"Bursa Malaysia's Approach on Corporate Governance" By: SELVARANY RASIAH Chief Regulatory Officer 24 May 2010

Our Approach towards Enhancing Corporate Governance of PLCs including listed SOEs 5 Pronged Approach Development Monitoring & Surveillance Engagement Enforcement Education Bursa Malaysia has a strong, and necessary, focus on promoting good corporate governance practices by the Boards of PLCs in Malaysia. Since the establishment of a Corporate Governance Department in 2008, we have embarked on various initiatives to accentuate our commitment to maintaining high standards of corporate governance so as to maintain market integrity. We follow a 5-pronged approach based on development; engagement; education; enforcement; and monitoring and surveillance. SOE are expected to show higher standards of corporate governance as compared to a non-SOE plcs. SOEs should not be solely profit motivated but needs to take into account of their stakeholders and community’s interest. Regulating corporate governance is a shared responsibility. There is clear and well defined roles between the SC and Bursa Malaysia. The MCCG Code issued by the SC although not mandatory on plcs but requires the plcs under the LR, to include in their AR a narrative account of how they have applied the principles and best practices set out in the Code and to identify and give reasons for areas of non-compliance, together with alternative practices adopted, if any. The LR whose compliance is overseen by the Exchange has dedicated a whole chapter i.e. chapter 15 on corporate governance. The approach we undertake applies to all listed companies.

OUR CG APPROACH - Development Development of Guidance, Frameworks, Rules & Best Practices Publication of activities through media & websites Identification of Key Governance Issues & Rolling Out of Activities Continuous development of new rules, guidance, frameworks and best practices through benchmarked jurisdictional studies to ensure our rules are robust to cater to the ever changing dynamics of the capital market. The Exchange also works with other regulators such as the Companies Commission of Malaysia in enhancing CG rules for our plcs. We do take a consultative approach on this. To create awareness in the market on our CG initiatives and stress the importance of high standards of CG, we continuously engage the media. This year, we will put greater focus and efforts on improving the quality of boards on our plcs as a means of strengthening the practice of corporate governance.

International CG Ratings Shareholders involvement & Rights OUR CG APPROACH - Engagements (Cont’d) PLCS & Boards of Directors International CG Ratings Shareholders involvement & Rights Individual engagements with PLCs and BOD – On transactions that may not tantamount to a breach of the LR but where its practices poor CG where we share our concerns and expectations. E.g. Multi Sports Holdings Bhd who has appointed an inexperience director as Chairman of their Nominating Committee Engagements with International CG Raters to manage negative perception on Malaysia and improve our CG standing internationally. Ultimately we’d hope to attract and convince foreign funds to invest in our capital market. Engagements on shareholders’ involvement & rights – Given the influence that institutional investors can have on the governance practices of their investee companies, we have engaged and will continue to engage these investors to play a more active role in shaping the CG practices of their investee companies. Also we also have a close working relationship with MSWG to promote corporate governance through shareholder activism. Statistics of trades by institutional investors on Bursa Malaysia: Up to 31 Mar 2010 – 76% ; 2009 - 67% ; 2008 - 72% 4

OUR CG APPROACH (Cont’d) Monitoring & Surveillance Surveillance of PLCs CG Compliance Review Engagement with boards of listed issuers Identify & deal with specific CG issues CG Compliance Review - Reviews of plcs’ statement on corporate governance to ensure that listed issuers practise high standards of corporate disclosure and corporate governance practices. Engagements with plcs are held following the review through various methods e.g. issuance of reminder letters, teleconversations and one-on-one meetings. We hare established a mechanism to rate and identify listed issuers in terms of their corporate governance risk and financial failure risk. The mechanism is a risk based approach to facilitate corporate surveillance activities and takes into consideration financial and non-financial information.

OUR CG APPROACH (Cont’d) Enforcement PLCs Directors Advisors Sponsors Bursa continues with its shift towards placing greater emphasis on directors in discharging their obligations effectively and efficiently. In this regard, the shift can be clearly seen where there were more director enforcement in 2008 and 2009 as compared to previous years and greater emphasis is placed on directors through imposition of fines/heavier penalties as opposed to listed companies (plcs). Enforcement ratio (PLCs: Directors) based on decisions made in 2009: 76:232, and 2008 is 80:125 as compared to 2007 (154:120) and 2006 (120:50). We take strict enforcement action on directors be it EDs or Independent Directors. In addition to the above, we also have started to impose training requirements for errant directors (found to be in breach of the LR under directors enforcement) and directors of plcs which are reprimanded for breaches of the LR in particular, breaches relating to deviation between unaudited and audited results and related party transactions. We have together with the training provider, Bursatra, reviewed the modules of the mandatory accreditation program for directors (MAP), which were introduced in 2001, to ensure that the program remain relevant including changes to make the modules more interesting and interactive. The new revamped MAP was implemented in August 2009.

CG Conference / Seminars OUR CG APPROACH (Cont’d) Education CG Guide CG Conference / Seminars CG Week CG Evening Talks We value the importance of education and since last year we have placed greater emphasis on market education in the form of training, dialogues, conference and direct engagements. This is all done to improve the quality of our directors for the betterment of our capital market. To ensure board effectiveness, we also held high level forums with high risk companies identified under our risk rating mechanism where we have conveyed our concerns and also our expectations. The CG Guide was developed and issued by Bursa last year for our boards of directors to gain a clear and constructive direction on CG best practices. The Guide we hope will encourage boards, managers and shareholders to eschew a tick-the-box approach in favour of thoughtful governance and to raise the level of corporate governance through the structuring and implementation of sound practices and processes which engender an effective board. Statistic on trainings : Evening Talks and training sessions on the CG Guide attended by 717 directors so far.

Collaborative approach in the promotion & enhancement of CG Regulators - Provides the impetus in promoting high CG standards in Malaysia (Carrot & Stick) Shareholders must take responsibility for their investment by exhorting their CG expectations on their investee companies Directors - Inculcate the right mindset & embrace CG in substance Strong industry associations for the promotion of CG Intermediaries & Advisors – Aid directors & companies in enhancing shareholder value

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