CORPORATE GOVERNANCE STATEMENT

Establish clear roles and responsibilities

Clear functions of the Board and Management

The Board is responsible for oversight and overall management of the Company. To ensure the effective discharge of its function and responsibilities, the Board established a Governance Model for the Group delegating specific powers of the Board to the relevant Board Committees¹ and the CEO. The Governance Model is supported by the Authority Limits Document (ALD), which clearly sets out relevant matters reserved for the Board's approval, as well as those which the Board may delegate to the Board Committees, the CEO and Management. The Governance Model and ALD are reviewed and amended as and when required, to ensure an optimum structure for efficient and effective decision making in the organisation.

¹ The Board Committees comprise three Governance Committees and four Regulatory Committees as set out in the Governance Model of Bursa Malaysia of this Annual Report, which is also available at www.bursamalaysia.com, About Us-Corporate Governance section.

Key matters reserved for the Board's approval include the annual business plan and budget, dividend policy, business continuity plan, issuance of new securities, business restructuring, expenditure above a certain limit, disposals of significant fixed assets and the acquisition or disposal of companies within the Group.

The Board Committees are entrusted with specific responsibilities to oversee the Group's affairs, with authority to act on behalf of the Board in accordance with their respective Terms of Reference² (TOR). At each Board meeting, minutes of Board Committee meetings are presented to keep the Board informed. The Chairmen of the relevant Board Committees also report to the Board on key issues deliberated by the Board Committees at their respective meetings.

² The TOR of each Board Committee together with the names of members of the Board Committees for the term of appointment from 12 May 2012 to 11 May 2013 are available at www.bursamalaysia.com, About Us-Corporate Governance section.

Clear roles and responsibilities

The Board has discharged its responsibilities in the best interests of the Company in pursuit of an integrated regulatory and commercial objective. The following are among the key responsibilities of the Board:

1. Reviewing and adopting the Company's strategic plans
   
   The Board plays an active role in the development of the Company's strategy. It has in place a strategy planning process, whereby the Management presents to the Board its recommended strategy annually, together with its proposed business and regulatory plans for the ensuing year at a dedicated session, for the Board's review and approval. At this session, the Board deliberates both the Management's and its own perspectives, and challenges the Management's views and assumptions, to ensure the best outcome. In conjunction with this, the Board also reviews and approves the annual budget for the ensuing year, and sets the Key Performance Indicators (KPIs) under the Corporate Balanced Scorecard (CBS), ensuring that the targets correspond to the Company's strategy and business plan, reflect competitive industry trends and internal capabilities as well as provide sufficient stretch for the Management.
   
   For 2012, the strategic planning process began at an off-site Board meeting held in June 2011 where the Management presented its proposals for the Board's review. The Board subsequently approved the Company's Strategy and 2012 Business and Regulatory Plans (BRP).
   
   A mid-year review of the 2012 BRP as well as the Budget was conducted by the Board in July 2012, at which the targets set by the Board were compared against the actual performance year-to-date. The Board also discussed strategy implementation processes and requirements together with key transformational initiatives undertaken in the first half of the year to achieve the targets set out in the 2012 BRP. In this exercise, the Board took cognisance of internal and external factors which had supported various achievements as well as challenges facing Management. The Board actively engaged with the Management in monitoring the progress of initiatives identified in the 2012 BRP and, where required, in identifying alternative measures to be taken to ensure the successful realisation of the strategies.
   
   As part of a Business Process Improvement initiative, PricewaterhouseCoopers Advisory Services Sdn Bhd was engaged to review Bursa Malaysia's 2012 CBS framework and enhance the effectiveness and efficiency of internal processes, ensuring that they were appropriately institutionalised. The review also supported Bursa Malaysia's goals of becoming a high-performance organisation. Findings from the review and subsequent recommendations were tabled to the Nomination and Remuneration Committee (NRC) and the Board. The Board approved the revisions to the 2012 CBS and KPIs, which saw an increased focus on improving internal processes and human capital development.
   
   In November 2012, the Management presented to the Board the proposed 2013 BRP and Budget. The Board reviewed the sustainability, effectiveness and implementation of the strategic plans for 2012, and provided its input to the Management. The 2013 BRP and Budget for the Group was approved by the Board, taking into consideration the need to continuously invest, build and grow the three main markets of Bursa Malaysia in line with the approved plans.


2. Overseeing the conduct of the Company's business
   
   The CEO³ is responsible for the day-to-day management of the business and operations of the Group in respect of both its regulatory and commercial functions. He is supported by the Management Committee⁴ and other committees established under the Group's Management Governance Framework⁵. The Management's performance, under the leadership of the CEO, is assessed by the Board through a status report which is tabled to the Board and which includes a comprehensive summary of the Group's operating drivers and its financial performance during each reporting period. The Board is also kept informed of key strategic initiatives and significant operational issues and the Group's performance, based on the approved KPIs in the CBS.
   
   
   ³ The CEO's job description was last reviewed and approved by the Board in September 2010.
   ⁴ The Management Committee members are as set out in the Management Committee/Senior Management of this Annual Report.
   ⁵ The Management Governance Framework, which takes effect from 25 May 2011, comprises two committees for governance function, and two committees for business operations functions. It is available at www.bursamalaysia.com, About Us-Corporate Governance section.
   
   
   To ensure independence of the regulatory function, the Chief Regulatory Officer (CRO) provides the Board with a separate status report on a regular basis, to inform the Board of actions taken by the Regulation function and provide updates on regulatory initiatives. The Management also presents to the Board in the first quarter of every year a report on Bursa Malaysia's compliance with its regulatory duties and obligations under the Capital Markets and Services Act 2007 (CMSA) during the preceding year. In March 2012, the Board reviewed the Annual Regulatory Report 2011 prior to submission to the Securities Commission (SC) in compliance with Section 16 of the CMSA.
   
   In February 2012, the Board reviewed the results of the 2011 employee engagement survey (EES) to assess the level of employee satisfaction. The survey, conducted by an external firm, aimed to ensure continuous improvement in the operating environment by maintaining areas of strength and improving areas of opportunity for its internal stakeholders. Post EES, intervention initiatives were taken to address those areas below benchmark norms.
   
   
3. Identifying principal risks and ensuring the implementation of appropriate systems to manage them
   
   Through the Risk Management Committee (RMC), the Board oversees the Enterprise Risk Management (ERM) framework of the Group. The RMC advises the Audit Committee (AC) and the Board on areas of high risk faced by the Group and the adequacy of compliance and control throughout the organisation. The RMC reviews the risk management policies formulated by Management and makes relevant recommendations to the Board for approval. Details on the RMC and the Company's ERM framework are set out in this Corporate Governance Statement and Risk Management Statement of this Annual Report.
   
   
4. Succession planning
   
   The Board has entrusted the NRC with the responsibility to review candidates for key management positions, to determine compensation packages for these appointments, and to formulate nomination, selection, compensation and succession policies for the Group. The Board is satisfied that the NRC, in its current form, effectively and efficiently discharges its functions in respect of nomination and remuneration matters listed separately in its TOR for the purpose of clarity. As such, there is no need to separate the nomination and remuneration functions into discrete nomination and remuneration committees.
   
   In discharging its responsibility, the NRC reviews the Group's human resources plan including the succession management framework and activities, human resources initiatives and the annual manpower budget. In November 2012, the NRC reviewed Bursa Malaysia's comprehensive succession management framework which was subsequently approved by the Board in the same month. The succession management framework serves to ensure the smooth transition of key personnel into critical positions and the development of human capital within Bursa Malaysia.
   
   The NRC undertakes yearly evaluation of the performance of key management personnel whose remunerations are directly linked to performance, based on their scorecards. For this purpose, the 2011 CBS and KPI results of the CEO and relevant senior management were reviewed by the NRC in February 2012. The assessment by the NRC however excludes the Chief Internal Auditor (CIA). The CIA reports to the AC, which evaluates and reviews his performance. The CEO's compensation package is reviewed annually by the NRC, after which it is put to the Board for decision.
   
   
5. Overseeing the development and implementation of a communication policy for the Company
   
   Bursa Malaysia believes in building investor confidence through good CG practices. The Company carried out its Investor Relations (IR) activities in accordance with its stated IR Policy, which is available on its website. A report on IR activities is provided in the For the Shareholders section of this Annual Report.
   
   
6. Reviewing the adequacy and integrity of management information and internal control system of the Company
   
   The Board is ultimately responsible for the adequacy and integrity of the Company's internal control system. Details pertaining to the Company's internal control system and the review of its effectiveness are set out in the Internal Control Statement and Risk Management Statement respectively of this Annual Report.

Formalised ethical standards through Code of Ethics

The Company's Codes of Ethics for Directors and employees continue to govern the standards of ethics and good conduct expected of Directors and employees, respectively. The Code of Ethics for Directors includes principles relating to theirduties, conflict of interest (COI) and dealings in securities. For employees, the Code of Ethics covers all aspects of the Company's business operations, such as confidentiality of information, dealings in securities, COI, gifts, gratuities or bribes, dishonest conduct and sexual harassment.

In addition, the Company's Whistleblower Policy and Procedures (WPP) seek to foster an environment where integrity and ethical behaviour are maintained and any illegal or improper action and/or wrongdoing in the Company may be exposed. The Board has overall responsibility to oversee the implementation of the WPP for Directors, and all whistle-blowing reports are addressed to the Non- Executive Chairman of the Board or Senior Independent Non- Executive Director (SID) of Bursa Malaysia⁶. The AC has the responsibility to oversee the implementation of the WPP for the Group's employees. Duties in relation to the day-to-day administration of the WPP are delegated to the CIA and/or designated officer(s) of Group Internal Audit (GIA). The SID is also responsible for receiving report(s) made by employees or external parties for the purpose of whistle-blowing in the form as prescribed under the WPP⁷.

⁶ The contact details are set out under Corporate Information of this Annual Report. It is available at www.bursamalaysia.com, About Us-Other Corporate Information section.
⁷ The whistle-blowing report form is available at www.bursamalaysia.com, About Us-Corporate Governance section.

Bursa Malaysia on 17 December 2012, signed the Corporate Integrity Pledge to create an effective system to increase integrity through good governance, including anti-corruption measures. This demonstrates the Board's commitment to upholding anti-corruption principles in the conduct of the Company's business, and to promoting integrity, transparency and good governance in all aspects of operations.

Strategies promoting sustainability

The Board promotes good CG in the application of sustainability practices throughout Bursa Malaysia, the benefits of which are believed to translate into better corporate performance. A detailed report on sustainability activities, demonstrating Bursa Malaysia's commitment to the global environmental, social, governance and sustainability agenda, appears in the Corporate Sustainability Statement of this Annual Report.

Access to information and advice

The Directors have individual and independent access to the advice and dedicated support services of the Company Secretaries in ensuring the effective functioning of the Board. The Directors may seek advice from the Management on issues under their respective purview. The Directors may also interact directly with the Management, or request further explanation, information or updates on any aspect of the Company's operations or business concerns from them.

In addition, the Board may seek independent professional advice at the Company's expense on specific issues to enable it to discharge its duties in relation to matters being deliberated. Individual Directors may also obtain independent professional or other advice in furtherance of their duties, subject to the approval of the Chairman or the Board, depending on the quantum of the fees involved.

Qualified and competent Company Secretaries

The Board is satisfied with the performance and support rendered by the Company Secretaries to the Board in the discharge of its functions. The Company Secretaries play an advisory role to the Board in relation to the Company's constitution, Board's policies and procedures and compliance with the relevant regulatory requirements, codes or guidance and legislations. The Company Secretaries support the Board in managing the Group Governance Model, ensuring it is effective and relevant. The Company Secretaries also ensure that deliberations at the Board and Board Committee meetings are well captured and minuted, and subsequently communicated to the relevant management for necessary action. The Board is updated by the Company Secretaries on the follow-up or implementation of its decisions/ recommendations by the Management till their closure.

The Company Secretaries keep abreast of the evolving capital market environment, regulatory changes and developments in CG through continuous training.

Board Charter

The Board's Charter is embedded in the Governance Model document of the Company which is available on the corporate website. The document clearly sets out the roles and responsibilities of the Board and Board Committees and the processes and procedures for convening their meetings. It serves as a reference and primary induction literature providing prospective and existing Board members and Management insight into the fiduciary and leadership functions of the Directors of Bursa Malaysia.

The Board reviews its charter regularly, to keep it up to date with changes in regulations and best practices and ensure its effectiveness and relevance to the Board's objectives.

Strengthen composition

Nominating Committee

The TOR of the NRC provides that it shall comprise five Non- Executive Directors (NEDs) of whom two are Public Interest Directors (PIDs) and three are Independent NEDs. The NRC is chaired by a PID.

The TOR of the NRC further provides that it shall have specific responsibilities in relation to nomination and remuneration matters. With respect to nomination matters, the specific responsibilities of the NRC shall include:

• Formulating the nomination, selection and succession policies for members of the Board
• Making recommendations to the Board on new candidates for appointment and the re-appointment/ re-election of Directors to the Board
• Reviewing the required mix of skills, experience and other qualities of the Board annually
• Reviewing and recommending to the Board the appointment of members of Board Committees established by the Board annually
• Establishing a set of quantitative and qualitative performance criteria to evaluate the performance of each member of the Board, and reviewing the performance of the members of the Board
• Ensuring that orientation and education programmes are provided for new members of the Board, and reviewing the Directors' continuing education programmes

Develop, maintain and review criteria for recruitment and annual assessment of Directors

1. Recruitment or Appointment of Directors
   
   The policies and procedures for recruitment or appointment (including re-election/re-appointment) of Directors are detailed in the Protocol for Appointment of Directors and Members of Board Committees of Bursa Malaysia (the Protocol), which has been approved by the Board. The NRC is guided in the nomination, selection and appointment process by the Protocol, which also sets out the requirements under the relevant laws and regulations. The Board has established a pool of potential Directors of Bursa Malaysia for its reference when considering new appointments, in line with the sourcing process and criteria for candidates as set out in the Protocol. The pool is refreshed from time to time, to ensure the list of candidates available for the NRC/ Board's consideration remains relevant and offers the talents/skills required.
   
   In 2012, the Board composition was reviewed in conjunction with implementation of the Board's nine-year policy for Independent NEDs to ensure continued effective functioning of the Board as well as to enable its progressive refreshing. For this purpose, the NRC reviewed the Board composition with the view to identify and close any possible gap in the Board's functional knowledge and competencies by bringing in new experience, knowledge and expertise on the Board, to meet the current and future needs of the Company.
   
   The NRC's review of the criteria for the appointment process focused largely on creating a good mix of skills, experience and strengths in areas relevant to enable the Board to discharge its responsibilities in an effective and competent manner. Other factors considered include the candidates' ability to commit sufficient time to Bursa Malaysia, their character and level of independence (in line with the Main LR), integrity and professionalism. The NRC also focused on having a balanced mix of age and diversity in gender, race, culture and nationality, to facilitate optimal decision-making by harnessing different insights and perspectives. Based on the review, the NRC submitted to the Board its recommendation of suitable candidates for appointment as Directors of the Company, to replace those who will be retiring at the 36th Annual General Meeting (AGM) in 2013. In November 2012, the Board approved the NRC's recommendation.
   
   Pursuant to Article 69 of the Articles of Association (AA) of the Company, Directors (other than PIDs) are to be elected at every AGM of the Company, when one-third of the Directors longest in office should retire or, if eligible, may offer themselves for re-election. The NRC is responsible for recommending to the Board those Directors who are eligible to stand for re-election/reappointment. This recommendation is based on formal reviews of the performance of the Directors, taking into account the results of their latest Board Effectiveness Evaluation (BEE), contribution to the Board through their skills, experience, strengths and qualities, level of independence and ability to act in the best interest of the Company in decision-making. The NRC also takes into account the gradual implementation of the nine-year policy for Independent NEDs based on the schedule of retirement by rotation.
   
   In 2012, the Board approved the recommendation of the NRC for four Directors to retire at the 36th AGM in accordance with Article 69 of the AA. Three of the retiring Directors, namely Dato' Dr. Thillainathan a/l Ramasamy, Encik Cheah Tek Kuang and Encik Izham bin Yusoff, will not seek re-election in view of the nine-year policy. The fourth Director, Dato' Wong Puan Wah @ Wong Sulong, has expressed his intention not to seek re-election. The Board also approved the NRC's recommendation to support the re-appointment of Tun Mohamed Dzaiddin bin Haji Abdullah and Tan Sri Datuk Dr. Abdul Samad bin Haji Alias, both of whom are over the age of 70 years and should retire at the 36th AGM, in accordance with Section 129(2) of the Companies Act 1965 (CA).
   
   Section 10(1)(b) of the CMSA requires Bursa Malaysia, as an exchange holding company, to obtain the SC's concurrence on any proposed appointment/reappointment of Directors (other than PIDs). Hence, formal submissions were made in the last quarter of 2012, to seek the SC's concurrence on Bursa Malaysia's proposed candidates and the re-appointment of Director prior to seeking the shareholders' approval at the 36th AGM. The SC subsequently carried out a vetting exercise on each candidate and Director seeking re-appointment to determine if he or she is a person of integrity and is fit and proper to be a Director of an exchange holding company.
   
   The NRC also reviews the composition of the Board Committees annually in accordance with the procedures as set out in the Protocol. In determining candidates for appointment to the Board Committees, various factors are considered, including time commitment of the Board Committee members in discharging their roles and responsibilities through attendance at their respective meetings. The NRC also refers to the results of the Board Committee Effectiveness Assessment and Board Committee members' Self and Peer Assessment (SPA) under the BEE, to ensure the requirements of the committees are addressed.
   
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2. Annual assessment
   
   The NRC carries out the BEE exercise annually. For this purpose, an external consultant is engaged every three years to assist the NRC, the last time being in 2011. In 2012, the Company Secretaries facilitated the NRC in carrying out the BEE exercise. The BEE is conducted via questionnaires, comprising a Board and Board Committee Effectiveness Assessment and a Directors' and Board Committee members' SPA. The NRC reviews the outcome of the BEE and recommends to the Board for approval areas identified for continuous improvement.
   
   The Board's effectiveness is assessed in the areas of composition, administration, accountability and responsibility, conduct and the performance of the Chairman and CEO. The Board, through the Governance and Regulatory Committee Effectiveness Assessment, examines the respective Governance and Regulatory Committees, including their respective Chairmen, to ascertain whether their functions and duties are effectively discharged in accordance with their respective TOR. The Director's SPA is intended to ascertain the mix of skills, experience and other relevant qualities the Directors bring to the Board, and takes into account individual Directors' abilities to exercise independent judgement at all times and to contribute to the effective functioning of the Board. The SPA process also examines the ability of each Director or Committee member to give material input at meetings and to demonstrate a high level of professionalism and integrity in the decision-making process. Results of the assessment form the basis of the NRC's recommendation to the Board for the re-election of Directors at the next AGM.
   
   In November 2012, each Director and Board Committee member was provided with individual results together with a peer average rating on each area of assessment for personal information and further development.


3. Gender diversity policy
   
   The Board has approved the establishment of a gender diversity policy, and has set the target to have at least two female Directors by 2013 and three female Directors by 2016. The Company will endeavour to achieve these targets through the progressive refreshing of the Board as it implements the nine-year policy for Independent NEDs.


4. Appointment of SID
   
   Prior to expiry of the term of appointment of the second SID in December 2012, the NRC undertook the nomination process in recommending a new SID for 2013. In November 2012, the Board approved the NRC's recommendation to appoint Tan Sri Ong Leong Huat, who will carry out the responsibilities in accordance with the TOR of the SID⁸ for a one-year term commencing 1 January 2013.

⁸ The TOR of the SID is available at www.bursamalaysia.com, About Us-Corporate Governance section.

Remuneration policies

The specific responsibilities of the NRC in relation to remuneration matters are set out under the TOR including:

• Formulating and reviewing the remuneration policies and remuneration of members of the Board, Board Committees and the CEO, and recommend the same to the Board for approval; and


• Recommending the engagement of external professional advisors to assist and/or advise the NRC on remuneration matters, where necessary.

The Board is mindful that fair remuneration is critical to attract, retain and motivate the Directors of the Company. Hence, the Board has established formal and transparent remuneration policies for the Board and Board Committees, and the procedures for the policies. The NRC, in discharging its responsibilities in the review of the remuneration policies, considers various factors including the NEDs' fiduciary duties, time commitments expected of them, the Company's performance and market condition.

In 2012, the Board approved the NRC's recommendation to maintain the remuneration policy of the NEDs, and a similar quantum of Directors' fees for 2011 was approved by the shareholders at the 35th AGM.

The current remuneration policy for the NEDs comprises the following:

1. Directors' Fees
   
   The sum of RM90,000 per annum for the Chairman and RM60,000 per annum for each NED of Bursa Malaysia (as approved by the shareholders at the 33rd, 34th and 35th AGMs for 2009, 2010 and 2011 respectively).
   
   In January 2013, the Board decided not to recommend any increase in the Directors' fees of the Chairman and NED in respect of 2012, for which shareholders' approval will be sought at the forthcoming 36th AGM.


2. Meeting allowance for each Board or Board Committee⁹ meeting attended by a NED
   
   The Board had in 2012 approved the revision to the meeting allowance for Board and Board Committee meetings as follows:
   
   

   Meeting Allowance for	Board of Director		Board Committees
   	2011	2012	2011	2012
   Chairman	RM3,000	RM4,000	RM1,500	RM2,500
   Member	RM1,500	RM2,000	RM1,000	RM1,500

   
   
   The meeting allowance is also applicable to ad-hoc Board Committees, Tender Evaluation Committee or any management committee to which the NEDs are invited to attend pursuant to the Company's policy and procedures.
   
   The Board is of the view that the current remuneration level suffices to attract, retain and motivate qualified Directors to serve on the Board.
   
   
   
   ⁹ Information on the composition, number of meetings held and attendance of meetings of all Board Committees is set out in the Corporate Governance Statement of this Annual Report.
   
   
   
3. Benefits-in-kind and Emoluments
   
   NEDs are not entitled to participate in the Share Grant Plan (SGP) of Bursa Malaysia or any incentive plan for Group employees. They are given other allowances, such as travelling and mobile phone allowances, comparable to other public listed companies (PLCs), particularly those in the financial sector, government-linked companies and selected stock exchanges. The Chairman is also provided with a monthly fixed allowance, revised to RM50,000 since 1 March 2010, in view of his wide-ranging scope of responsibilities and the fact that he does not serve on the boards of any other PLC or market participant regulated by Bursa Malaysia, to avoid conflict of interest.
   
   The Executive Director/CEO is not entitled to the above Director's fee nor is he entitled to receive any meeting allowance for Board or Board Committee meetings he attends. The CEO, who also serves as Chairman of Yayasan Bursa Malaysia, Bursa Malaysia Derivatives Berhad and Bursa Malaysia Derivatives Clearing Berhad, and as Director of all other subsidiary companies within the Group, is also not entitled to Director's fees for attending Board meetings for the time being.
   
   The CEO's remuneration package comprises a fixed component which includes a monthly salary and benefits-in-kind/emoluments, such as gratuity, a company car, driver and leave passage; and a variable component which includes short-term incentives in the form of a performance-based bonus and long-term incentives in the form of shares under the Restricted Share Plan and Performance Share Plan of the SGP (Plan Shares), where applicable.
   
   In addition to the above, the Directors have the benefit of Directors and Officers (D&O) Insurance in respect of any liabilities arising from acts committed in their capacity as D&O of Bursa Malaysia. However, the said insurance policy does not indemnify a Director or principal officer if he or she is proven to have acted negligently, fraudulently or dishonestly, or in breach of his or her duty or trust. The Directors and principal officers are required to contribute jointly towards the premium of the said policy.
   
   Disclosure of each Director's remuneration, including that of the CEO, is set out in the Annual Audited Financial Statements of this Annual Report.

Reinforce Independence

Annual Assessment of Independence

The Protocol also sets out policies and procedures to ensure effectiveness of the Independent NEDs on the Board, including new appointments. The Board, through the NRC, assesses the independence of NEDs annually using the Directors' SPA as part of the BEE, which takes into account the individual Director's ability to exercise independent judgement at all times and to contribute to the effective functioning of the Board. Their SPA results demonstrate the NEDs' independence of judgement and clarity of thought in problem-solving.

Based on the above assessment in 2012, the Board is generally satisfied with the level of independence demonstrated by all the NEDs, and their ability to act in the best interest of the Company.

With respect to the two NEDs who are seeking re-appointment at the forthcoming 36th AGM, the NRC is satisfied that both, Tun Mohamed Dzaiddin bin Haji Abdullah and Tan Sri Datuk Dr. Abdul Samad bin Haji Alias, have satisfactorily demonstrated that they are independent of management and free from any business or other relationship which could interfere with the exercise of independent judgment, objectivity or the ability to act in the best interests of the Company. The Board, therefore, recommends and supports their proposed re-appointment.

Tenure of Independent Directors

The Board has adopted a nine-year policy for Independent NEDs, which is implemented on a gradual basis to ensure the continued effective functioning of the Board as well as to enable the progressive refreshing thereof, in line with best CG practice. Dato' Dr. Thillainathan a/l Ramasamy, Encik Cheah Tek Kuang and Encik Izham bin Yusoff are among the first batch of Independent NEDs of the demutualised Bursa Malaysia, who were appointed on 10 April 2004. They will have served nine years as Independent NEDs by 9 April 2013, and will be retiring at the 36th AGM.

Shareholders' approval for the re-appointment of Non- Executive Directors

Tun Mohamed Dzaiddin bin Haji Abdullah, 75, was appointed on 1 March 2004 as a PID and Chairman of Bursa Malaysia by the MOF in consultation with the SC pursuant to Section 10(1)(a) and (3) of the CMSA. He has offered himself for re-appointment as Director of the Company at the 36th AGM, in accordance with Section 129(6) of the CA.

The Board is satisfied with the skills, contribution and independent judgment that Tun Mohamed Dzaiddin bin Haji Abdullah brings to the Board. In view thereof, the Board recommends and supports his re-appointment as NED of the Company which is tabled for shareholders' approval at the forthcoming 36th AGM of the Company.

Shareholders' approval will not be sought to retain Tun Mohamed Dzaiddin bin Haji Abdullah as an Independent NED in accordance with Recommendation 3.3 of the Malaysian Code on CG 2012 in view of the statutory nature of his appointment as a PID and Chairman of an exchange holding company by the MOF pursuant to Section 10(1)(a) and (3) of the CMSA.

Separation of positions of the Chairman and CEO

The Chairman, who is a PID, leads the Board with a keen focus on governance and compliance. In turn, the Board monitors the functions of the Board Committees in accordance with their respective TOR to ensure its own effectiveness. The positions of Chairman and CEO are held by two different individuals. The CEO is a Non-Independent Executive Director, who manages the business and operations of the Company and implements the Board's decisions. The distinct and separate roles of the Chairman and CEO, with a clear division of responsibilities, ensure a balance of power and authority, such that no one individual has unfettered powers of decision-making.

Composition of the Board

The Board of Bursa Malaysia, chaired by a PID, comprises 12 Directors of whom four are PIDs, seven are Independent NEDs and one is an Executive Director who is also the CEO. The four PIDs, including the Chairman, are appointed by the MOF in line with requirements of the CMSA for the Company to act in the public interest, having particular regard to the need for the protection of investors in performing its duties as an exchange holding company.

The Independent NEDs account for more than 50% of the Board. The Directors play an active role in the Board's decision-making process bringing with them vast experience and knowledge as well as independence and objectivity in their views, acting in the best interest of Bursa Malaysia and at the same time safeguarding public interest.

Foster Commitment

Time commitment

The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of Bursa Malaysia. This is evidenced by the attendance record of the Directors at Board meetings, as set out in the table.

Name of Director	Attendance
Tun Mohamed Dzaiddin bin Haji Abdullah (Chairman and PID)	10/10
Datuk Dr. Md Tap bin Salleh (PID)	10/10
Datuk Dr. Syed Muhamad bin Syed Abdul Kadir (PID)	10/10
Datuk Puteh Rukiah binti Abd Majid (PID)	7/10
Dato' Dr. Thillainathan a/l Ramasamy	9/10
Izham bin Yusoff	8/10
Dato' Wong Puan Wah @ Wong Sulong	10/10
Cheah Tek Kuang	9/10
Dato' Saiful Bahri bin Zainuddin	9/10
Tan Sri Ong Leong Huat @ Wong Joo Hwa	9/10
Tan Sri Datuk Dr. Abdul Samad bin Haji Alias	10/10
Dato' Tajuddin bin Atan (CEO)	10/10
Datin Paduka Siti Sa'diah binti Sheikh Bakir10	1/2

¹⁰ Retired as Director at the 35th AGM held on 29 March 2012.

To ensure that the Directors have the time to focus and fulfil their roles and responsibilities effectively, one criterion as agreed by the Board for determining candidates for the pool of potential Directors is that they must not hold directorships at more than five PLCs and must be able to commit sufficient time to Bursa Malaysia.

The Directors are required to submit an update on their other directorships and shareholdings in Bursa Malaysia every quarter. Such information is used to monitor the number of directorships held by the Directors of Bursa Malaysia, including those on PLCs, and to notify the Companies Commission of Malaysia accordingly.

To facilitate the Directors' time planning, an annual meeting calendar is prepared and circulated to them before the beginning of every year. It provides the scheduled dates for meetings of the Board and Board Committees, the AGM, major conferences hosted by the Company, as well as the closed periods for dealings in securities by Directors based on the targeted dates of announcements of the Group's quarterly results.

Training

The Board emphasises the importance of continuing education for its Directors to ensure they are equipped with the necessary skills and knowledge to meet the challenges of the Board. A budget for Directors' continuing education is therefore provided each year by the Company. The Board also has a policy requiring each Director to attend at least three training sessions on capital market developments each year to keep abreast of industry developments and trends. In addition, each Director determines the areas of training that he or she may require for personal development as a Director or as a member of a Board Committee. The Company Secretaries arrange for the Directors' attendance at these training programmes, which are conducted either in-house or by external service providers.

The Company Secretaries also assist the NRC in arranging induction programmes for newly appointed Directors to familiarise themselves with the operations of the Group through briefings by the relevant management teams.

In 2012, all Directors of Bursa Malaysia attended at least six training programmes. At least three of the same were on capital market development. The development programmes included Corporate Governance, Risk Management and Audit, Leadership, Legal and Business Management, and Financial and Capital Markets. The Directors were also invited to attend a series of talks organised by Bursa Malaysia together with various professional associations and regulatory bodies. Several Directors attended conferences and seminars as guest speakers, panelists or moderators. The Directors further attended the two main conferences in the capital market organised by the Company, namely Invest Malaysia 2012 held on 29-30 May 2012 and the 23rd Palm & Lauric Oils Conference held on 6 March 2012. The following additional in-house development programmes were organised for the Directors in 2012:

Directors' Duties, Defences, Bursa Malaysia and Judicial Review	15 July 2012
Competition Law: How It May Impact the Way We Do Business	15 July 2012

Besides the above, the Directors attended various external programmes in 2012, which included the following:

Corporate Governance

• Malaysian Code on CG 2012, 10 & 16 May 2012 / 21 November 2012 (Attended by Tan Sri Ong Leong Huat / Dato' Wong Puan Wah @ 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 Whistleblowing, 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 Datuk Dr. 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)

An off-site development session was held on 29 September 2012 for the Market Participants Committee to update on Bursa Malaysia's supervision approach and observations, the common areas of breach, proposed enforcement actions and policies, as well as related issues and challenges. The Listing Committee, meanwhile, held an off-site development session on 31 October 2012 to deliberate on its enforcement policies, enforcement impact with regard to key breaches, as well as related issues and challenges.

Uphold integrity in financial reporting

Compliance with applicable financial reporting standards

The Board ensures that shareholders are provided with a balanced and meaningful evaluation of the Company's financial performance, its position and future prospects, through the issuance of Annual Audited Financial Statements (AAFS) and quarterly financial reports, and corporate announcements on significant developments affecting the Company in accordance with the Main LR.

The AC Chairman Tan Sri Datuk Dr. Abdul Samad bin Haji Alias¹¹, who is a member of three professional accounting organisations, together with all AC members who have vast accounting and/or financial related experience, meets on a quarterly basis, to review the integrity and reliability of the Group's financial statements in the presence of both external and internal auditors, prior to recommending them for the Board's approval and issuance to stakeholders.

As part of the governance process in reviewing the quarterly and yearly financial statements by the AC, the CFO provided assurance to the AC that adequate processes and controls are in place for an effective and efficient financial statement close process, that appropriate accounting policies had been adopted and applied consistently and that the relevant financial statements gave a true and fair view of the state of affairs of the Group in compliance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the CA.

In addition to the above, the CIA also undertook an independent assessment of the internal control system on a quarterly basis and assured the AC that no material issue or major deficiency had been detected which posed a high risk to the overall internal control under review.

¹¹ Tan Sri Datuk Dr. Abdul Samad bin Haji Alias' profile is set out in the Board of Directors' Profiles of this AnnualReport.

Assessment of suitability and independence of external auditors

The AC undertakes an annual assessment of the suitability and independence of the external auditors in accordance with the Board's Auditor Independence Policy which was adopted in 2006. Having satisfied itself with their performance and fulfilment of criteria as set out in the policy, the AC will recommend their re-appointment to the Board, upon which the shareholders' approval will be sought at the AGM.

In this regard, the AC had in February 2012, assessed the independence of Messrs Ernst & Young (EY) as external auditors of the Company as well as reviewed the level of non-audit services to be rendered by EY to the Company for FY2012. The AC was satisfied with EY's technical competency and audit independence.

Recognise and manage risks

Sound framework to manage risks

The RMC oversees the ERM framework of the Group, reviews the risk management policies formulated by Management and makes relevant recommendations to the Board for approval.

The Company continues to maintain and review its internal control procedures to ensure, as far as possible, the protection of its assets and its shareholders' investments.

Internal audit function

The Board has established an internal audit function within the Company, which is led by the CIA who reports directly to the AC.

Details of the Company's internal control system and framework are set out in the Internal Control Statement together with the Risk Management Statement and AC Report of this Annual Report respectively.

Ensure timely and high quality disclosure

Corporate Disclosure Policy

The Company has in place a Policies and Procedures for Compliance with the Listing Requirements, a document which sets the policies and standard operating procedures for employees (including the CEO) to facilitate and ensure compliance by Bursa Malaysia as a PLC. It also serves as a guide to enhance awareness among employees of corporate disclosure requirements. Clear roles and responsibilities of Directors, management and employees are provided together with levels of authority, to be accorded to 'designated person(s)'¹², spokespersons and committees in the handling and disclosure of material information. Persons responsible for preparing the disclosure will conduct due diligence and proper verification, as well as coordinate the efficient disclosure of material information to the investing public.

The Company has put in place an internal control policy on confidentiality to ensure that confidential information is handled properly by Directors, employees and relevant parties to avoid leakage and improper use of such information. The Board is mindful that information which is expected to be material must be announced immediately.

¹² The name(s) and contact information are available on Bursa Malaysia's website.

Leverage on information technology for effective dissemination of information

Bursa Malaysia's website incorporates a Corporate section which provides all relevant information on Bursa Malaysia and is accessible by the public. This Corporate section enhances the Investor Relations (IR) function by including share price information, all announcements made by Bursa Malaysia, annual reports as well as the corporate and governance structure of Bursa Malaysia. Notice of general meetings, minutes of general meetings together with slide presentations made at such meetings and webcasts are also made available on the website for the benefit of shareholders who are not able to attend meetings.

The Company has leveraged on information technology for broader and effective dissemination of information with regard to the dates scheduled to release its quarterly results. After the end of every quarter, the Company Secretary will announce these dates in advance via Bursa LINK.

The announcement of the quarterly financial results is also made via Bursa LINK immediately after the Board's approval between 12.30 p.m. and 1.30 p.m., following which a press release is issued. This is important in ensuring equal and fair access to information by the investing public.

Strengthen relationship between Company and shareholders

Encourage shareholder participation at general meetings

Bursa Malaysia dispatches its notice of AGM to shareholders at least 28 days before the AGM, well in advance of the 21- day requirement under the CA and Main LR. The additional time given to shareholders allows them to make necessary arrangements to attend and participate either in person, by corporate representative, by proxy or by attorney.

Bursa Malaysia encloses the Administrative Guide together with the notice of AGM, which provides information to the shareholders with regard to, amongst others, details of the AGM, their entitlement to attend the AGM, the right to appoint a proxy and also the qualifications of a proxy. The Company allows a member to appoint a proxy who may be a member of the Company. If the proxy is not a member of the Company, he/she need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies.

Commencing with the 35th AGM held on 29 March 2012, Bursa Malaysia removed the limit on the number of proxies to be appointed by an exempt authorised nominee with shares in the Company for multiple beneficial owners in one securities account to allow greater participation of beneficial owners of shares at general meetings of the Company. The AA of the Company further entitles a member to vote in person, by corporate representative, by proxy or by attorney. Essentially, a corporate representative, proxy or attorney is entitled to vote both on a show of hands and on a poll as if they were a member of the Company.

To further promote participation of members through proxy(ies), which is in line with the insertion of Paragraph 7.21A(2) of the Main LR, the Company will be seeking shareholders' approval to amend its AA to include explicitly the right of proxies to speak at general meetings. Shareholders' approval is being sought under Special Resolution as set out in the Notice of the 36th AGM.

The Board will consider adopting electronic voting to facilitate greater shareholder participation at general meetings, and to ensure accurate and efficient outcomes of the voting process.

Encourage poll voting

At the 35th AGM of the Company held on 29 March 2012, no substantive resolutions were put forth for shareholders' approval, other than resolutions pertaining to the adoption of AAFS for the year ended 31 December 2011, payment of final dividend, re-appointment/re-election of retiring NEDs, payment of Directors' fees and re-appointment of external auditors. As such, the resolutions put forth for shareholders' approval at the 35th AGM were voted on by a show of hands.

Effective communication and proactive engagement

At the 35th AGM, a total of 12 out of 13 Directors were present in person to engage directly with, and be accountable to the shareholders for their stewardship of the Company. The proceedings of the 35th AGM included the CEO's presentation of the Company's operating and financial performance for 2011, the presentation of the external auditors' unqualified report to the shareholders, and a Q&A session during which the Chairman invited shareholders to raise questions pertaining to the Company's accounts and other items for adoption at the meeting, before putting a resolution to vote. The Directors, CEO/Management and external auditors were in attendance to respond to the shareholders' queries. The CEO also shared with the shareholders the Company's responses to questions submitted in advance of the AGM by the Minority Shareholder Watchdog Group.

Shareholders were also invited to submit any additional questions they might have had via an enquiry box placed at the venue of the 35th AGM so that these could be responded to in writing after the meeting. Officers of the Company were present to handle other face-to-face enquiries from shareholders.