HSBC BANK MALAYSIA BERHAD (Company No. 127776-V) (Incorporated in Malaysia) FINANCIAL STATEMENTS – 31 DECEMBER 2016 Domiciled in Malaysia. Registered Office: 10th Floor, North Tower, 2, Leboh Ampang, 50100 Kuala Lumpur HSBC BANK MALAYSIA BERHAD (Company No. 127776-V) (Incorporated in Malaysia) CONTENTS 1 Board of Directors 2 Corporate Governance Disclosures 5 Board Responsibility and Oversight Board of Directors Board Committees 11 Management Reports 12 Internal Control Framework 14 Remuneration Policy 15 Rating by External Rating Agencies 16 Directors’ Report 26 Directors’ Statement 27 Statutory Declaration 28 Independent Auditors’ Report 32 Statements of Financial Position 33 Statements of Profit or Loss and Other Comprehensive Income 34 Statements of Changes in Equity 38 Statements of Cash Flows 42 Notes to the Financial Statements HSBC BANK MALAYSIA BERHAD (Company No. 127776-V) (Incorporated in Malaysia) BOARD OF DIRECTORS Peter Wong Tung Shun Non-Independent Executive Director (re-appointed on 5 February 2017) Mukhtar Malik Hussain Non-Independent Executive Director/Chief Executive Officer Lee Choo Hock Independent Non-Executive Director Tan Kar Leng @ Chen Kar Leng Independent Non-Executive Director Tan Sri Dato’ Tan Boon Seng @ Krishnan Independent Non-Executive Director Choo Yoo Kwan @ Choo Yee Kwan Independent Non-Executive Director (appointed on 11 February 2017) Datuk Shireen Ann Zaharah Muhiudeen Independent Director (resigned on 2 February 2016) 1 HSBC BANK MALAYSIA BERHAD (Company No. 127776-V) (Incorporated in Malaysia) CORPORATE GOVERNANCE DISCLOSURES The Bank is committed to high standards of corporate governance. As a financial institution, the Bank is subject to and complies with Bank Negara Malaysia policy document on ‘Corporate Governance’. The statement of corporate governance practices set out on pages 2 to 14 and information incorporated by reference constitutes the Corporate Governance Disclosures of HSBC Bank Malaysia Berhad (the Bank). Directors The Directors serving as at the date of this report are set out below. Peter Wong Tung Shun, 66 Non-Independent Executive Director Appointed to the Board and as Chairman: 5 February 2010 Re-appointed as Non-Independent Executive Director: 5 February 2017 Mr Wong holds a Bachelor’s degree in Computer Science, MBA in Marketing and Finance and MSc in Computer Science from Indiana University in the United States. He joined HSBC in 2005, as Group General Manager, HSBC Holdings plc and Executive Director, The Hongkong and Shanghai Banking Corporation Limited, before assuming the position of Chief Executive for Asia-Pacific in February 2010. He became Deputy Chairman of The Hongkong and Shanghai Banking Corporation Limited in May 2013. Mr Wong is currently the Deputy Chairman and Chief Executive of The Hongkong and Shanghai Banking Corporation Limited. He is a Group Managing Director and a member of the Group Management Board of HSBC Holdings plc. In addition, he is the Chairman and Non-Executive Director of HSBC Bank (China) Company Limited, Non-Executive Director of Hang Seng Bank Limited and an Independent Non-Executive Director of Cathay Pacific Airways Limited. Mr. Wong is also the Vice Chairman and Non-Executive Director of Bank of Communications Co., Limited Mukhtar Malik Hussain, 57 Non-Independent Executive Director/Chief Executive Officer Appointed to the Board and as Chief Executive Officer: 15 December 2009 Mr Mukhtar is a member of the Nominations Committee of the Bank. Mr Mukhtar graduated from the University of Wales with a Bachelor of Science in Economics. He first joined the HSBC Group in 1982 as a graduate trainee in Midland Bank International. He was then appointed as Assistant Director in Samuel Montagu in 1991. After more than 10 years of working in the HSBC Group’s London offices, Mr Mukhtar held numerous posts in Dubai, including Chief Executive Officer of HSBC Financial Services (Middle East) Limited from 1995 to 2003. He established the initiative to create the first foreign investment bank in Saudi Arabia for HSBC. In 2003, Mr Mukhtar assumed the position of Chief Executive Officer, Corporate and Investment Banking. He then headed back to London as the Co-Head of Global Banking in 2006. He was the Global Head of Principal Investments in London from 2006 to 2008. Between 2008 to 2009, he was the Deputy Chairman HSBC Bank Middle East Limited and Global Chief Executive Officer of HSBC Amanah. He was also the Chief Executive Officer, Global Banking and Markets for Middle East and North Africa before assuming his current role as the Chief Executive Officer of the Bank in 2009. Mr Mukhtar is also a Non-Executive Director of HSBC Amanah Malaysia Berhad (HBMS), a HSBC Group General Manager and member of the Executive Committee of HSBC Asia Pacific. 2 HSBC BANK MALAYSIA BERHAD (Company No. 127776-V) (Incorporated in Malaysia) CORPORATE GOVERNANCE DISCLOSURES (Cont’d) Lee Choo Hock, 64 Independent Non-Executive Director Appointed to the Board: 5 December 2013 Chairman of Audit Committee Mr Lee is a member of the Nominations Committee and Connected Party Transactions Committee of the Bank. He is a member of the Institute of Chartered Accountants in England and Wales as well as the Malaysian Institute of Accountants. He began his career with Miller, Brener & Co., London, a professional accounting firm in 1975 and joined Maybank in 1982. Having worked with Maybank for 27 years, Mr Lee has built a successful career as a professional accountant. He served various management positions during his tenure with Malayan Banking Berhad until he retired in 2008 and last position was as the Executive Vice President, Head of Accounting Services and Treasury Back Office Operations. He has also served as a Director of a number of subsidiaries of Malayan Banking Berhad. In addition to his current role, Mr Lee also sits on the Board of Kossan Rubber Industries Berhad, Yayasan Kossan and HSBC Amanah Malaysia Berhad. Tan Kar Leng @ Chen Kar Leng, 73 Independent Non-Executive Director Appointed to the Board: 2 April 2014 Chairman of Nominations and Remuneration Committee (appointed on 13 February 2017) Ms Chen serves as a member of the Risk Committee, Nominations Committee and Connected Party Transactions Committee of the Bank. As a graduate from the University of Singapore (now the National University), she was called to the Malaysian Bar in January 1968 and Brunei Bar in May 1996. She has been appointed a partner of Skrine, Kuala Lumpur since January 1974 and Head of its Corporate Division on 31 December 2009. After her retirement, she has been retained as a consultant of the firm. In addition to her current role, Ms Chen also sits on the Board of Eastern & Oriental Berhad and The Tun Dr Lim Chong Eu Foundation. She is also a member of the Advocates & Solicitors Disciplinary Board appointed by the Chief Justice of Malaya. 3 HSBC BANK MALAYSIA BERHAD (Company No. 127776-V) (Incorporated in Malaysia) CORPORATE GOVERNANCE DISCLOSURES (Cont’d) Tan Sri Dato’ Tan Boon Seng @ Krishnan, 65 Independent Non-Executive Director Appointed to the Board: 2 April 2014 Chairman of Nominations Committee (until 13 February 2017) Chairman of Risk Committee Tan Sri Dato’ Krishnan Tan is a member of the Audit Committee and Connected Party Transactions Committee of the Bank. He qualified as a Certified Public Accountant in 1978 after graduating with a Bachelor of Economics (Honours) degree from University of Malaya in 1975, and holds a Master’s degree in Business Administration from Golden Gate University, San Francisco, USA. Tan Sri Dato’ Krishnan Tan is currently the Deputy Non-Executive Chairman of IJM Corporation Berhad and serves as a Director of IJM Plantations Berhad, and Grupo Concesionario del Oeste S.A., Argentina. He joined IJM as a Financial Controller in 1983 and was appointed Group Managing Director in 1997 and served in this position until 2010. He held the position of Executive Deputy Chairman of IJM Corporation Berhad from 2011 to 2013. In addition to his current role, Tan Sri Dato’ Krishnan sits on the Board of Malaysia Airlines Berhad, Malaysia Aviation Group Berhad, Malaysia Property Incorporated and Malaysian Community & Education Foundation and a member of the Olympic Council Trust Management Committee. Choo Yoo Kwan @ Choo Yee Kwan, 64 Independent Non-Executive Director Appointed to the Board: 11 February 2016 Mr Choo serves as a member of the Audit Committee, Risk Committee and Nominations Committee of the Bank. Mr Choo has honours degrees in economics and law from University of Malaya and University of London respectively, and is a Barrister-at-Law (of Lincoln’s Inn) following his call to the Bar of England and Wales in 1984. Mr Choo retired in July 2014 after having served the banking and risk management industry for 38 years. His last post was as Country Chief Risk Officer for OCBC Bank (Malaysia) Berhad (OCBC), having first joined the OCBC Group in December 2007. Prior to joining OCBC, he was the Chief Risk Officer for Maybank Group and Group Chief Risk Officer for Alliance Bank Malaysia Berhad. During his 14 years career at Maybank Group, he had served as Division Head for Credit Control; International Banking; Corporate Remedial Management; and Group Risk Management. He also served on the Corporate Debt Restructuring Committee set up under Bank Negara Malaysia. Before starting his career with Maybank, he had worked for the National Westminster Bank plc of the United Kingdom in the areas of Global Specialised Industries; and Group Credit Control. Mr Choo had served on the Education Committee of Asian Institute of Chartered Bankers for 14 years, (between 2000 and 2014); and was re-appointed to Education Committee in June 2016. He was appointed as a member of the University Malaya Medical Centre Ethics Committee for 2 years (from 2014 to 2015). He is currently a Teaching Fellow in the Asian Banking School. 4 HSBC BANK MALAYSIA BERHAD (Company No.