EPF Risk Management Seminar 2015
EPF
9. 6th Annual Multinational Pensions Forum - Communicating with Members - Global Best Practice (Panel Speaker)
JP Morgan
10. Media Prima Berhad: Board of Directors Workshop
Media Prima Berhad
11. Thought Leaders Roundtable - Roundtable Discussion
Institutional Investor
12. EPF Investment Seminar 2015 - Exploring Challenges & Gaining Opportunities
Employees Provident Fund & Macquarie Group
13. BFM's General Management Programme
BFM Business School
14. EPF Global Private Equity Summit 2015
EPF
15. CHOGM: Commonwealth Business Forum 2015 - Investing in Infrastructure: Building for the Long Term (Panel Speaker)
Commonwealth Heads of Government Meeting (CHOGM) and Commonwealth Enterprise and Investment Council
16. CAM Corporate Leadership Dialogue Series - Navigating Through The Middle Income Trap The Road Ahead for Malaysia (Guest Speaker)
Chevening Alumni of Malaysia (CAM)

YBhg Dato' Jasmy bin Ismail
1. Directors Forum 2015 - Talent and Human Capital: The drivers of growth and creativity
MINDA
2. Board of Directors, Shariah Advisory Committee & Management Committee Session - Salient features of Islamic Banks and its role to socio-economic development; updates on MCSN resolution 2015; updates on Muzakarah Cendekiawan Syariah Nusantara 2015
Malaysia Building Society Berhad

Encik Aw Hong Boo
1. Board of Directors, Shariah Advisory Committee & Management Committee Session – Salient features of Islamic Banks and its role to socio-economic development; updates on MCSN resolution 2015; updates on Muzakarah Cendekiawan Syariah Nusantara 2015
Malaysia Building Society Berhad
2. MIA International Accountants Conference 2015
Malaysian Institute of Accountants

Encik Lim Tian Huat
1. INSOL International, Annual Regional Conference
INSOL San Francisco
2. Conference for Insurance Guarantees Scheme
PIDM
3. Board of Directors, Shariah Advisory Committee & Management Committee Session - Salient features of Islamic Banks and its role to socio-economic development; updates on MCSN resolution 2015; updates on Muzakarah Cendekiawan Syariah Nusantara 2015
Malaysia Building Society Berhad
4. 2015 National Conference on Governance Risk and Control - Gearing for innovation
Institute of Internal Auditors Malaysia
5. MIA International Accountants Conference 2015
Malaysian Institute of Accountants
6. The Exchange Building Capabilities and Competencies
UEM Group

Cik Ravinder Kaur a/p Mahan Singh
1. Economic Wrap-Up 2014
Performance Management Delivery Unit (PEMANDU)
2. International Directors Summit 2015
Malaysian Directors Academy (MINDA)
3. Talent Mismatch Dialogue: Acquiring & developing the right talent for the Financial Services industry
Finance Accreditation Agency (FAA)
4. Forum for Spouses of ASEAN Heads of State & Government: Empowerment through social business
ASEAN Secretariat
5. Crystal Ball 2015 Economic Forecast
American Malaysian Chamber of Commerce (AMCHAM)
6. The 3rd Annual Technology & Innovation Conference: The future of banking & financial services
FST Media
7. Rolling Out Personal Data Protection Act (PDPA) Compliance Programme: Business issues & practical challenges to manage
Brickfi elds Asia College (BAC)
8. Future of Companies: A roundtable discussion
Alpha Catalyst Consulting (ACC)
9. The 19th Malaysian Banking Summit: Banking in a new regional landscape with ASEAN economic integration
Asian Strategy & Leadership Institute (ASLI)
10. CIMA global initiative: Roundtable on managing the value of your talent
Chartered Institute of Management Accountants (CIMA)
11. AIF International Symposium 2015: Bridging the talent gap
Asian Institute of Finance (AIF)
12. Enterprise Risk Management (ERM) Global Conference 2015: The Next Generation
Institute of Enterprise Risk Practitioners (IERP)
13. Crisis Management & Protecting Brand Reputation Workshop
Institute of Enterprise Risk Practitioners (IERP)
14. Brand You Conference: A key leadership strategy for women
LeadWomen
15. Economic Update & Outlook
Performance Management Delivery Unit (PEMANDU)
16. Khazanah Megatrends Forum 2015: Harnessing Creative Disruption: Unlocking the Power of Inclusive Innovation
Khazanah Nasional Berhad (KNB)
17. Board of Directors, Shariah Advisory Committee & Management Committee Session - Salient features of Islamic Banks and its role to socio-economic development; updates on MCSN resolution 2015; updates on Muzakarah Cendekiawan Syariah Nusantara 2015
Malaysia Building Society Berhad

Ir. Moslim bin Othman
1. 25th Annual Professor Chin Fung Kee Memorial Lecture - Ensuring a Better Water Future for Malaysia by Tan Sri Dato' Ir. Shahrizaila Bin Abdullah
The Institution of Engineers
2. Mandatory Accreditation Program (MAP) for Directors of Public Listed Companies
Bursatra

All Directors have attended the MAP as required under the Main Market Listing Requirements of Bursa Malaysia. The Directors are also regularly updated on any changes to legal and governance requirements which will affect the Group and also themselves as Directors.


Roles and Responsibilities of the Chairman and the President and Chief Executive Officer

There is a clear division of responsibility between the Chairman and the President and Chief Executive Offi cer to ensure a proper balance of power and authority. The Chairman of the Board is a Non-Executive Director and together with the rest of the Board, is responsible for setting the policy framework within which the Management is to work. The Chairman also leads the collective effort of the Board in monitoring the performance of Management in meeting the corporate goals and objectives. He also guides the Board on all issues presented before them at meetings or at such other forums where the consensus of the Board is required.

The President and Chief Executive Officer is primarily responsible for overseeing the day to day management to ensure the smooth and effective running of the Company and the Group.

He is entrusted with making sure that all decisions, directions, policies and/or instructions approved by the Board are carried out by Management in a timely and efficient manner. He carries the primary responsibility in ensuring management competency including the emplacement of an effective succession plan to sustain continuity.


Senior Independent Director

In accordance with the best practices on Corporate Governance, Encik Aw Hong Boo has been appointed as a Senior Independent Non-Executive Director on 22 April 2014. Encik Aw Hong Boo has extensive experience in finance and accounting and he is able to continue to provide constructive and independent advice from various perspective.

The responsibilities of the Senior Independent Non-Executive Director, amongst others, include the following:-

1. be available to Board Members if they have concerns which contact through the normal channels of Chairman or President and Chief Executive Officer has failed to resolve or for which such contact is inappropriate;
2. act as a sounding Board for the Chairman and President and Chief Executive Offi cer on board matters;
3. chair the Nominating & Remuneration Committee in ensuring that board composition meets the needs of the Company; and
4. act as a trusted intermediary for Non-Executive Directors where this is required to help them to challenge and contribute effectively.

Appointment and Re-election of the Board

A formal and transparent procedure has been established by the Board for the appointment of new directors. A proposed candidate is fi rst considered by the Nominating & Remuneration Committee which takes into account the skills and experience of the person before making a recommendation to the Board. The process of appointment is detailed out in Page 65 of this Annual Report.

In accordance with the Company's Articles of Association, one third (1/3) of the members of the Board for the time being shall retire by rotation at each Annual General Meeting and, subject to eligibility, may offer themselves for re-election.

Directors who are appointed by the Board during the financial year are subject to re-election by shareholders at the next Annual General Meeting held following their appointments.

The performance of those Directors who are subject to re-appointment and re-election of Directors at the Annual General Meeting will be subject to assessment whereupon the recommendation is submitted to the Board for decision on the proposed re-appointment or re-election of the Director concerned for shareholders’ approval at the next annual general meeting.


Independent Directors

The Board will assess the Independent Directors annually. The following are considered when assessing the independence:-

i. Fulfillment of all criteria under the definition of Independent Director as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad;
ii. Ability to function as a check and balance and bring an element of objectivity to the Board of Directors;
iii. Ability to constantly challenge the Management in an effective and constructive manner;
iv. Actively participate and provide independent advice in all Board/Board Committees discussion; and
v. Ability to act in the best interests of the Company and the Group.

In addition to the annual assessment by the Board on the Directors' independence, each Independent Director also submits an annual declaration on their independence.

The Board noted Recommendation 3.2 of the Code that the tenure of an independent director should not exceed a cumulative term of nine (9) years. The Board is of the view that the ability of long serving independent director to remain independent and to discharge their duties with integrity and competency should not be measured solely by tenure of service or any pre-determined age. Their long service should not affect their independence as they are independent minded and had provided necessary checks and balances in the interest of the shareholders. Further, the continued tenure of directorship brings stability to the Board and the Company benefits from directors who have over time gained valuable insight into the Group, its market and the industry.

Therefore, Recommendation 3.2 of the Code (assessment criteria for independence of directors should include tenure) and Recommendation 3.3 of the code (the Board is allowed to seek shareholders' approval for independent directors after nine (9) years to remain as an independent director) do not arise.

Accordingly, Encik Aw Hong Boo who have been Independent Non-Executive Director since 18 November 2005 will continue to be Independent Director of the Company notwithstanding having served as independent director on the Board for more than nine (9) years.


Supply of Information

Prior to the Board Meeting, the agenda and a set of Board papers relevant to the business of the meeting are circulated to all Directors on a timely basis for Directors to study and evaluate the matters to be discussed. Urgent papers may be presented and tabled at the meetings under supplemental agenda.

The President and Chief Executive Officer, Senior Management and relevant external consultants are invited to attend the Board meetings to brief and provide details on matters relating to their areas of responsibilities and also to provide details to the Directors on recommendations or reports submitted to the Board for deliberation and consideration.

The Board has full and unrestricted access to all information within the Company and Group as well as the advice and services of Senior Management and Company Secretaries in carrying out their duties. The Directors may also seek independent professional advice, at the Company's expense, if and when required.


Company Secretary

The Company Secretary demonstrates ongoing support in advising and assisting the Board on matters relating to the affairs of the Company, including issues pertaining to compliance, corporate governance and best practices, boardroom effectiveness and Directors’ duties and responsibilities.

The Company Secretary also facilitates the communication of key decisions between the Board, Board Committees and Senior Management. The Company Secretary is also responsible for advising the Directors of their obligations and duties to disclose their interest in securities, disclosure of confl ict of interest in transactions, prohibition on dealing in securities and restrictions on disclosure of price sensitive information.

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


Board Committees

The Board has established Board Committees to assist the Board in the running of the Company and the Group.

Pursuant to the above, the Board has established five (5) Board Committees. Each committee has clearly defined terms of reference regarding its objectives, duties and responsibilities, authority, meetings and memberships.

The Board Committees of the Company are as follows:-

Executive Committee
Audit Committee
Risk Management Committee
Nominating & Remuneration Committee
Option Committee

Any decision not within the authority of the Board Committee is referred back to the Board with its recommendations and comments for the Board's deliberation and approval.

The salient terms of reference of each Board Committee and details of members' attendance of meetings are as follows:

a) Executive Committee

The Executive Committee was established on 29 April 2005 specifically to assist the Board to evaluate and approve loan/financing applications within their approving authority limits. Loans/financing above the approving authority limit of the Executive Committee or loans/financing with connected parties as defined in the Guidelines on Related Party Transactions for Directors and Key Management Officers will be escalated to the Board for further deliberation and approval.

The Executive Committee has taken over the function of the Arrears Recovery Committee which was disbanded on 23 October 2013. The oversight and review of restructuring proposals for the recovery of non-performing loans/fi nancing (NPLs/NPFs), monitoring the progress of the recovery of NPLs/NPFs and formulation of recovery strategies, were carried out by the Executive Committee.

The Executive Committee currently consists of two (2) Independent Non-Executive Directors and three (3) Non-Independent Non-Executive Directors.

During the financial year 2015, six (6) meetings were held by the Executive Committee. The members and their attendance at the meetings are as follows:

Note:
1 Dato' Jasmy retired from the Executive Committee on 9 October 2015.
2 Ir. Moslim was appointed as a member of the Executive Committee on 9 October 2015.

b) Audit Committee

The principal function of the Audit Committee is to assist the Board in the effective discharge of its fiduciary responsibilities particularly in the areas of accounting and management controls and financial reporting; to reinforce the independence and objectivity of the Internal Audit Division; to provide the focal point for communication between external auditors, internal auditors, risk managers, Directors and the Management on matters in connection with accounting, reporting, risks and controls and providing a forum for discussion independent of the Management; and to undertake additional duties as may be deemed appropriate and necessary to assist the Board of Directors.

The Audit Committee currently consists of three (3) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director.

In accordance with the best practices of corporate governance, the Audit Committee presents its report as set out on pages 84-91 of this Annual Report.

c) Risk Management Committee

The Primary objectives of the Risk Management Committee are to assist the Board with risk oversight within the Group which includes reviewing the risk management policies, risk exposure and limits as well as ensuring that all risks are well managed within the Group’s risk appetite by providing adequate infrastructure and resources in place to support risk management activities.

The Risk Management Committee currently consists of three (3) Independent Non-Executive Directors.

During the financial year 2015, there were ten (10) meetings held by the Risk Management Committee. The members and their attendance at the meetings are as follows:-

Note:
1 Cik Ravinder Kaur retired from the Risk Management Committee on 9 October 2015.

d) Nominating & Remuneration Committee

The primary responsibilities of the Nominating Committee are:

a.

To recommend to the Board, candidates for all directorships to be filled by the shareholders or the Board. In making its recommendations, the Nominating Committee should consider the candidates'-

- skills, knowledge, expertise and experience;
- professionalism;
- gender diversity;
- integrity; and
- in the case of candidates for the position of independent non-executive directors, the Nominating Committee should also evaluate the candidates' ability to discharge such responsibilities/functions as expected from the independent non-executive directors;
b.

To consider, in making its recommendations, candidates for directorships proposed by the President and Chief Executive Officer and, within the boundaries of practicability, by any other senior executive or any director or shareholder;

c.

To recommend to the Board, directors to fill the seats on the Board Committee;

d.

To conduct annual review with the Board, the required mix of skills and experience, gender diversity and other qualities, including core competences which non-executive directors should bring to the Board;

e.

To implement a process with the Board, for assessing the effectiveness of the Board as a whole, the Committees of the Board, and for assessing the contribution of each individual director, including independent non-executive directors, as well as the President and Chief Executive Offi cer. All assessments and evaluations carried out in the discharge of all its functions should be properly documented;

f.

To consider and to recommend to the Board the appointment, resignation, retirement and other related issues involving the President and Chief Executive Officer;

g.

To consider and approve the appointment, promotion, resignation, retirement, removal and other related issues involving the key responsible persons. Key responsible person is defined as a person who:-

(i) has the authority, makes or has substantial influence in making decisions that affect the whole, or a substantial part of, the Company's business;
(ii) is principally accountable or responsible, whether solely or jointly with other persons, for implementing and enforcing policies and strategies approved by the board; or
(iii) is principally accountable or responsible, whether solely or jointly with other persons, for developing and implementing systems, internal controls and processes that identify, measure, monitor or control the Company's risks
h.

To recommend to the Board, candidates for appointment as Shariah Advisory Committee members. In making the recommendation, the Nominating Committee should consider the following criteria:

1. The candidate considered should be a Muslim;
2. The skills set of the candidates for the position; and
3. The candidate fulfilling the fit and proper criteria as per the applicable guidelines by the relevant authorities
i.

To conduct the annual review on the Performance of the Shariah Advisory Committee members

The activities of the Nominating Committee in 2015 are summarized as follows:-

a. Reviewed and recommended the re-appointment and re-election of Directors at the 45th Annual General Meeting.
b. Reviewed and recommended the appointment of a Shariah Advisory Committee member
c. Reviewed and recommended the performance bonus and salary increment of all staff
d. Reviewed and recommended the revision of terms/renewal of employment contract of the President and Chief Executive Officer.
e. Reviewed and recommended the appointment of an additional Independent Non-Executive Director
f. Reviewed the performance of the Shariah Advisory Committee.
g. Reviewed Directors Training requirement and expenses.
h. Reviewed and recommended the changes and the composition of Board Committees.

The nominating and election process of Directors is as follows:-

i. Identification of skills
ii. Selection of candidates
iii. Fit & proper assessment
iv. Nominating Committee deliberation
v. Interaction with candidates
vi. Recommendation for Board's approval

The primary responsibilities of the Remuneration Committee are:

a) To propose a system and amount of executive and non-executive Directors' annual remuneration package to the Board;
b) To review remuneration programmes from time to time and gauge their adequacy and results;
c) To ensure the Company has a developed succession policy and that such policy is kept under review;
d) To consider and to recommend to the Board the promotion, remuneration package, increment, bonuses and other related matters involving the President and Chief Executive Officer;
e)

To consider and approve the promotion, remuneration package, increment, bonuses and other related matters involving the key responsible persons. Key responsible person is defined as a person who:-

(i) has the authority, makes or has substantial influence in making decisions that affect the whole, or a substantial part of, the Company's business;
(ii) is principally accountable or responsible, whether solely or jointly with other persons, for implementing and enforcing policies and strategies approved by the board; or
(iii) is principally accountable or responsible, whether solely or jointly with other persons, for developing and implementing systems, internal controls and processes that identify, measure, monitor or control the Company's risks.
f) To consider and recommend to the Board, the remuneration package and other related matters involving the Shariah Advisory Committee; and
g) The Committee, when considering and recommending where appropriate will take into account that such recommendation/remuneration package/programmes and other related matters should reflect and be commensurate with the accountability, duties and responsibilities of the abovesaid parties under consideration.

The Nominating & Remuneration Committee also carries out the periodic review of the overall remuneration for Directors, President and Chief Executive Officer and key responsible persons whereupon recommendations for Directors and the President and Chief Executive Officer are submitted to the Board for approval.

The Nominating and Remuneration Committee currently consists of two (2) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director.

During the year ended 31 December 2015, five (5) meetings were held. The members of the Nominating & Remuneration Committee and their attendance at the meeting are as follows:

(e) Option Committee

The Option Committee was established on 27 May 2010. The principal function of this Option Committee is to administer the Company's Employees' Share Option Scheme (ESOS) in accordance with the ESOS Scheme's by-laws

The Option Committee currently consists of two (2) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director.

During the financial year 2015, three (3) meetings were held by the Option Committee. The members of Option Committee and their attendance at the meeting are as follows:

B.Directors' Remuneration
  Objective of Directors' Remuneration

The Company's remuneration policy for Directors is tailored towards attracting and retaining Directors with relevant experience and expertise needed to assist in managing the Company and the Group effectively.

Remuneration Package

The remuneration package is as follows:-

(a) Directors' Fee

The Directors are paid an annual fee, the quantum of which is approved by the shareholders at the Annual General Meeting. In the event a Director is appointed or resigns during a financial year, the fee will be pro-rated and apportioned accordingly based on the month of the said Director's appointment or resignation.

(b) Allowance

The Directors are paid a meeting allowance for their attendance at meetings of the Board and the Board Committees. The quantum of the allowance is recommended by the Nominating & Remuneration Committee and is approved by the Board. In addition, the Chairman is also paid a car allowance.

(c) Details

The aggregate remuneration of the Directors during the financial year 2015 are categorized into the appropriate components as follows:-

Details of the Directors' remuneration of each Director during the financial year 2015 are set out under Note 30 of the Notes to the Financial Statements in this Annual Report.

C.Shareholders
 Relationship with Shareholders and Investors

The Board recognises the importance of communication and proper dissemination of information to its shareholders, investors and all other stakeholders including the general public. Through extensive disclosures of appropriate and relevant information, the Company aims to effectively provide shareholders and investors with information to fulfill transparency and accountability. In this respect, the Company keeps shareholders informed via announcements and timely release of quarterly financial reports, press releases, annual reports and circulars to shareholders.

As part of the Group's initiatives, the President and Chief Executive Officer together with the Chief Financial Officer and the Company's Corporate Planning and Communications Division conducts discussions, dialogues and briefings with fund managers, financial analyst and media, as and when necessary and/or after the Group's quarterly financial results are released to Bursa Malaysia. This is to promote better understanding of the Group's financial performance, operations and other matters affecting shareholders' interest.

In addition, the Company has a website at www.mbsb.com.my which provides updated information on the corporate and business aspect of the Group. Press releases, announcements to Bursa Malaysia, analysts briefings and quarterly results of the Group are also made available on the website and this helps to promote accessibility of information to the Company's shareholders and all other market participants.

The Company also provides an abridged version of the Annual Report together with its Annual Report in CD format, highlighting key financial information to facilitate shareholders' easy access to such key information.

Annual General Meeting

The Annual General Meeting (AGM) of the Company is the principal forum for dialogue and interaction with its shareholders. Shareholders are given the opportunity to participate effectively in resolutions tabled at the AGM. All shareholders have direct access to the Board members at this AGM. In addition, the senior management, external auditors and other advisors are present at the AGM to provide answers and clarifi cations to shareholders.

The notice and agenda of AGM together with Form of Proxy are given to shareholders at least 21 days before the AGM, which gives shareholders suffi cient time to prepare themselves to attend the AGM or to appoint a proxy/proxies to attend and vote on their behalf. Each item of special business included in the notice of AGM will be accompanied by an explanatory statement on the effects of a proposed resolution.

D.Accountability and Audit
 Financial Reporting

The Board acknowledges its responsibility to ensure that the Company's and the Group's financial statements present a true and fair view of the state of affairs and are prepared in accordance with Malaysian Financial Reporting Standards ("MFRS"), International Financial Reporting Standards ("IFRS") and the provisions of the Companies Act, 1965.

The Board is also committed to providing the highest level of disclosure possible to ensure integrity and consistency of the financial reports

The Group publishes full financial statements annually and condensed financial statements quarterly as required by the Main Market Listing Requirements of Bursa Malaysia.

The Audit Committee assists the Board in scrutinizing the information for disclosure to ensure accuracy, adequacy and completeness.

Internal Control

The Board has the overall responsibility of maintaining a sound system of internal controls to safeguard shareholders' investment and the Company's assets

The Audit Committee through the Internal Audit Division reviews the effectiveness of the system of internal controls of the Group periodically. The review covers the financial, operational and compliance controls.

The Statement on Risk Management and Internal Control as set out in this Annual Report provides an overview of the state of risk management and internal controls within the Group.

The minutes of the Audit Committee meetings are tabled to the Board for notation and for action by the Board where appropriate.

Complaint & Whistle Blowing Policy

The policy is developed to provide an avenue for employees to report on suspected fraud, misconduct behavior and/or violations of the Company's Code of Conduct and Ethics as well as any other directives or policies issued by the Company from time to time. The Company also has in place a Fraud and Corruption Control and Guidelines in managing the risk of fraud and corruption which should be read together with the Complaint and Whistle Blowing Policy.

All employees are entrusted with the responsibility to stay alert for preventing and detecting defalcations, misappropriations and other irregularities. The policy sets out the specific roles of employees in prevention and detection of fraud and fraud discovery reporting as well as the procedures and processes the Company will take in respect of employees involved in fraudulent acts.

Relationship with Auditors

The Company's external auditors, Messrs Ernst & Young continue to provide the independent assurance to shareholders on the Company's and the Group's financial statements. The Board maintains a formal and transparent relationship with the auditors to meet their professional requirements.

The role of the Audit Committee in relation to the internal and external auditors is described in the Audit Committee Report section of the Annual Report.

E.Directors' Responsibility Statement
 

The Directors are required by the Companies Act, 1965 to prepare financial statements for the financial year which have been made out in accordance with the applicable Malaysian Financial Reporting Standards ("MFRS"), International Financial Reporting Standards ("IFRS") and the provisions of the Companies Act, 1965 in Malaysia and give a true and fair view of the state of affairs and of the results and cash flows of the Company and the Group for the financial year then ended.

In preparing the financial statements, the Directors have used appropriate and relevant accounting policies that are consistently applied and supported by reasonable as well as prudent judgments and estimates, and ensure that applicable MFRS and IFRS have been complied with.

The Directors are responsible for ensuring that the Company and the Group keep proper accounting records which disclose with reasonable accuracy the financial position of the Group and Company and which enable them to ensure that the financial statements comply with the Companies Act, 1965.

The Directors have the general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group, to detect and prevent fraud and other irregularities.

F.Additional Compliance Statement
 Utilisation of Proceeds Raised from any Corporate Proposal

During the financial year ended 31 December 2015, the following were carried out by the Group:

Dividend Reinvestment Plan ("DRP")

The net proceeds raised from DRP (after deducting the estimated expenses for DRP) are for working capital purposes and/or other requirements of the Group.

Share Buy-back

There was no approved share buy-back scheme during the financial year.

Options, Warrants or Convertible Securities

During the financial year ended 31 December 2015, a total of 3,691,041 options over ordinary shares were exercised pursuant to the Company's Employees' Share Option Scheme ("ESOS").

The share options granted to the President and Chief Executive Officer were as follows:-

Since the commencement of the ESOS, the maximum allocation applicable to Key Senior Management of MBSB is 50% of the ESOS Aggregate Maximum Allocation.

As at 31 December 2015, the actual percentage of total options granted to Key Senior Management of MBSB under the ESOS was 0.87% of the total ESOS granted.

Details of the ESOS during the financial year 2015 are set out under Note 22 of the Notes to the Financial Statements in this Annual Report

During the financial year ended 31 December 2015, a total of 4,026,684 warrants were exercised pursuant to the Company's warrant 2011/2016.

American Depository Receipt (ADR) or Global Depository Receipt (GDR) Programme

The Company did not sponsor any ADR or GDR programme during the financial year.

Sanctions and/or Penalties Imposed

There were no sanctions or material penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies during the financial year.

Non-Audit Fees

Apart from the annual audit fees, the Group has incurred other assurance related fees of RM5,000 and non-audit fees of RM1,311,000 to the external auditors of MBSB, Messrs Ernst & Young or its affiliates for the financial year ended 31 December 2015.

Variation in results

There were no variations between the audited results for the financial year ended 31 December 2015 and the unaudited results for the fourth quarter ended 31 December 2015 of the Group

Profit Guarantee

The Company did not issue any profit guarantee during the financial year.

Material Contracts with Related Parties

Save as disclosed in Note 35 to the financial statements, there are no other material contracts subsisting at the end of the financial year or entered into since the end of the previous financial year by the Company and its subsidiaries which involves interests of Directors and major shareholders.

Dividend Payment Policy

The Company has adopted a 30% dividend payment ratio on profit after tax.

G.Statement on Compliance with the Best Practices of the Malaysian Code on Corporate Governance
 

Having reviewed the governance structure and practices of the Company and the Group, the Board considers that it has complied with the best practices as set out in the Code as well as the items set out in Part A of Appendix 9C of the Main Market Listing Requirements of Bursa Malaysia in relation to the requirement of a separate disclosure in the Annual Report.

This Statement on Corporate Governance was approved by the Board of Directors on 9 March 2016.