OBU Research & Analysis Project

Oxford Brookes University
An Assessment of the Quality of Corporate Governance

Within Bursa Malaysia Bhd and the Impact on
The Organizations Key Stakeholders

(6528 words)

Being a Research and Analysis Project
Submitted in Partial Fulfillment of the Requirements of

BSc (Hons) in Applied Accounting
Oxford Brookes University

Name : Loh Jia Ying
ACCA Registration Number : 2513940
Submission Period : 10
th
May 2013

Oxford Brookes University Research and Analysis Project

Loh Jia Ying (2513940) Page 2

Table of Contents

PART 1: PROJECT OBJECTIVES AND OVERALL RESEARCH APPROACHPAGE
1.1 Topic Area 5
1.2 Reasons for Choice of Topic 5
1.3 Organization Background 6
1.4 Reasons for Choice of Organization 6
1.5 Project Objectives and Research Questions 7
1.6 Overall Research Approach 8

PART 2: INFORMATION GATHERING AND ACCOUNTING/BUSINESS TECHNIQUE

2.1 Sources of Information 10
2.2 Methods of Information Collection 10
2.3 Limitations of Information Gathering 11
2.4 Ethical Issues 12
2.5 Accounting and Business Techniques Used 13

PART 3 RESULTS, ANALYSIS, CONCLUSIONS AND RECOMMENDATIONS
3.1 Extent of Compliance with the Malaysian Code on Corporate Governance 17
3.1.1 Establish Clear Roles and Responsibilities 18
3.1.2 Strengthen Composition 20
3.1.3 Reinforce Independence 23
3.1.4 Foster Commitment 24
3.1.5 Uphold Integrity in Financial Reporting 25
3.1.6 Recognise and Manage Risk 26
3.1.7 Ensure Timely and High Quality Disclosure 27
3.1.8 Strengthen Relationship between Company and Shareholders 29



3.2 Identification of Key Stakeholders 30

3.3 Impact of Good Corporate Governance On Companys Key Stakeholders
3.3.1 Government and Regulatory Authorities 32
3.3.2 Shareholders 33
3.3.3 Employees 36
3.3.4 Community 37

3.4 Conclusions and Recommendations 39



PART 1: PROJECT OBJECTIVES
AND OVERALL RESEARCH
APPROACH



1.1 TOPIC AREA
The topic that I have chosen for my Research and Analysis Project is Topic 17, An
Assessment of the Quality of Corporate Governance within an Organization and the
Impact on the Organizations Key Stakeholders.
One of the earliest attempts to define corporate governance (CG) is made by The
Cadbury Report (1992) in which it is defined as the system by which companies are
directed and controlled.
In Malaysia, the High Level Finance Committee on Corporate Governance (1999,
p.20) define CG as the process and structure used to direct and manage the
business and affairs of the company towards enhancing business prosperity and
corporate accountability with the ultimate objective of realizing long term shareholder
value, whilst taking into account the interests of other stakeholders. This is a clear
indication that CG is not only applicable to shareholders but has a profound impact
on other stakeholders as well.

1.2 REASONS FOR CHOICE OF TOPIC
One of the main reasons I have chosen this topic is in view of the worldwide
increased understanding and emphasis placed on CG and its role in assuring
suppliers of finance to receive adequate returns on their investment (Shleifer and
Vishny, 1997). High profile corporate scandals for the past decade, ranging from
Enron and Worldcom to the more recent Olympus and Hewlett Packard cases have
further elevated the awareness of the importance of good CG.
The long lasting debate on the correlation between CG and a companys financial
and non-financial performance also stirred my interest in further exploring existence
of such relationship.
I have gained prior exposure to the topic of CG through ACCA Paper F4 Corporate
and Business Law and Paper F8 Audit and Assurance. During my last semester,
further in depth studies on the topic was undertaken through ACCA PaperP1
Governance, Risk and Ethics. Researching on this topic provides me the opportunity


of applying all my previous studies in practical context in real life situations and
instills a more holistic understanding on this topic.

1.3 ORGANIZATION BACKGROUND
Bursa Malaysia is an approved exchange holding company under Section 15 of the
Capital Markets and Services Act 2007. A public company limited by shares under
the Companies Act 1965, Bursa operates a fully-integrated exchange with about
1,000 companies across 50 economic activities, offering equities, derivatives,
offshore listings, bonds as well as Islamic products, and provides a diverse range of
investment choices globally (MIDA, 2012).
Established in 1973, the Kuala Lumpur Stock Exchange changed its name to Bursa
Malaysia Berhad in 2004 following a demutualisation exercise to enhance its
competitive position and to respond to global trends in the exchange sector by being
more customer-driven and market-oriented. On 18 March 2005, Bursa was listed on
the Main Board of Bursa Malaysia Securities Berhad (Bursa, n.d.).
Committed to make the Malaysian capital market attractive to investors worldwide,
the exchange places great emphasis in ensuring a fair and orderly market at all
times, with high priority on investor protection. Its strength lies in its progressive
regulatory approach to ensure that high standards of conduct are practiced by
market players (MIDA, 2012).

1.4 REASONS FOR CHOICE OF ORGANIZATION
Together with the Securities Commission (SC), Bursa Malaysia is one of the two
main regulators of Malaysian capital markets which have the responsibility of
maintaining the proper functioning of the market. Being publicly listed, Bursa is
accountable to its shareholders but as a market regulator, it is also ultimately
accountable to the general public and investors. Such delicate balance of different
stakeholders interest has attracted my interest in researching on this organization.


Malaysia has made significant progress in CG over recent years, especially where
corporate culture is finally showing signs of openness (ACGA, 2012). It would be
interesting to see how Bursa has actually walked the talk. Its governance practice
could also have a profound impact on CG development within the country.
Moreover, Bursa has won numerous awards in terms of CG best practice (The Edge,
2011) whileits annual reports havealso been forthcoming and provides extensive
coverage on governance issues. Such transparency and easy access of reliable
information would save precious time in information gathering and allow me to focus
on assessing its governance quality and impact on its stakeholders.

1.5 PROJECT OBJECTIVES AND RESEARCH QUESTIONS
The objectives of this research are as follows:
To assess Bursa Malaysias extent of compliance with the Malaysian Code on
Corporate Governance (MCCG)
To evaluate the impact of CG practices on Bursas key stakeholders
To assess methods taken by a listed market regulator in discharging its
accountability to different groups of stakeholders
To identify the relationship between quality of CG practice and companys
financial and non-financial performance
The following are research questions relevant to the objectives set:
What is the extent of Bursas compliance with MCCG? Is it merely in terms of
codes and rules or in spirit and substance?
What are the impacts of CG and how they affect stakeholders of the company?
How does a market regulator balance the interests of different stakeholders
and discharge accountability?
What is the relationship between CG practice and companys performance?



1.6 Overall research approach
Generally, a primary research via surveys or interviews would result in more specific,
relevant and up-to-date data collection (Onkvisit & Shaw, 2009). However, due to
cost and time constraints, analysis of secondary data has been chosen as the more
pragmatic approach to relieve the otherwise extensive demand expected of a
primary research. Moreover, there are various sources of secondary data available
to allow critical assessment of Bursas CG practice.
In the process of secondary analysis, a literature review has been conducted by
reviewing journals, articles and researches produced by relevant professionals in the
governance topic, including the latest pronouncement by relevant authorities such as
the Securities Commission, Malaysian Institute of CG and the Minority Shareholder
Watchdog Group. These provided me extensive insights and facilitated my
understanding on the topic background before proceeding on my research.
A triangulation process in which qualitative data is combined and integrated with
quantitative data is used to minimize their respective limitations and complement
each other (Taylor, 2005).A benchmarking of Bursas CG practice against best
practices or relevant companies in the same industry has also been conducted to
understand the organizations current position and identify potential
recommendations for improvements to be made.



PART 2: INFORMATION
GATHERING AND
ACCOUNTING/BUSINESS
TECHNIQUE



2.1SOURCES OF INFORMATION
There are two main sources in which information can be collected for a research:
Primary Source
Primary source provides first-hand testimony or direct evidence concerning a topic
under investigation (Yale University, n.d.). Use of such source would have allowed
relevant information being presented in a more specific context. However, due to
concerns over time and cost pressure, it is not used in this project.
Secondary Source
A secondary source is a report on the findings of the primary source. While not as
authoritative as the primary source, it often provides a broad background and readily
improves ones learning curve (Stacks, 2011). Due to its nature, information obtained
from such source may suffer from potential limitations such as credibility issues or
being out of date. Nevertheless, it is preferred in the preparation of this project due to
its relative ease of access.

2.2 METHODS OF INFORMATION COLLECTION
Internet
The internet plays an increasingly important role in this era of advancement in
information technology. With the assistance of search engines such as Google and
Yahoo!, information from various sources can be obtained. With easy access to
relevant scholarly articles, e-books, e-journals and researches, this allows wide
ranging exposure which facilitates the overall research process.
Many information specific to Bursa Malaysia has been obtained from its corporate
website: http://www.bursamalaysia.com/corporate/.The website provides access to
the most recent annual reports, sustainability reports and other investor relations
information which are not available elsewhere. Committed to high standards of
integrity and transparency as a market regulator, Bursa has dedicated almost half of
its annual reports to governance and sustainability issues. All these formed the
fundamental bases of information for this project.


Library
The Sunway Universitys College library facility has been useful in the process of
preparation for this project. With an extensive collection of books, periodicals,
journals and other reference books, it provided me with great amount of relevant and
reliable resources. The presence of e-databases also makes information collection
much more efficient and effective.

2.3 LIMITATIONS OF INFORMATION GATHERING
Reliability of information
One of the main concerns of utilizing secondary data is reliability of information
obtained. Information obtained directly from Bursas website, while comprehensive,
may suffer from element of management bias. The company may present itself in
better light while there are limited avenues for me to verify the credibility of such
information. Such concern applies to other sources of information as well, especially
those extracted from the Internet, as there are relatively lack of standards and
controls on their accuracy (University of Illinois, n.d.).
Such potential limitation is overcome by cross-referencing the information obtained,
ensuring only those consistent throughout various sources are being utilized. There
is also a conscious effort to avoid data in which author or original source cannot be
traced.
Timeliness of Information
As Bursas financial year (FY) 2012 Annual Report is only released on 28/2/2013, it
is not available at the time when this research was started. However, since the new
set of Malaysian Code of Corporate Governance (MCCG) is only applicable for
annual reports from FY2012 onwards, I have decided to utilize the latest annual
report to gain exposure on the latest MCCG.
Significant difficulties are faced in the initial stage of this research due to non-
availability of certain information. Therefore, I have adapted my research approach
by first doing extensive background reading on CG topics and collection of other


relevant information before incorporating context specific information from the latest
annual report.
It is also a challenge to assess Bursas performance. It is the only exchange holding
company in Malaysia and there are no other comparable companies. London and
Singapore Stock Exchanges have been chosen as the main proxies for
comparisons. However, all three companies have different year ends and thus
adjustments are needed on the financial results. While less than ideal, this is
nonetheless the most practical way for like-to-like comparisons to be made.
Ease of Access
Much of the internal information on governance of Bursa used in this project is not
available elsewhere and only accessible through the companys annual reports. As
noted above, use of information provided by the company has its limitations although
careful scrutiny has been undertaken to ensure critical and objective assessment of
their validity.
Besides, access to certain CG reports or findings is restricted where payments are
required. Consequently, data from other alternative sources are collected to ensure
full understanding on the topic is not being compromised.

2.4 ETHICAL ISSUES
Plagiarism
While past years research paper submissions are sampled to obtain a clearer idea
on the project approach, I have been vigilant to avoid any unconscious act of
representing any of the students ideas as my own.
Proper citations and references of published information used in this project are also
conducted through the Harvard Referencing System to ensure the original works of
the authors are being acknowledged.



Objectivity
Due to the heavy reliance of secondary information, there is risk of undue influence
by authors who may have vested interest in the company. Personal bias due to the
companys reputation may also affect the validity of judgements and conclusions
made. Therefore throughout the research, a clean state of mind is maintained and
information used is corroborated from different sources to confirm their credibility.
Professional Competence and Due Care
It is crucial that one is well versed and knowledgeable in the topic of research. While
I have exposure to CG through previous studies, extensive read up on the topic was
nevertheless carried out to ensure adequate technical knowledge and skills for a
proper research. It is also important to keep abreast with the latest developments,
such as the revamp of the Malaysian Code on Corporate Governance alongside with
revisions on other guidelines.

2.5 ACCOUNTING AND BUSINESS TECHNIQUES USED
Malaysia Code on Corporate Governance (MCCG) 2012
As a listed company, Bursa is required to report on its compliance with MCCG
provisions and thus the Code is used as the main benchmark to assess the quality of
Bursas CG. MCCG 2012 is preferred as it supersedes the 2007 Code (Securities
Commission Malaysia, 2012).
However, use of such national Code has potential limitations as its application is
country-specific and thus any comparisons with foreign companies practices would
have certain difficulties.
Mendelows Matrix
Mendelow's matrix provides a way of mapping stakeholders based on the power to
affect the organisation and their interest in doing so. It identifies the responses which
management needs to make to the stakeholders in the different quadrants
(Management Accountant Blog, 2008) as seen in the diagram below:


Diagram 1: Mendelows Matrix

Source: Mendelow (1991)
However, there are certain limitations in application of this framework as it is very
difficult to measure power and interest of Bursas stakeholders and thus involve
inherent elements of subjectivity (BPP Learning Media, 2010). Furthermore, over
time, the ongoing fluctuations in stakeholders power and interest would render such
static approach inadequate (CRC Construction Innovation, 2009).

Ratio Analysis
Ratio analysis, both horizontal and vertical, is performed to compare Bursas
performance against past trend as well as performance of other companies in the
same industry. The main ratios analyzed in this project include earnings per share,
dividend per share, share price growth and total shareholders return.
While easy for understanding and comparisons, ratio analysis also has its limitations
as ratios of companies with different accounting policies and practices would be
distorted and unsuitable for analysis. Besides, it only provides an indication of
companys performance without offering any potential underlying reasons. Further


analysis and judgment would be needed to identify and assess the reasons behind
such favorable or unfavorable variances.



PART 3 RESULTS, ANALYSIS,
CONCLUSIONS AND
RECOMMENDATIONS



3.1 ANALYSIS OF EXTENT OF COMPLIANCE WITH THE MALAYSIAN CODE ON
CORPORATE GOVERNANCE
The MCCG draws from the United Kingdoms (UK) experience set out in the Hampel
Report. Best practices are prescribed for compliance and reasons of non-compliance
will need to be disclosed.
Such approach establishes sound principles for CG but yet accord the flexibility for
each company to develop its own procedures and alternatives that may be just as
sound. However, if relevant matters are not disclosed in a companys annual report,
actions can be taken against the company of its directors as set out in the Listing
Requirements of Bursa Malaysia.

Diagram 2: Main Principles of CG in Malaysia

Source: Securities Commission (2012)

MCCG
2012
Establish Clear
Roles and
Responsibilities
Uphold Integrity in
Financial
Reporting
Strengthen
Composition
Recognise and
Manage Risk
Reinforce
Independence
Ensure Timely and
High Quality
Disclosure
Foster
Commitment
Strengthen
Relationship
between Company
and Shareholders


3.1.1 ESTABLISH CLEAR ROLES AND RESPONSIBILITIES
Clear Functions, Roles and Responsibilities
Unclear roles and responsibilities may result in unclear source of authority, lack of
accountability and commitment (HRA Consulting, n.d.). In Bursa, the Governance
Model (Appendix 1) and Authority Limits Document (ALD) are prepared. These
documents clearly distinguish the functions and relevant matters reserved for the
board, board committees and management (Bursa Malaysia, 2012, p. 56). Both
documents are reviewed and amended as and when required to adapt to the
companys changing circumstances.
Bursas boards charter is embedded in the Governance Model document which is
easily available on Bursas corporate website. The charter is a source reference and
primary induction literature, providing insights to prospective board members and
senior management (SC, 2012).
Bursas board takes on the key responsibilities as recommended in MCCG 2012.
Among those, management strategies and plans are deliberated and challenged by
the board before approval. Independent advice by PricewaterhouseCoopers
Advisory Services Sdn Bhd is also sought to review the 2012 Corporate Balanced
Scorecard (CBS) which is then used by the board to oversee the conduct of the
companys business (Bursa Malaysia, 2012, p.57).

Code of Ethics
As the nations securities exchange, Bursa would naturally attract high public
scrutiny. The company responded by formulating Codes of Ethics for directors and
employees to govern the ethical standards and conducts expected, particularly in the
areas of information confidentiality, conflict of interest and securities dealing. A
whistleblower policy and report form is also in place and available on Bursas
website. Audit Committee (AC) oversees implementation of the policy while all
reports are addressed to the Non-Executive Chairman or Senior Independent Non-
Executive Director.


It is also noteworthy that Bursa signed the Corporate Integrity Pledge during the year.
The pledge is encouraged by the Malaysian Anti-Corruption Commission to combat
corruption and enhances the confidence among foreign investors (The Star, 2012a).
The act of signing demonstrates Bursas commitment to integrity and good
governance in its operations.

Sustainability
Bursa promotes the application of sustainability practices. This can be seen through
its participation in various global environmental, social, governance and sustainability
initiatives such as Earth Hour, the Carbon Disclosure Project and Global Reporting
Initiative (GRI). Responsible use of resources and the importance of environmental
protection are promoted among its employees and stakeholders.
Unlike certain countries such as Australia and France which mandate sustainability
reporting, there is no such requirement in Malaysia. Nevertheless, Bursa produced
its inaugural Sustainability Report in 2011. On a broader scale, Bursa is also
contributing towards drafting a Framework for Greenhouse Gas (GHG) Reporting for
Malaysian companies (Bursa, 2012).

Access to Information and Advice
All directors in Bursa have individual and independent access to advice and support
services of the company secretary. The directors may also seek direct interaction
with management or independent professional advice at the companys expense in
furtherance of their duties.
Company secretaries play an important role in advising and supporting the board to
discharge its functions effectively. While details of the training programs undertaken
by Bursas company secretaries during the year are not provided, the secretaries are
members of The Malaysian Institute of Chartered Secretaries and Administrators
(MAICSA) and thus should be professionally competent.



3.1.2 STRENGTHEN COMPOSITION
Nominating Committee
Bursa combines both nomination and remuneration roles into one Nomination and
Remuneration Committee (NRC), which is less ideal than 2 separate committees
discharging the separate functions. All 5 members of NRC are non-executive
directors (NEDs) of who three are independent and the other two are Public Interest
Directors (PID). This is in compliance with the MCCG (2012) which states that the
committee should comprise exclusively of NEDs, a majority of whom must be
independent.

Directors Recruitment and Annual Assessment
Bursas board composition is regularly reviewed to enable progressive refreshing
and effective functioning. It has established a pool of potential directors for its
reference when considering new appointments. As an exchange holding company,
Bursas recruitment process is slightly complicated by the need of obtaining the
concurrence of the Securities Commission for the proposed appointments
(Malaysian Government, 2007, s10(1)(b)).
Bursa takes the annual assessment of directors and committee members seriously.
A Board Effectiveness Evaluation (BEE) is carried out each year by the NRC while
an external consultant is engaged every three years for assistance (Bursa Malaysia,
2012, p.62). The results will form the basis of NRCs recommendation to the board
for re-election at the next AGM.
In 2012, the NRC recommended for 4 directors to retire and 3 suitable candidates to
replace them. The recommendation is approved by the board and shareholders. The
change has positive effects on the boards overall age profile and tenure as seen in
Appendix 2.
The gender diversity of Bursas board is non-satisfactory in comparison with fellow
stock exchanges in Singapore and London. While marginally higher than the
average women participation rate on the board in Malaysia of 7.1%, it is far from the
30% target set by the Malaysian government (The Star, 2012b). As the market


regulator, Bursa would have been expected to take the lead in heeding the
governments call.
Table 1: Number of Women Directors in the Board
Bursa SGX LSE
Number of women
directors in board
1/12 2/14 2/12
Percentages 8% 14% 17%

Source: Bursa Malaysia, Singapore Stock Exchange, London Stock Exchange
Annual Reports (2012)
The company plans to achieve its target of having three female directors by 2016
through the progressive refreshing of the board yet none of the three newly
nominated directors are female. It appears that there are no concrete plans or
actions in place to achieve such targets.

Remuneration Policies
The incentives of top management have been characterized as an important
mechanism of corporate governance as it ensures the alignment of the management
and the shareholders interest (John et al 2004, cited in Abdul Hadi, M. Fazilah,
MdIshak, n.d.).Bursas NRC is responsible for recommending the remuneration
policy. Its policies are formal and transparent as individual directors remuneration
breakdowns is disclosed (Appendix 3).
While directors fees have not increased since 2009, the meeting allowances are
revised during the year, with an increase of 33%-67% (Table2). This partially
contributed to the worrying increase in directors remuneration in recent years
(Appendix 3).



Table 2: Bursas Meeting Allowances
Meeting
Allowance
Board of Directors Board Committees
2011 2012 Increase 2011 2012 Increase
Chairman RM 3,000 RM 4,000 33.3% RM 1,500 RM 2,500 66.7%
Member RM 1,500 RM 2,000 33.3% RM 1,000 RM 1,500 50%

Source: Bursa Annual Report (2012)
However, the main cause of such increase is the change in CEO. The salary was
increased from RM 1.2 million in 2009 to RM 5.1 million in 2012 (Table 3). Salaries
are fixed in nature and should attract higher scrutinisation from shareholders as they
are non-performance related.
Bursas current CEO was previously Managing Director of RHB Bhd and was then
enjoying a remuneration of around RM 3 million. Further investigation would reveal
that RHB Bhd has almost RM 152 billion in assets and generates Earnings per
Share (EPS) of 69 cents compared to Bursas RM 2 billion and 28 cents respectively
(RHB Capital, 2011). While there are heavy responsibilities placed on a stock
exchanges CEO, it is still baffling that a company with smaller asset base and profits
is paying its CEO more than 60% higher than his previous corporate position.

Table 3: Executive Directors Remuneration Breakdown
Executive Directors Remuneration (RM000) 2009 2010 2011 2012
Salaries and other emoluments 1243 1322 4729 5095
Defined contribution plan EPF 192 187 354 418
Share options granted under ESOS 3 - - -
Estimated money value of benefit-in-kind 31 31 32 32
Total 1469 1540 5115 5545
* Current CEO is appointed on 1 April 2011
Source: Bursa Malaysia Annual Report (2012 & 2010)



Furthermore, CEOs remuneration alone is more than double the total remuneration
of all other directors in Bursa. Simple comparison with other stock exchanges (Table
4) can also show that Bursa has indeed grossly over-remunerated its CEO. No
plausible explanations are given and there is cause for concern on misusing of
shareholders funds.
Table 4: Comparison of Salaries
Comparison of Salaries Bursa LSE SGX
CEOs Salary (RM// S$ 000) 5095 675 755
Market Capitalization (RM// S$ billions) 1465 3500 934
Remuneration: Market Capitilization 3.5 0.2 0.8
* Calculations focus on fixed salaries and not total remuneration
* Market capitalization refers to combined market capitalization of all listed companies in
respective exchanges as an indication for extent of responsibilities
Source: Bursa Malaysia, Singapore Stock Exchange, London Stock Exchange
Annual Reports (2012)
3.1.3 REINFORCE INDEPENDENCE
Assessment of Directors Independence
The BEE assessment is used to ensure directors ability to exercise independent
judgment at all times. A senior independent director is also appointed in the board.
As a result of the adoption of a nine-year policy for independent NEDs, 3 directors
retired in the recent AGM without seeking re-appointment. However, 2 directors who
have served for more than 9 years are reappointed and consequently, re-designated
as a non-independent director.

Separation of Chairman and CEO
Concentration of power in one individual could lead to decisions made in their own
self-interest at the expense of shareholders. Separation of roles would promote
accountability and facilitates division of responsibilities among them (SC, 2012). In
Bursa, the Chairman and CEO have distinct and separate roles, with a clear division
of responsibilities which is in line with the recommendations in MCCG 2012.


Board Composition
Although there are no conclusive results thus far, Adams and Mehran (2003)
suggested that increases in proportion of outside directors on the board would
increase performance due to the greater effectiveness in monitoring of managers.
Bursas board composition is partly influenced by the regulatory requirements of the
Capital Market Services Act (2007) where one-third of the members of the board
must be appointed by the Minister of Finance as PIDs and one of them shall be
appointed as the non-executive chairman. Together with the high proportion of
independent NEDs (Chart 1), there should be adequate safeguards to ensure
protection of investors and public interest.


3.1.4 FOSTER COMMITMENT
Time Commitment
To ensure that its directors have adequate time to fulfill their roles and
responsibilities effectively, Bursa capped other Public Listed Companies (PLCs)
directorships at not more than 5. Directors are also required to provide an update of
their other directorship status every quarter. The attendance record of the directors
during the year (Appendix 4) should suggest that they have devoted sufficient time to
their roles.

1
7
4
Chart 1: Directors' Independence
Executive Director
Indendent Non-Executive
Directors
Public Interest Directors*
* Appointed by the Minister
of Finance pursuant to
Section 10 of the Capital
Market Services Act 2007



Directors Continuing Education
Directors are charged with critical responsibilities to act as advisors to companies
and safeguard shareholders interests, and as such, it is important that they are
sufficiently knowledgeable, experienced and well-trained (Singapore Institute of
Directors, 2005).Being at the forefront of the securities market, Bursa acknowledges
the importance of its directors continuing education. A dedicated training budget is
provided each year and board policy is set that each director must attend at least 3
training sessions each year on capital market developments (Bursa Malaysia, 2012,
p.65). In 2012, all directors attended at least 6 training programs (Appendix 5).

3.1.5 UPHOLD INTEGRITY IN FINANCIAL REPORTING
Compliance with Applicable Financial Reporting Standards
Bursas audited financial statements and quarterly financial reports are in compliance
with the Malaysian Financial Reporting Standards (FRS) and International FRS as
well as requirements of the Companies Act. It has never been issued a qualified
audit report and the external auditors have never raised any issues or complications
during their audit engagements.
The Audit Committee (AC) is made up of 4 independent NEDs and 2 PIDs. Together
with their accounting or financial related qualification and experience (Appendix 6),
they fulfill the Listing Requirements and are in good position to review the financial
statements as well as provide relevant recommendation to the board and
shareholders.

Assessment of External Auditors
Bursa adopted an Auditors Independence Policy since 2006 which requires the lead
and concurring audit engagement partners to be subject to a 5-year rotation with a 5-
year cooling off period. The last rotation of partners from Messrs Ernst & Young (EY)
was in 2010.


RM000
Gul and Teoh(1986) suggests that the provision of non-audit services reduces public
confidence in auditors independence. Bursa appears to recognize this and has
reduced the proportion of non-audit fees over recent years (Chart 2),The AC also
undertakes an annual assessment and is satisfied with EYs technical competency
and audit independence.
Chart 2: Bursa Auditors Remuneration Breakdown


3.1.6 RECOGNISE AND MANAGE RISK
Risk Management
A nationwide survey on Risk Management Practices in Malaysia has revealed that
companies are placing increasing importance on risk management as it aid in
business decision-making and enhance shareholder value (IIA Malaysia &EY, 2011).
In Bursa, the risk management committee (RMC) oversees, reviews and makes
relevant recommendations to the board on the Enterprise Risk Management
framework and policies. The framework is reviewed periodically to ensure that it is
relevant and adequate to manage the evolving risk Bursa is exposed to in the
changing business environment.
0
100
200
300
400
500
600
700
800
900
2009 2010 2011 2012
Audit
Non-audit


Having previously suffered trading system failure in 2008 and 2000 (New Straits
Time, 2008, cited in Malaysian Bar, 2008), a comprehensive Business Continuity
Plan, including a Disaster Recovery Plan is prepared and tested annually to prevent
repeat of such incidents.

Internal Audit
Since 2008, Bursa has mandated all listed companies in Malaysia to establish an
internal audit function and report directly to AC (MIA, 2008). Bursa has complied with
such requirement.
Bursas AC is tasked to review the adequacy and effectiveness of internal controls.
There ispractice of segregation between the companys commercial and regulatory
functions. Internal policies, standards and procedures are also in place to ensure
compliance with internal controls and relevant laws and regulations applicable to the
company.

3.1.7 ENSURE TIMELY AND HIGH QUALITY DISCLOSURE
Disclosures
For disclosure of material information, Bursa has set clear roles, responsibilities and
levels of authority for all employees, including directors and CEO. Besides, due to
sensitive nature of an exchange, there are internal control policies to avoid leakage
or improper use of confidential information.
Bursa is determined to disclose reliable financial results in timely fashion (Table 5).
While there are no legal obligations for auditors involvement, external auditors are
engaged to conduct a limited review on the quarterly results. Besides, the results are
released well within the stipulated time period (2 months for quarterly results and 6
months for Annual Report) and in par with Public Bank Bhd which is a frequent
winner of corporate governance excellence awards.



Table 5: Comparison of Days to Release Financial Results
Financial
Results
2012
Bursa Public Bank Berhad
Date of
Issuance
Number of days
after reporting date
Date of
Issuance
Number of days after
reporting date
Q1 19/4/2012 19 18/4/2012 18
Q2 18/7/2012 18 23/7/2012 23
Q3 19/10/2012 19 18/10/2012 18
Q4 31/1/2013 31 6/2/2013 37
Annual
Report
28/2/2013 59 21/2/2013 52
Source: i3investor.com (2013)
Leverage on Information Technology
Bursa Malaysia has revamped its website in 2012 and divided it into the corporate
and market sections to provide a clear differentiation of its dual role as a listed
company and an exchange marketplace (The Star, 2012c). The corporate section
enhances the investor relations function by providing all needed information and
announcements from Bursa. There are also dedicated areas for corporate
governance and investor relations in the website.
The company leveraged on information technology through the Bursa Listing
Information Network (LINK). It has proven to be a much broader and effective
dissemination of information to shareholders as well as the investing public.
Diagram 3: Flow of Listing Information Network (LINK)

Source: Bursa Malaysia (n.d.)


3.1.8 STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND
SHAREHOLDERS
Encouraging Shareholder Participation
Bursa has committed to dispatch its Annual General Meeting (AGM) notice at least
28 days in advance, well above the regulatory requirement of 21 days. Besides,
Bursa has also attempted to encourage shareholder participation by allowing
participation either in person, corporate representative, proxy or attorney. To further
promote participation, the company recently amended its Articles of Association to
explicitly include the right of proxies to speak at AGMs.
The recent AGM was held in Putra World Trade Center which is easily accessible.
However, being held on a Thursday morning (28/3/2013) deters participation of
shareholders who are working on weekdays.

Poll Voting
Electronic voting is currently unavailable although Bursas board indicated that it will
consider adoption of such technique to facilitate greater shareholder participation
(Bursa Malaysia, 2012, p.69).
Resolutions in Bursa were put forth for shareholders approval merely by show of
hands. No poll voting is employed, possibly due to the clear majorities obtained in
approval. However, it is encouraged by MCCG 2012 to put substantive resolutions to
poll and Bursa should emulate fellow Singapore Stock Exchange which has
implemented electronic poll voting since 2009.

Effective Communication and Proactive Engagements
Q&A session is provided during AGM as directors, management and external
auditors are all present to respond to the any shareholders queries. The CEO also
shared the companys response to questions submitted in advance of the AGM by
the Minority Shareholder Watchdog Group. Overall, the engagement with
shareholders seems genuine.


3.2 IDENTIFICATION OF KEY STAKEHOLDERS
Stakeholder is defined by Freeman (1984) as any group or individual who can affect
or be affected by the achievement of an organizations objectives. Stakeholder
theory emphasizes that companies are not merely shareholders private property, but
also a forum of interaction between various stakeholders. For Bursa, its 4 key
stakeholders include government and regulatory authority, shareholders, employees
and the community (Diagram 4).
Diagram 4: Stakeholder Mapping

Source: Mendelow (1991)

The Government and Securities Commission of Malaysia are highly interested in
Bursas running as an exchange-holding company. Besides, the government yields
high power through the control of almost 43% direct and indirect stakes in Bursa
(Table 6). Moreover, the Capital Market and Services Act (2007) grant the Securities
Commission and Minister of Finance direct power and influence, ranging from the
appointment of Bursas directors up to the review of its annual report.



Table 6: Substantial Shareholders as at 31 January 2013
No. Name % of Issued Shares
1. Capital Market Development Fund 18.55
2. Minister of Finance Incorporated 16.20
3. Employees Provident Fund Board 8.64
Total 43.39
Unlike other public listed companies, shareholders of Bursa only have limited power
as they are prohibited from acquiring more than 5% voting shares without prior
approval of the Minister (Malaysian Government, 2007, s25(1)). Therefore, despite
their interest, they have limited power over the direction of the company.
Nevertheless, they should be kept informed on progress of the company and their
investments.
Employees and the community also fall within the quadrant of high interest, low
power. The former is concerned with job security and benefits while the latter would
be concerned of how public interest is being safeguarded. Considering the absence
of strong trade unions or public voice out mechanism, both groups of stakeholders
have little power over Bursas governance.



3.3 IMPACT OF GOOD CORPORATE GOVERNANCE ON COMPANYS KEY
STAKEHOLDERS
3.3.1 Government and Regulatory Authorities
With Malaysia striving to be a high income nation by 2020, the government has
identified the capital market as a key driver of the Economic Transformation Program
(PEMANDU, n.d.). 2012 was an exciting year as a result of Bursas strong
governance and leadership. The benchmark FBM KLCI Index ended the year at
historic high and the Islamic market retained its global leadership position for the 4
th

consecutive year. Moreover, the ASEAN Exchange is set up to facilitate freer flow of
capital across borders while Bursa was also the worlds 4
th
largest IPO
destination(Bursa, 2012).
With its unique role as a front-line regulator, Bursa is expected to take the lead in
enhancing CG standards of Malaysias PLCs. During the year, Bursa has aligned the
Listing Requirements and Corporate Governance Guide for PLCs to reflect the new
principles and recommendations of MCCG 2012. A series of CG initiatives are
championed as well to promulgate the importance of embracing CGs best practices
among PLCs (Bursa, n.d.).
As a result, the CG Watch 2012 Report saw Malaysias rankings improved to
4
th
(ACGA, 2012) while the country is also recognized by World Bank as a regional
leader in CG (Business Times, 2013). Bursa itself is included in the Top 50 CG
ranking of mid/small caps in Asia Pacific by ACGA (Bursa, 2012).
With the appointment of PIDs, regulatory committees and presence of strong internal
controls, Bursa has managed to comply with all the relevant regulations and
standards in both form and in substance. This would be in line with demand of the
Securities Commission for Bursa to uphold its statutory duty by acting in public
interest, having particular regards for the need for investor protection.



RMmillion
RMcents
3.3.2 Shareholders
Shareholders who invested in Bursa would be interested in financial returns and
protection of their investments. Recent years have been challenging for the financial
industry but Bursas operating performance has been resilient. While some foreign
exchanges have experienced reduced revenues and profits, Bursa has managed to
achieve a compound annual growth rate (CAGR) of 6.5% and 9.4% for its revenue
and earnings per share respectively in the last 5 years.

Chart 3: Revenue and EPS
However, Bursa has been less satisfactory in terms of shareholders returns. From a
5-year perspective, its share price underperformed fellow London Stock Exchange
(LSE) and Singapore Exchange Limited (SGX).In 2012 alone, the share price also
underperformed by dropping 7% from RM 6.70 to RM 6.22 mainly due to foreign
fund selling as Bursa is reclassified from MSCI Mid-Cap Index to Small-Cap Index.
0
5
10
15
20
25
30
0
50
100
150
200
250
300
350
400
450
FY 08 FY 09 FY 10 FY 11 FY 12
Revenue Earnings per share


Chart 4: Bursa Share Price Performance

Source: Yahoo Finance UK, Bursa (2013)

After taking into account dividend, Bursa has still failed to enhance shareholders
value during 2012 (Table 7). It is worth noting that share prices are often affected by
many different factors not wholly within the control of the company. It would be
grossly unfair to blame the company especially when it has improved the operating
performance and increase its dividend year on year (Chart 5).



RMcents

Chart 5: Dividend Payout Ratio and Dividend per Share


Table 7: Total Shareholders Return
Bursa (%) SGX (%) LSE (%)
2012 (3.7) 18.8 40.5
2011 (10.8) (24.0) (1.9)
2010 0.2 5.0 (20.2)
2009 58.6 68.2 45.6
2008 (62.2) (60.0) (73)
Total (48.4) (37.6) (53.1)
Detailed calculations shown in Appendix 7
Source: Yahoo Finance UK (2013)

10
12
14
16
18
20
22
24
26
28
86
87
88
89
90
91
92
93
94
95
96
FY 08 FY09 FY10 FY 11 FY 12
Dividend Payout Ratio Dividend per Share
%


3.3.3 Employees
As Bursa strives to achieve leadership in the marketplace, it places great emphasis
on its employees development and well-being. It practices a system of total rewards
management which encompasses not only compensation and benefits but also
performance recognition, work-life integration as well as professional development
and career progression (Bursa, 2012).
Bursas total pay philosophy is positioned at the market 50
th
percentile for total pay
while outstanding employees are distinguished and positioned at the market 75
th

percentile (Bursa, 2010, p.55). A share grant plan is also introduced as part of the
long term incentive to reward and recognize employees contribution.
There are also excellent staff training and talent development programs in Bursa.
252 development programs were held in 2012 and thus it is no surprise that its
employees are able to register 4.9 training days, which is 63% higher than its target
of 3 training days (Bursa, 2012, p.40).
There are also training facilities, knowledge centers available in Bursa while
coaching and mentoring opportunities are offered. Work-life balance is obtained by
providing gymnasiums and indoor sports court for employees.
Bursa provides promotion opportunities internally and set up frameworks for
succession planning (Diagram 5). Various consultative programs such as Individual
Development Plans and Customized Accelerated Development Programs are crafted
based on individual employees behavioral and technical competence, forming the
foundation for short to middle-term career progression.



Diagram 5: Succession Planning Framework

Source: Bursa Malaysia Annual Report (2012)

To gain insight on the employees views and gauge their feedbacks, an annual
Employee Engagement Survey (EES) is conducted by an external firm. The score is
on an increasing trend since 2008, reflecting that employees are generally pleased
with Bursas efforts. Post EES intervention initiatives would also be taken to address
any areas below benchmark norms.
However, there is important information regarding employees which is not included
in Bursas annual report. Unlike London and Singapore Stock Exchange, Bursa has
not disclosed its employee turnover rate. It is one of the common indicators on
employee satisfaction and thus should be disclosed to enhance transparency.

3.3.4 Community
Nowadays, corporations are realizing that their activities could have a pervasive
impact on the local and global community. As an exchange holding company, Bursa
has a statutory duty to act in public interest (Malaysian Government, 2007, s11 (3)(a))
and would be expected to be socially responsible in areas such as marketplace,
community, environment and workplace.
Bursa has pursued various initiatives to ensure market quality and integrity. Besides,
it serves the community through act of philanthropy where scholarships, internships


and trainings for unemployed graduates are provided. In 2012, Bursa also co-
sponsored The Edge-Bursa Malaysia Rat Race and held The Great Cookout Day
which raised more than RM 2.2 million to be distributed to 26 beneficiary
organizations. Employee voluntarism is encouraged as well through its community
outreach programs to assist the less fortunate.
On environmental issues, Bursa has committed to reduce its environmental impact
by minimizing operational carbon footprint. It promotes sparing in electricity usage,
business air travel and paper consumption to reduce its greenhouse gas (GHG)
emissions (Diagram 6). It manages to reduce GHG emission by 4.49% and 2.1% in
2011 and 2012 although the latter is below the 3% reduction target set by the
company. As recognition of its environmental efforts, Bursa is being recertified for
ISO 14001:2004 during the year.
Table 8: Greenhouse Gas Emission

Source: Bursa Sustainability Report (2011)
Bursa has also taken the lead in participation of projects such as the Carbon
Disclosure Project, Global Reporting Initiative etc. and this should set an example for
all other PLCs. The ongoing drafting on GHG Reporting Framework for Malaysian
companies could also potentially have a wider impact in the preservation of
environment.



3.4 CONCLUSIONS AND RECOMMENDATIONS
In conclusion, Bursa embraces good governance in spirit and in substance,
demonstrated through its various initiatives and proactive actions. These in turn have
largely met the demands of the key stakeholders, keeping them pleased and
satisfied.
There are strong elements of segregation within Bursa as it strives to balance the
stakeholders demands both as a public listed company and a market regulator. It is
always conscious of its role and responsibility and thus avoids any potential conflict
of interest.
The relationship between corporate governance quality and companys financial and
non-financial performance is not conclusive for Bursa. While the operating
performance has been impressive, this is not reflected from the market sentiments
on its share price. Besides, it is unlikely to be appropriate to conclude on any such
relationships merely based on results of a single company.
Nevertheless, there are some areas which still have room for further improvement.
The NRC currently oversees nomination and remuneration matters. It is
recommended for the committee to be split into 2 separate committees, allowing its
committee members to specialize and not being overburdened. Besides, concrete
plans and active steps are needed to address the gender diversity issue in the board.
Moreover, Bursa should provide justifications regarding the CEOs remuneration
steep increase over the last 2 years. Specific reasons should be given to
shareholders on why such increases are considered appropriate.
Bursa should also make better use of AGM by considering holding it on weekends.
The current date and time chosen are inconvenient for shareholders who are
working on weekdays. Poll voting and electronic voting should also be considered to
further encourage shareholder participation.



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Appendix 1: Governance Model
Source: Bursa Malaysia (n.d.)


Appendix 2: Age Profile and Board Tenure

Name Age Board Tenure
Tun Mohamed Dzaiddin bin Haji Abdullah 75 9 years
Dato Tajuddin bin Atan 53 1 year 11 months
Datuk Dr. Syed Muhamad Bin Syed Abdul
Kadir
66 2 years 7 months
Dato' Dr. Thillainathan A/L Ramasamy* 68 8 years 10 months
Datuk Dr. Md Tap Bin Salleh 63 2 years 11 months
Encik Izham Bin Yusoff* 45 8 years 10 months
Dato' Wong Puan Wah @ Wong Sulong 65 6 years 3 months
Encik Cheah Tek Kuang* 65 8 years 10 months
Dato' Saiful Bahri Bin Zainuddin 51 4 years 8 months
Tan Sri Ong Leong Huat @ Wong Joo Hwa* 68 4 years 8 months
Tan Sri Datuk Dr. Abdul Samad bin Haji Alias 70 1 year 8 months
Datuk Puteh Rukiah Binti Abd Majid 60 1 year 9 months
Datuk Karownakaran @ Karunakaran a/l
Ramasamy#
62 -
Chay Wai Leong# 49 -
Ghazali bin Darman# 48 -
Current Average 62 5 years 2 months
Revised Average 60 2 years 10 months

* Outgoing Directors
# Incoming Directors



Appendix 3 Directors Remuneration 2009-2012



Appendix 4: Attendance Record of Directors in the Board and Committees
Board

Board Committee



Appendix 5: Directors Training Programmes
Corporate Governance
Malaysian Code on CG 2012, 10 & 16 May 2012 / 21 November 2012 (Attended by Tan Sri Ong
Leong Huat / Dato' Wong PuanWah @ Wong Sulong)
CG Today and the Directors Moving Forward, 14 June 2012 (Attended by Datuk Dr. Syed
Muhamad bin Syed Abdul Kadir)
CG Blueprint and Malaysian Code on CG 2012, 18 June 2012 (Attended by Datuk Dr.Md Tap bin
Salleh, Datuk Puteh Rukiah binti Abd Majid and Encik Izham bin Yusoff)
Malaysian Code on CG 2012: The Implication and Challenges to PLCs, 3 July 2012 (Attended by
Datuk Dr. Md Tap bin Salleh, Datuk Puteh Rukiah binti Abd Majid and Dato' Saiful Bahri bin
Zainuddin)
CG and Whistle blowing, 9 August 2012 (Attended by Encik Izham bin Yusoff)
Risk Management and Audit
Board Audit Committee Forum, 2-4 March 2012 (Attended by Dato' Dr. Thillainathan a/l
Ramasamy)
Role of the Audit Committee in Assuring Audit Quality, 22 May 2012 (Attended by Datuk Puteh
Rukiah binti Abd Majid and Tan Sri Datuk Dr. Abdul Samad bin Haji Alias)
Governance, Risk Management and Compliance: What Directors Should Know, 8 August 2012
(Attended by Dato' Wong Puan Wah @ Wong Sulong)
The Key Components of Establishing and Maintaining World-Class Audit Committee (AC)
Reporting Capabilities, 3 October 2012 (Attended by Dato' Dr. Thillainathan a/l Ramasamy, Encik
Izham bin Yusoff and Tan Sri Datuk Dr. Abdul Samad bin Haji Alias)
What Keeps an AC up at Night, 3 October 2012 (Attended by Dato' Dr.Thillainathan a/l
Ramasamy, Encik Izham bin Yusoff and Tan Sri Datuk Dr. Abdul Samad bin Haji Alias)
Leadership, Legal and Business Management
IDEAS Conference: The Role of the Judiciary as a Key Check and Balance in Malaysia, 11
February 2012 (Attended by Tun Mohamed Dzaiddin bin Haji Abdullah)
International Police Conference on Principled Policing: Rule of Law, Public Order and Sustainable
Development, 13 February 2012 (Attended by Tun Mohamed Dzaiddin bin Haji Abdullah)
Briefing on Goods and Services Tax, 22 March 2012 (Attended by Dato' Dr.Thillainathan a/l
Ramasamy)
Briefing on Personal Data Protection Act 2010, 15 March 2012 / 9 August 2012 (Attended by Tan
Sri Ong Leong Huat / Dato' Saiful Bahri bin Zainuddin)
Briefing on Competition Act 2010, 7 May 2012 / 16 August 2012 (Attended by Tan Sri Ong
Leong Huat / Dato' Saiful Bahri bin Zainuddin)
International Directors Summit 2012: Awakening the Corporate Entrepreneurship for High Income
Economy, 21-22 May 2012 (Attended by Tan Sri Datuk Dr. Abdul Samad bin Haji Alias)
Harvard Business School Management Development Programme, 4 & 7 July 2012 (Attended by
Tan Sri Datuk Dr. Abdul Samad bin Haji Alias)
Human Capital Management in the Boardroom, 14 August 2012 (Attended by Tan Sri Ong Leong
Huat)
Growth Through Innovation, 23 August 2012 (Attended by Datuk Dr. Syed Muhamad bin Syed
Abdul Kadir)
Professionalism in Directorship Programme: What Does It Take to be an Effective Corporate
Director? 26-27 September 2012 (Attended by Datuk Puteh Rukiah binti Abd Majid)
International Malaysia Law Conference 2012: Asian Perspectives, Global Viewpoints, 26-28
September 2012 (Attended by Encik Cheah Tek Kuang)


Khazanah Megatrends Forum 2012: The Big Shift Traversing the Complexities of a New World,
1-2 October 2012 (Attended by Datuk Dr. Syed Muhamad bin Syed Abdul Kadir and Tan Sri
Datuk Dr. Abdul Samad bin Haji Alias)
Khazanah Global Lectures: Institutionalising Knowledge to Build Malaysia's Human Capital, 29
November 2012 (Attended by Datuk Dr. Syed Muhamad bin Syed Abdul Kadir)
Financial and Capital Markets
Bank Negara Malaysia (BNM)'s Annual Report 2011: Financial Stability and Payment Systems
Report Briefing, 21 March 2012 (Attended by Datuk Dr. Syed Muhamad bin Syed Abdul Kadir)
International Financial Reporting Standards Conference, 28 March 2012 (Attended by Encik
Izham bin Yusoff)
Pillar 3 Disclosure on Basel II, 23 April 2012 (Attended by Datuk Dr. Syed Muhamad bin Syed
Abdul Kadir)
BNM Requirements for the Internal Capital Adequacy Assessment Process (ICAAP), 30 April
2012 (Attended by Datuk Dr. Syed Muhamad bin Syed Abdul Kadir)
Understanding BNM's New Liquidity Framework, 9 June 2012 (Attended by Tan Sri Ong Leong
Huat)
Financial Institutions Directors Education (FIDE) Forum, 12 June 2012 (Attended by Tun
Mohamed Dzaiddin bin Haji Abdullah and Tan Sri Ong Leong Huat)
Rating Agency of Malaysia (RAM) Annual Bond Market Conference: Making the Asian Bond
Market a Reality, 12 July 2012 (Attended by Dato' Dr.Thillainathan a/l Ramasamy)
Anti-Money Laundering Act: Financial Crime Risk CIMB Perspective, 10 September 2012
(Attended by DatukDr. Syed Muhamad bin Syed Abdul Kadir)
Briefing on ICAAP, 20 September 2012 & 11 December 2012 (Attended by Tan Sri Ong Leong
Huat)
52nd General Assembly of the World Federation of Exchanges, 14-17 October 2012 (Attended by
Tun Mohamed Dzaiddin bin Haji Abdullah and Dato' Tajuddin bin Atan)
17th Malaysian Capital Market Summit: Malaysia the Rising Star Geared for Growth, 29
October 2012 (Attended by Datuk Dr. Md Tap bin Salleh)
7th China International Oils & Oilseeds Conference, 6 November 2012 (Attended by Dato'
Tajuddin bin Atan)
Global Financial Leadership Conference, 12-14 November 2012 (Attended by Tun Mohamed
Dzaiddin bin Haji Abdullah and Dato' Tajuddin bin Atan)
8th Asia-Pacific New Markets Forum: Enhancing the Quality of Emerging Markets in the Asia-
Pacific Region, 29-30 November 2012 and 1 December 2012 (Attended by Dato' Tajuddin bin
Atan)
Application of Equity Valuation Methods, 8 December 2012 (Attended by Tan Sri Ong Leong
Huat)




Appendix 6: Audit Committee Members Qualifications

Name Status Academic/Professional Qualification(s)
Tan Sri Datuk
Dr. Abdul
Samad bin
Haji Alias
(Chairman)

INED

Bachelor of Commerce, University of Western Australia
Honorary Doctorate of Philosophy (Accounting), Universiti
Utara Malaysia
Institute of Chartered Accountants, Australia (Fellow
Member)
Malaysian Institute of Accountants (MIA) (Member)
Malaysian Institute of Certified Public Accountants
(MICPA) (Member)
Datuk Dr.
Syed
Muhamad bin
Syed Abdul
Kadir

PID
Bachelor of Arts (Hon) and Bachelor of Jurisprudence
(Hon), University of Malaya
Master of Business Administration, University of
Massachusetts, USA
Masters of Law (Corporate Law), Universiti Teknologi
MARA
PhD (Business Management), Virginia Polytechnic
Institute and State University, USA
Certificate in Legal Practice (Malaysian Professional
Legal Board)
Chartered Institute of Arbitration, United Kingdom
(Member)
Dato' Dr.
Thillainathan
a/l Ramasamy
INED
Bachelor of Arts, University of Malaya
Master and Doctorate of Economics, London School of
Economics, United Kingdom
Encik Izham
bin Yusoff

INED
Bachelor of Accounting, University of Miami, USA
Master of Business Administration (Accounting &
International Business), University of Miami, USA
Institute of Internal Auditors Malaysia (Associate Member)
Encik Cheah
Tek Kuang
INED
Bachelor of Economics, University of Malaya
Institute of Bankers Malaysia (Fellow Member)
Datuk Puteh
Rukiah binti
Abd Majid
PID
Bachelor of Economics (Hon), University of Malaya
Master of Arts (Economics), Western Michigan University,
USA
*INED Independent Non-Executive Director
*PID Public Interest Director



Appendix 7: Total Shareholders Return
Bursa SGX LSE
TR
(RM)
ISP
(RM)
TSR
(%)
TR
(S$)
ISP
(S$)
TSR
(%)
TR
()
ISP
()
TSR
(%)
2012 (0.25) 6.7 (3.7) 1.15 6.13 18.8 321.7 795 40.5
2011 (0.84) 7.8 (10.8) (2.02) 8.42 (24.0) (15.7) 838 (1.9)
2010 0.02 7.99 0.2 0.415 8.28 5.0 (144.8) 718 (20.2)
2009 3.018 5.15 58.6 3.465 5.08 68.2 232.4 510 45.6
2008 (8.769) 14.1 (62.2) (8.06) 13.42 (60.0) (1444.6) 1979 (73)
Total (6.821) 14.1 (48.4) (5.05) 13.42 (37.6) (1051) 1979 (53.1)

TR Total returns, comprising dividends and net share price movement
ISP Initial share price at beginning of year
TSR Total shareholder return, TR/ISP
*SGX & LSE data are adjusted for different year ends
Source: Yahoo Finance UK (2013)



Appendix 8: Income Statement

INCOME STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012
Group Company

Note

2012
RM'000
2011
RM'000
2012
RM'000
2011
RM'000
Operating revenue 3 388,480 381,503 315,214 291,593
Other income 4 38,603 38,639 24,052 20,928
427,083 420,142 339,266 312,521
Staff Costs 5 (102,481) (104,122) (94,656) (96,275)
Depreciation and amortisation 6 (33,713) (38,444) (30,999) (36,818)
Other operating expenses 7 (74,857) (71,463) (53,815) (65,673)
Profit before tax 216,032 206,113 159,796 113,755
Income tax expense 9 (58,286) (54,779) (9,248) (9,980)
Profit for the year 157,746 151,334 150,548 103,775
Profit attributable to:

Owners of the Company 151,458 146,160 150,548 103,775
Non-controlling interest 6,288 5,174 - -
157,746 151,334 150,548 103,775
Earnings per share attributable to
owners of the Company (sen per
share):

Basic 10(a) 28.5 27.5
Diluted 10(b) 28.4 27.5




Appendix 9: Statements of Comprehensive Income

STATEMENTS OF COMPREHENSIVE INCOME

Group Company

2012
RM'000
2011
RM'000
2012
RM'000
2011
RM'000

Profit for the year 157,746 151,334 150,548 103,775
Other comprehensive income:
Net fair value changes in AFS financial
assets
160 (16,920) 44 (16,983)
Cumulative loss reclassified to income
statement
(Note a)
- 1,164 - -
Foreign currency translation (99) 59 - -
Income tax relating to AFS financial
assets
14 (25) 54 9
Other comprehensive income for the
year, net of tax
75 (15,722) 98 (16,974)
Total comprehensive income for the
year
157,821 135,612 150,646 86,801

Total comprehensive income
attributable to:
Owners of the Company 151,533 130,446 150,646 86,801
Non-controlling interest 6,288 5,166 - -
157,821 135,612 150,646 86,801

Note a
The cumulative loss reclassified to income statement is in relation to a recognition of
impairment loss of an investment security.



Appendix 10(a): Consolidated Statement of Financial Position

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012

Note 31.12.2012
RM'000
31.12.2011
RM'000
1.1.2011
RM'000
Assets

Non-current assets
Property, plant and equipment 12 209,733 218,397 231,104
Computer software 13 61,274 59,614 73,056
Goodwill 14 42,957 42,957 42,957
Investment securities 16 123,782 93,371 110,404
Staff loans receivable 17 9,140 11,678 13,805
Deferred tax assets 18 1,278 1,034 1,023
448,164 427,051 472,349

Current assets
Trade receivables 19 30,262 27,870 33,526
Other receivables 20 14,281 12,932 10,197
Tax recoverable 4,296 388 4,586
Investment securities 16 54,936 33,441 27,335
Cash and bank balances not belonging
to the Group 22 1,175,000 671,880 710,323
Cash and bank balances of the Group 23 471,503 499,943 449,938
1,750,278 1,246,454 1,235,905
Total assets 2,198,442 1,673,505 1,708,254




Appendix 10(b): Consolidated Statement of Financial Position

Equity and liabilities

Equity

Share capital 24 266,012 265,800 265,700
Share premium 90,505 87,553 86,101
Other reserves 25 26,828 25,429 40,147
Retained earnings 492,106 481,611 460,356
Equity attributable to owners of the Company 875,451 860,393 852,304
Non-controlling interest 15,770 14,232 11,266
Total equity 891,221 874,625 863,570

Non-current liabilities
Retirement benefit obligations 27(a) 24,816 24,311 22,825
Deferred capital grants 28 9,934 11,850 10,986
Deferred tax liabilities 18 9,196 9,886 18,349
43,946 46,047 52,160

Current liabilities
Trade payables 22 1,137,234 636,166 676,576
Clearing funds 22 35,938 34,485 33,543
Other payables 29 80,535 67,330 68,916
Tax payable 9,568 14,852 13,489
1,263,275 752,833 792,524
Total liabilities 1,307,221 798,880 844,684
Total equity and liabilities 2,198,442 1,673,505 1,708,254




Appendix 11: Statement of Cash Flows
Group Company

2012
RM'000
2011
RM'000
2012
RM'000
2011
RM'000
Cash flows from operating activities
Profit before tax 216,032 206,113 159,796 113,755
Adjustments for:
Amortisation of premium less accretion of
discount 723 152 637 96
Depreciation and amortisation 33,713 38,444 30,999 36,818
Dividend income from investment security (3,038) (930) (3,038) (930)
Grant income (1,916) (2,636) (1,566) (1,547)
Gross dividend income from subsidiaries - - (165,259) (125,131)
Impairment loss on amount due from a
subsidiary - - 3,324 8,527
Impairment loss on computer software - 335 - 335
Impairment loss on investment security - 1,164 - -
Interest income (23,153) (21,267) (11,735) (10,367)
Net gain on disposal of investment
securities (257) (328) (257) (223)
Net impairment loss/ (reversal of
impairment loss) on trade and other
receivables 1,239 (188) 1,043 20
Net (gain)/loss on disposal of property,
plant and equipment (4) 13 - 13
(Net reversal of impairment
loss)/impairment loss on investment in
subsidiaries - - (3,166) 5,734
Property, plant and equipment and computer
software written off 17 836 15 836
Retirement benefit obligations 2,574 1,542 2,574 1,542
Reversal of provision for short term
accumulating compensated unutilised leave (266) (70) (250) (100)
SGP expense 4,488 2,548 4,215 2,342
Unrealised (gain)/loss on foreign exchange
differences (25) 37 - -
Operating profit before working capital
changes 230,127 225,765 17,332 31,720
Decrease/(increase) in receivables 218 7,317 (1,344) (1,699)
Increase in other payables 4,619 1,434 1,615 2,254
Changes in subsidiaries' balances - - (6,952) (6,498)


Cash generated from operations 234,964 234,516 10,651 25,777
Staff loans repaid, net of disbursements 3,135 2,861 2,974 2,434
Retirement benefits paid (2,069) (56) (2,069) (56)
Taxes paid, net of refund (71,016) (60,188) (10,098) (3,075)
Net cash from operating activities 165,014 177,133 1,458 25,080

Cash flows from investing activities
Interest received 21,104 18,200 10,266 8,292
Decrease/(increase) in other deposits not for
short-term funding requirements 26,872 (34,218) (7,960) (7,694)
Proceeds from disposal of investment
securities 82,646 78,306 62,640 42,287
Proceeds from disposal of motor vehicles 4 156 - 156
Purchases of investment securities (134,425) (83,666) (74,358) (48,170)
Purchases of property, plant and equipment
and computer software (18,441) (17,654) (11,550) (7,195)
Net cash used in investing activities (22,240) (38,876) (20,962) (12,324)
Cash flows from financing activities
Dividends paid (140,963) (124,905) (140,963) (124,905)
Dividends paid by a subsidiary to non-
controlling interest (4,750) (2,200) - -
Dividends received 1,476 1,073 158,227 116,694
Grant received - 3,500 - -
Net cash (used in)/from financing activities (144,237) (122,532) 17,264 (8,211)
Net (decrease)/increase in cash and cash
equivalents (1,463) 15,725 (2,240) 4,545
Effects of exchange rate changes (105) 62 - -
Cash and cash equivalents at beginning of
year 155,343 139,556 78,701 74,156
Cash and cash equivalents at end of year
(Note 23 (iii)) 153,775 155,343 76,461 78,701




Appendix 12: 5-Year Highlights

31 DEC
2008
31 DEC
2009
31 DEC
2010
31 DEC
2011
31 DEC
2012
Key Results
(RM Million)

Operating Revenue
1
302.5 297.8 331.3 381.3 388.5
Operating Expenses
2
186.0 183.2 197.3 214.0 211.1
PATAMI 104.4 177.6
3
113.0 146.2 151.5

Other Key Data
(RM Million)

Total Assets 1,729.9 1,786.6 1,708.3 1,673.5 2,198.4
Total Liabilities 997.6 938.0 844.7 798.9 1,307.2
Shareholders' Equity 732.3 840.0 852.3 860.4 875.5
Capital Expenditure 34.0 22.1 21.9 13.6 26.7

Financial Ratios (%)
Operating Revenue
Growth
1

(33.3) (1.5) 11.2 15.1 1.8
Cost to Income Ratio 56.1 45.5
3
54.6 50.9 49.4
Net Profit Margin 31.5 44.1
3
32.0 36.0 36.9
ROE 13.8 22.6
3
13.4 17.1 17.4

Share Information
Basic EPS (sen) 19.9 33.7 21.3 27.5 28.5
Net Dividends per Share
(sen)
18.1 17.8 20.0 26.0 27.0
Payout Ratio (%) 90.9 92.9 94.0 94.6 94.8
Net Assets per Share
(sen)
1.39 1.59 1.60 1.62 1.65
Share Price - High (RM) 16.30 8.59 8.66 9.02 7.72
Share Price - Low (RM) 4.68 4.36 6.75 5.76 5.91
Share Price as at 31
December (RM)
5.15 7.99 7.80 6.70 6.22
Price Earnings Ratio
(times)
26 24 37 24 22
Company Market
Capitalisation (RM
billion)
2.7 4.2 4.1 3.6 3.3

1 Comparative figures have been restated to include administration fees and conference fees and exhibition related income.
2 Comparative figures have been restated to include commitment fees.
3 The results and ratios for 2009 which exclude the gain on disposal of a subsidiary are as follows:

(i)
(ii)
(iii)
(iv)
PATAMI: RM101.6 million
Cost to income ratio: 56.1%
Net profit margin: 31.1%
ROE: 13.6%


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