Transcript Bursa Malaysia FY2011 Results Briefing

Transcription

1 BURSA MALAYSIA S FY2011 FINANCIAL RESULTS BRIEFING (Read in conjunction with PowerPoint Presentation) Exchange Square, Bukit Kewangan, Kuala Lumpur Thursday, 9 th February 2012 Dato Tajuddin Bin Atan, Chief Executive Officer Pn. Nadzirah Abd Rashid, Chief Financial Officer Dato Tajuddin: Assalamualaikum and a very good afternoon to everyone. First and foremost, I would like to welcome all our participants today including those joining by phone. The presentation slides have been ed to our analysts and fund managers and it can also be downloaded from the website. This afternoon s briefing will be divided into 4 parts. 1. I will take you through the 1st & 2nd parts which are the highlights and business review & strategy. 2. Then, my CFO, Nadzirah will go into more details on the financials. 3. The third part, I will go through our targets and prospect. 4. And lastly, I will conclude the session with Questions & Answers. At one point, I was figuring out whether I should go through every single detail since most of you have already got the result and all those things. But, based on the questions that have come out, I think it is better for me to go into the details and maybe you will be able to hear and understand what the thought and process behind it, what we have been doing over the last year to achieve what we have done. Not necessarily in the manner which we can expedite the whole process, being an exchange where there are many stakeholders involved, but what we have here is a process that takes a little bit longer time than any other normal businesses. Having said that, these are today s highlights and the agenda that we can see on the screen. First slide is on the Business Highlights, we will go through our Business Highlights for the year In the 1st half of 2011, we have seen Bursa Malaysia elevated to Advances Emerging market status from Secondary Emerging market in the FTSE Global Equity Index Series. Malaysia s market 1

2 weightage across MSCI indices increased from 2.9% to 3.2%, and also, the U.S. Commodity Futures Trading Commission has now approved US clients to buy and sell our FKLI. In the 2nd half of 2011, we promoted the Fast Track Dual-Licensing Programme, in collaboration with SC, to enhance the distribution channel and accessibility of our Derivatives offerings. This programme allows more eligible and experienced securities brokers to obtain a license to trade futures contracts. We also saw positive growth in the number of PDT s that increased from 36 to 58 in 2nd half of 2011, and this helped to enhance liquidity in our securities market. For your information, the PDT in 2011 vs 2010 is an increase of around 0.1%, which is 4.3% from 4.2%. In year 2011, Bursa Malaysia also introduced a comprehensive set of new indices and a Negotiated Large Trade Facility to the market. In the space of Regulatory improvements, 2011 included the release of a new corporate disclosure guide to increase disclosure standards amongst Malaysian PLCs, which will increase the attractiveness of Malaysian companies as investment opportunities. In addition, a new practical guide to listing was released to help more companies in their journey towards listing. This was launched by our honourable minister from Minister of International Trade and Industry (MITI). These are some of the positive enhancements that have taken place and part of our efforts to increase the country profile further and to make our market more competitive & vibrant, hence these are some of the spaces and areas that we want to work on. Looking at the financial numbers on slide 5, being analysts, you might have received these figures quite early, and I think my CFO has done quite a good job in showing arrows indicated some good numbers that have come out on this slide. Basically, our operating revenue has increased by 15% to RM381 million, PATAMI up 29% to RM146 million, EPS up 29% to 28 sen. Cost to income ratio was something that we have worked on quite extensively last year to see a drop from 55% (2010) to 51% in This was an improvement of 7%. To analyse further, I would like to highlight that, excluding Globex fees, operating costs increased by only 4% in ROE stood at 17% in 2011, which was an increase of 28% from last year. For dividend per share, the BOD has also declared a final dividend of 13 sen, hence the dividend payment of 26 sen per share, an increase of 30%. On the space of dividend, in total, we will pay out 95% of our profit in 2011, enabling us to maintain our dividend payout policy of 75%. From this slide, we can see the trend of our yearly ROE 3 years moving CAGR for PATAMI, Total Operating Revenue, and PATAMI since the year The depiction that we are trying to project going forward is that, growth needs to be sustained, and how are we going to achieve this? So we charted figures and we asked ourselves how we are going to plot profit and ROE for easy understanding to show that our business strategy has been translated and implemented. Of course, I am saying this with caution especially during this time and space as there are many factors that will influence these figures, from external factors, onshore factors, to the internal organisational factors. Moving on to the review of our securities market, on 8th July 2011, our FBMKLCI Index hit its all time high at 1,594.74, also, the high volume that took place yesterday gave us more positive encouragement to present to you today. Back to the slide, the first chart shows ADV increased from RM 1.6 billion to RM1.8 billion in the year This was a result of greater participation from both foreign 2

3 and domestic, as well as institutional and retail funds in our market. Velocity remained unchanged at 33%, as growth in ADV was matched by growth in market cap. Our FBMKLCI Index performed relatively well in comparison to other regional indices, and hit its all time high as mentioned earlier, on 8 th July. For IPO activity, it has been reported that last year, we managed to attract 28 IPOs compared to the 29 in the precedent year. While the numbers are close, in terms of the total fund raised, the numbers between year 2011 and the precedent year are quite far. Total funds raised through IPOs & Secondary Market offerings in 2011 amounted to RM15 billion, which was less favourable compared to RM33 billion raised in This reduction is due to the large RM12.8 billion listing of Petronas Chemicals which took place in the previous year. On the Derivatives front, 2011 was a remarkable year of milestones achieved. I have to credit my Derivatives team that is headed by my CEO of Derivatives, Mr. Chong Kim Seng. I think his team has performed very well over the year as we broke many records in terms of contracts traded for both FCPO and the whole market. The key point here is the migration of our products to the CME Globex electronic trading platform in 2009 resulted in more global visibility for Bursa Malaysia Derivatives. An Increase in trade volumes was achieved from higher participation of foreign and domestic interest. Foreign and domestic trades grew by 59% and 31% respectively in 2011, with retail and institutional DAC growing by 34% and 47% respectively. We attracted new participation from High Frequency Traders (HFTs), providing clear validation for the path of globalisation that we have chosen. As a result, records were broken in Open Interest, FCPO and Exchange trading volumes in Turning to our Islamic business, it has mainly revolved around BSAS (Bursa Suq As- Sila ) gaining momentum. But before that, Bursa Malaysia has retained its position as the Top Sukuk Listing Destination, for the third consecutive year in 2011, with USD29 bil worth of sukuk listed. Global demand for sukuk has remained high and in Malaysia, we continue to be encouraged by the positive outlook for sukuk issuance in Bursa Suq Al-Sila' has progressed quite aggressively with an ADV of RM1.2 billion daily. Some 90 % of domestic banks today are trading on the world's first end-to-end Shari'ah-compliant electronic commodity trading platform. We have also secured memberships from a number of international organizations, especially from the GCC this year, with 22 new members in 2011 (15 local and 7 foreign participants). Some of the new members like Saudi Hollandi Bank, The Islamic Bank of Asia Limited, Alinma Bank, Jordan Dubai Islamic Bank, Al Rajhi Investment Banking Corporation, and Nafaes International Group General Trading and Contracting Company. Now on to the 2 nd part of the presentation. I think I will spend a little more time to speak about our strategic direction set in We have gone through one year and implemented some things, and seen some of the results. Some due to our efforts, and some due to the cost of the market participation. We cannot to claim all the credit, but we are encouraged to say that we are able to facilitate these activities. Back to the slide, this is the house that we want to build and we are trying to enhance some of the key areas. Our mid-term target (2013) is to build a competitive and a vibrant market. To drive this, we will be guided by 5 strategic thrusts to grow the 3 core markets; basically the Securities Market, Derivatives Market (which includes the futures and commodity), and of course, the Islamic Market. 3

4 Speaking of which, Thrust 1, to revitalise the market means, as a commercial entity ourselves, we are taking steps to revitalise our core business segments with a greater focus on liquidity and market vibrancy, while we continue to embrace our internal transformation strategy to re-align our vision and focus. Thrust 2 is regarding the improvement of the ecosystems. What we mean here is to continue to invest in our ecosystems to reach our objective of having a framework by giving issuers, investors and intermediaries simple and full access to market. We are also aiming to minimise frictional costs in order to improve market competitiveness. Thrust 3 is regarding the improvement of efficiency & productivity. Given the highly-competitive global operating environment, Bursa Malaysia recognises the demands on it to increase operational efficiency and productivity, to that extent, we need to preserve our margins and market share, and to enhance our attractiveness as a stock exchange. All efforts are being made to work on every single detail in this space. The results might not be seen in a short period of time, but giving some time and space, you will be hearing a lot of announcements and initiative of programmes out of this. Thrust 4 is to internationalise the Market. A key goal for Bursa Malaysia is to continue the internationalisation of its operations. Towards this end, we have built successful global partnerships and strategic alliances, and we will continue to collaborate on a variety of fronts to raise our international profile. Thrust 5 is the development of world class workforce. I keep saying this again and again, these are the programmes that we have been working on internally. We are going to launch our Transformation Programme very soon to achieve culture transformation among Bursa staff, to move towards a result-driven mindset. This transformation progress also includes business initiatives to revitalise market and ecosystem. In order to achieve these objectives, we are relying on our 3 foundational enablers; first, is having the right people by developing and retaining world class talent through internal promotion and hiring external talent to fill the gap. I strongly believe that in the case of Bursa, it is a very unique organisation unlike any other organisation that I have been before, where there are talents within, and that is one of the key reasons why I strongly believe that internal promotion should be given and encouraged. However, if there is a gap of talent in order to enhance what we need to be achieved, we will also look into it. The balance between these is something that we need to do. But we also need to be very strategic in coming out with the strategy of developing world class talent by having the right people, training the right people, and giving the right opportunity. Second, is having a sound regulatory framework by improving regulatory approaches and standards. I think we will be able to see a lot of recognitions being achieved in the coming slide and my CRO, Ms. Selvarany has done a good job, and we will continue to build from here onwards. We are also adopting appropriate technologies. In view of globalisation and market liberalisation, we are faced with increased competition for speed, flexibility and efficiency. Hence, we expect to introduce new trading features which will create a vibrant and efficient trading environment to become a more competitive marketplace. The new trading features would enable traders and investors to execute various trading strategies more efficiently. We have been working on a new derivatives clearing system, and we will introduce it by 1H this year. Having said this, there are 2 things that we are looking at, the 1 st is on the introduction of more features on the Bursa Trade System that we currently have, and the 2 nd is on the Derivatives side regarding the Derivatives Clearing System. Once the Derivatives Clearing System has come into place, we can expect more functionalities and features from the Derivatives side 4

5 Slide 12 on the Business Progress in 2011, we have seen positive improvement in our Securities and Derivatives markets throughout the year. For the Securities Market, we spoke about the increase of the number of PTDs to 58 from 36, which has aided in boosting liquidity in our market. We will continue to grow, as we know for a fact that we have been given a target of 100 and I think this is something that we are able to promote. We also continued profiling Bursa to new foreign institutional markets such as Shanghai. We did a road show in Shanghai last year where and had a positive response and result from it, and it will continue to improve in time and space. The Exchange has also assisted in building supply through incentives on ETF seed funding (Valuecap allocates RM200 million cash funding) and extension of tax benefit for REITS (for 5 years starting 2012). We have also been reengaging Singapore retail investors who are very much interested to trade in our stocks. For a fact, a lot of trading has been done by our neighbouring countries in our exchange. Structured warrants have also increased from 204 in 2010 to 363 in This is very encouraging, as it is not about trading the warrant itself, it is about trading the warrants and its underlying that will allow the market to be more vibrant, and more trading as a consequence on the cash market. As stated earlier, arising from our continuous engagement with the index providers, we have sorted out some perception issues and seen Malaysia s weightage increased from 2.9% to 3.2% in the MSCI Emerging Market and we have been elevated to Advanced Emerging market status in FTSE s Index. Both of these developments will help to increase the visibility of the Malaysian market amongst foreign investment funds. You will notice me repeating on the area of visibility of the Malaysian market, not only the cash market, but also Derivatives and Islamic Market, hence the reason why a lot of activities could be seen in this particular space. On the other areas, Bursa Malaysia has also collaborated to form ASEAN Exchanges, with a mission to establish an interlinked ASEAN capital market via greater cross-border investments, mobilisation of intra-asean funds and trading of equity markets. The alliance saw the launch of ASEAN Brand Identity, ASEAN Exchanges website and ASEAN Stars, with the intent to promote the growth of the ASEAN capital market and spur higher liquidity in the region. The target launch of trading link will be roughly in June If I may speak a little bit more on the Derivatives Market, last year, we saw an increase in foreign ADC by 59% in 2011 which was driven by greater visibility amongst foreign traders from Bursa Malaysia s move to the Globex platform. Local ADC also increased by 31% in 2011 from We also continue to ease the entry requirements for local participants as well as promoting the Fast Track Programme for dual licensing. On the international front, the CFTC has approved US clients to buy or sell FKLI contracts. Finally, we have attracted high frequency traders into our market, which has helped to improve volume and trading activity. Essentially, what Bursa has done in 2011 was to come up with clear direction and strategy for the team to execute. We also build and align the team s inspiration to achieve the goals that we have set internally. Hence, the reason why we were excited to see all the arrows that were presented and thoroughly crafted by my CFO, Nadzirah. I believe that we have laid out a strong foundation for Bursa to move forward to achieve its aspiration of becoming a dominant and competitive exchange in the region. 5

6 If I may speak a little bit on our Regulatory Progress, from a distance, it may look a bit cluttered, hence I am going through slide by slide to give you a complete picture, but I am sure that most of you have received these slides earlier. What I want to say about our regulatory outcome is that, it has been driven and guided by our regulatory objectives of safeguarding the interest of investors and maintaining market integrity, whilst being facilitative of business and market development as well as by our philosophy of being balanced and outcome based. We believe we have the right regulatory balance through the approaches that we take in regulating the market. Our key focus areas in the space of market regulation are; enhancing market quality; increasing the standard of conduct of intermediaries and listed issuers, whereby we have escorted well in this area; improving regulatory standards and approaches; and last but not least; enhancing efficiency of regulatory services. In the space of the outcome on the efficient capital raisings, our time to market for approvals of listings is comparable to markets like Singapore and Hong Kong, which is between 1-13 days. We have an internal KPI for that, depending on the type of application which we believe is quite credible. Internally, we are trying to improve this further by engaging with intermediaries and investment bankers to help us to deliver a better job in this area. The quality of submissions will allow us to create time to market. In 2011 alone, we have processed about 618 applications from PLCs involving everything from IPOs, warrants, and the secondary fund raising areas. On the space of Orderly Market, we undertake surveillance of trading activities on our market and use various techniques and approaches to detect activities that could undermine the operation of an orderly and fair market, such as real-time alerts from our surveillance system analysis of orders and trades based on certain criteria, information from market intelligence, and various other analytical tools. The third area of improvement is the improved standard of governance of PLCs. The framework to monitor the financial condition and level of operation of PLCs is also in place, whereby we engaged the PLCs and requested them to take appropriate steps to address their financial condition and to ensure sustainable business practices. The key words that always keep bouncing and coming back is about sustainability of a good business practice. For your information, in 2011, 6 new companies were classified as PN17/GN3 in 2011, compared to 32 companies in 2010, bringing the total of PN17/GN companies to 25 PN17/GN3. We need to be clear that the decrease in number is largely due to the tapering off of the effects from the global economic crisis in 2008 as well as the engagements with the Watchlist companies. Last year, we also saw 7 PN17/GN companies regularised. There was a slight increase in the delisting of PN17/GN3 from 16 companies in 2010 to 21 companies last year. In September 2011, we issued a Corporate Disclosure Guide (CDG) explaining disclosure obligations in the Listing Requirements to assist PLCs in discharging their obligation to disclose material information to investors to enable them to make informed investment decisions. I, for once, sometime help to distribute this idea. Not to say that our PLCs do not understand this, but we are trying to raise the bar in this space. I think this Corporate Disclosure Guide helps us to understand and find us a better way to organise ourselves. The fourth is to improve the standard of conduct of intermediaries. In 2011, our Brokers financial positions are healthy and well above the threshold required under the rules. There were no industry wide breaches or systemic risk issues detected during our audits of the Brokers. 6

7 We also conducted supervisory activities using a risk-based approach, where focus was on areas and brokers that are of significant risk. Notwithstanding of what has been spoken earlier, we carry out enforcement proceedings and actions for material breaches of our rules, which impact market integrity or investors. For less serious breaches, we issue a warning or caution. In addition to imposition of penalties, we also provide an avenue for remedial or corrective actions (where possible) to be undertaken by the errant parties. Through these enforcement actions, we aim to deter future breaches, educate market participants and promote a better culture of compliance. On the next slide 14, this is regarding our priorities for It depicts holistic improvement towards vibrant markets. On the Securities Market, as I said earlier, the foundation has been laid out in 2011, we are looking forward to delivering more going forward in the medium term, our priorities are focused on holistic improvements building on 2011 s efforts and achievements. In formulating our three-year Business Plan for , we were aware of the national economic and policy agendas, particularly the New Economic Model (NEM) and the ETP. We were guided by our role in supporting national growth needs and aspirations, while meeting the challenges of regional competition and globalisation. The focus area in the Securities Market is that we strive to increase overall visibility of the market and enhance velocity. In order to achieve this, we will focus on; building an informed retail investor base and promoting greater retail market participation; facilitating and promoting a wider range of products across institutional and retail segments. i.e. Retail Bonds and allowing business trusts to be listed on our main market; enhancing trading system infrastructure and features whilst streamlining access to the market, and exploring business collaboration via an International Board. For the Derivatives front, we aim to further liberalise access to our market and launch attractive new products for investors. We plan to revamp our participant s structure, bringing in new market entrants. We are looking for opportunities to enable Direct Market Access, enabling US clients to trade directly through GLOBEX. We plan to expand our distribution channel by improving internet penetration, increasing the number of dual licensees and local participants. For this, we are encouraging the setting up of more branches and trading kiosks. This is an interesting space where it requires a lot of effort and manpower to the extent that my senior officers would be travelling all over the country to start engaging with people from different backgrounds. We also plan to introduce new Derivatives products in this space. For Islamic markets, as part of our objective to be the centre for Islamic Equities, we want to expand our current client base, with particular focus on foreign clients and we are also looking at ways to enhance our shari ah compliant offerings. The other 3 aspects to be elaborated are regarding IT; as the exchange landscape grows more competitive and presents greater challenges, innovative infrastructural enhancements in respect of trading, clearing and settlement systems will sustain our continuing relevance and provide further assurance of our value within the global operating environment. For our BTS system, we will continue to leverage on the strength of the current trading system until the end of its shelf life in 2013 because of its stability and reliability. The current system is more than adequate and sufficient to cater to our current business needs. Last year has shown a good sustainability result on that. Touchwood, we believe that 7

8 our current system maintains as a stable and reliable system and the continuation on that will continue to benefit us as it is adequate enough cater to the current market and we should be able to hang on to the current BTS system at least until year In the meantime, we will introduce new features to facilitate greater flexibility and increase operational efficiency when placing orders.the new features which will be enabled in the BTS in the near future are diverse order types and validity of orders. For Derivatives, we will introduce a new Derivatives clearing system, with multi asset class, time-zone and currency capabilities. I spoke of manpower earlier and it is translated in our priority for On the Regulatory front, I have spoken in length and what is important is that you will see in 2012, the introduction of the new surveillance system. We will also review our listing requirements and further enhance the standards of closure and corporate governance for PLCs. We will also strengthen the level of selfregulation of intermediaries. This is where I have spoken of raising the bar in this particular area. We will review and strengthen our regulatory approaches and enhancing regulatory efficiency through automation of key process. Slide 16 is quite self-explanatory where the Exchange has been trying hard to achieve and as a result, being recognised as an exchange worthy of such accolades. Pn. Nadzirah: I will now pass the presentation to my CFO for the slides on Financial Review. Thank you Datuk, I will now take you through the brief overview of the numbers. I will try to make it fast because this is the time where everybody will be yawning. Quarterly snapshot, we saw RM31m profit in the 4 th quarter of Comparing this against the 4 th quarter of 2010 (light blue bar), we see an increase of 10% from RM94m in 2010, while our cost to income ratio remained stable at 54%. The improvement in our results despite a drop in revenue was due to a more conscientious spending and tax savings from the surrender of business losses from certain subsidiaries. The drop in revenue of 10% from the 4 th quarter of 2010 was due to the overall cautious sentiment at the end of 2011 compared to the more upbeat sentiment at the end of If we now compare the grey bars and the dark blue bars, we see that the results in the 4 th quarter were not as good as the 3 rd. Profit dropped from RM39m in the 3 rd quarter to RM31m in the 4 th quarter, and cost to income went up from 49% to 54%. The higher profits in the 3 rd quarter were on a back of higher trading on the securities market as institutional investors reacted to S&P s downgrading of the US. Moving on now to the full year results, our profits saw a healthy growth of nearly 30% despite a challenging year fraught with uncertainties. PATAMI grew from RM113m to RM146m, ROE improved from 13% to 17%, and cost to income ratio was lowered to 51% from 55% in As Dato mentioned earlier, our year on year results is due to the higher foreign and domestic participation in both securities and derivatives markets, and a better management of costs in

9 Looking at operating revenue in more detail, we see that the largest contribution to the 15% growth in operating revenue came from trading revenue. Securities trading revenue grew by 15%, from RM168m in 2010 to RM193m in Derivatives trading revenue grew by 36%, from RM38m in 2010 to RM51m in Stable and other operating revenue grew by RM5m and RM6m respectively. The growth in securities and derivatives trading are a result of increased participation as mentioned by Dato earlier. The ADV on the securities market improved from RM1.6b in 2010 to RM1.8b in 2011, while the ADC on the derivatives market improved by nearly 40% from 24,800 contracts in 2010 to 34,500 contracts in The growth in other operating revenue came mainly from income streams from the derivatives business, where we saw growth in interest from managing collaterals and growth in conference fees. The growth of 5% in stable revenue from RM108m in 2010 to RM113m in 2011 was made up of different components. Key growth areas were listing fees, information sales and access fees. Listing fees were higher at RM38m due to a higher market cap of our PLCs and an increase in structured warrant issues in Market cap at the start of 2010 and 2011 grew from RM1b to RM1.3b, while the number of structured warrants issued increased from 204 in 2010 to 363 in The demand for information grew in line with the heighted trading activity on the securities and derivatives markets in 2011, increasing the subscriptions and hence revenue generated from the sale of information from RM17m in 2010 to RM19m in Access fees increased by RM1.4m as a result of higher number of direct market access in Depository services saw a drop of RM2.2m due to smaller IPOs in Moving on to expenses, we see that the growth of 8% comes mainly from staff costs and Globex service fees. Our Globex fees are a variable expense, which moves in line with the trade volume on the derivatives market. As mentioned by Dato, removing this, the increase in our cost is merely 4%. The 4% increase is mainly due to year on year increments and higher performance rewards for our staff. Our other expenses, especially the day to day expenses, have been very controlled. Depreciation decreased by 11% as a result of the cessation of Bursa Trade Derivatives in Marketing and business development expenses were lower due to a review of travel effectiveness and route efficiency. As announced by our CEO earlier, our final dividend for the year is a 13 sen single tier dividend. Our directors have agreed to maintain the trend of returning to our shareholders more than 90% of our current year profits. If the 13 sen final dividend is approved by shareholders at our 29 March AGM, our total dividends for 2011 will be 26 sen at a payout of 95%. With this I hand back the session to our CEO. Dato Tajuddin: I hope you can bear with 3 more slides to go. On the midterm KPIs that we spoke of last year, it is guided by two key areas of performance: profitability and liquidity. On profitability, to ensure our shareholders value grows, we aim to maintain our PAT growth rate of at least 20% per annum over the next 3 years. In 2011, Bursa, with help from the market and all the improvements that have been achieved, has recorded 31% growth in PAT compared to the corresponding period last year. Looking at PATAMI, it has increased 29% compared to the precedent year. On the Securities side, looking at the growth of ADV, for 2011, Bursa has lead and outperformed other regional listed exchanges in terms of 9

10 Growth in DATV by 14%. Last but not least, for Derivatives, we are targeting to achieve DAC (daily average contracts) of 50,000 by Initially, when we put out this, we thought that we are trying to outdo ourselves so much. From a strategic perspective, we believe, if we do fall short, we fall short in a more positive tone. Having done that, as said earlier, I think the team has done well and Bursa has achieved 39% growth in 2011 DAC with the average 34,474 contracts per day. The next slide is the concluding slide, where we know, despite the debt crises in the U.S. and Europe and its impact on markets across the globe, Bursa Malaysia demonstrated its resilience and tenacity through increased participation by both foreign and local investors. Year 2011 saw improvements in both trading volume and value, with the FBMKLCI outperforming most regional markets. What are the Prospects of year 2012? I think it is not an easy task to answer this question and different people may have different views. But, the fact of the matter is that we know that there will still be uncertainty in the global market conditions. We expect our 2012 financial performance to at least mirror that of, if not better than, If we can achieve that, I think it will be a credible achievement already. Notwithstanding that, our internal target is still to achieve our 3 year plan. In 2012, for the Securities market, we strongly believe Malaysia s resilient economic fundamentals, ongoing economic reforms and the divestment of assets by GLC s will further contribute to the liquidity & vibrancy of the market. With regards to IPOs, the pipeline continues to be strong and there are a few big IPOs taking place this year all subject to approval and process. They are Felda Global Ventures, Khazanah Nasional Bhd's healthcare unit - Integrated Healthcare Holdings, and Gas Malaysia. For capital raising in the secondary market, we approved more applications in 2011 compared to 2010, and we hope to see this trend continue. Going forward, we will continue to invest in hard and soft infrastructure, facilitate new product development & improve the market eco-system. As for Derivatives Market, I remain hopeful and Bursa will continue to benefit from the highly volatile cash market due to the increasing need for risk management & hedging. We expect an exciting & promising year for 2012 as Bursa pulls in global interest to trade in our derivatives market. We will continue to leverage business growth through strategic partner, CME. To the end, I would like to say that we are, in Bursa Malaysia, committed to achieve our 3 year plan of and we are glad and fortunate to have under our belt a credible year of Building from that base, it makes our job a little bit easier, a little bit more confident, but again, you know, I know, that 2012 is a challenge to at least mirror the achievement in Question: Mr. Seet Eng Seang, Macquarie Securities. Do you see further room for cost rationalising on order to sustain your margins in the event volumes continue to deteriorate? Answer: 10

11 1st question is about cost rationalisation and sustainability of margins in the event of volume deterioration. First and foremost, we need to understand the cost structure of the Exchange. What we wanted to do is find the optimum cost in any organisation. The process is on-going and we managed to see the cost optimisation. I don t believe in cost reduction to the certain extent. Cost optimisation is important to see how we actually measure all the initiatives, revenue and margin against the cost of doing business. In that respect, you see, relatively, the percentage of the cost income ratio dropped from 55% to 51%. We also need to understand that to grow the business, we need to continue to invest, hence the reason why we spoke about IT. In this aspect of cost optimisation, we need to be mindful of the business cases that we look at. Exchanges around the world continue to expand by introducing products and services, but we must be quick enough to understand that if it is not returning well to the ROE, we have to actually ask ourselves, do we need to continue or we need to cut out. In that aspect, we will continue, and I think there is still room for cost optimisation on a relative basis on cost to income. We will not able to see the nominal area as many areas need to be asked from the cost structure. Regarding margin, the first aspect that I was looking at is the size of the pie itself, that is the revenue side. Having given all those aspect that we do to promote the revenue side, we think the margin in those aspects will continue as long as the trading environment in the market continues. As an exchange, we have positioned ourselves as the listing, capital raising and also trading venue saw a lot of trading activities hence the reason why that particular revenue is coming in. If you are looking at that aspect, the margin continues to grow where some of the cost is already a fixed cost. It is however, a self-explanatory statement when you said the volume continues to deteriorate. That statement by itself is a challenge. Question: Can you elaborate a bit more on your strategy to achieve your targeted 50,000 ADV for Derivatives by And would the growth largely be driven by FKLI and FCPO? Answer: From strategic perspective, this is our focus, to achieve 50,000 ADV. If you can refer to slide 12, the reason why we put 50,000 ADV earlier is because it is a 3 years plan, and for 2011, the based has increased. However for 2012, the based is higher. The plan here is about increasing further foreign and local participation, easing entry requirements for local participants, and Fast Track Programme on Dual Licensing. Slide 14 shows all the revamps that we want to promote, where the number 1 itself is a challenge. Most important area is trying to bring in new market entrants. More places indicate more values, on top of varied strategies, and you see more activities towards that. We also can see the leveraging on Globex. The third point will cover the retail space where it involves the expansion of distribution channel. I am encouraged to see this as Bursa and SC have been working very hard to grow Derivatives Market. Based on the areas that have been approved by SC, we can see that they are very supportive in order to develop the Derivatives Market. 11

12 Question: What will be your targeted business mix between Securities and Derivatives? Answer: For the third question, my CFO has actually calculated the numbers. On the revenue perspective, 78% is from Securities and 18% is from Derivatives. In term of the profit, 82% comes from Securities and 14 % from Derivatives side. To a certain extent, the growth percentage will remain in this space given the fact that Securities Market contribution is huge. What comes out from Derivatives Market is a new income stream that will contribute to the bottomline. But if we separate the whole process and focus on Derivatives itself in terms of progress, I think it is a very credible job by my Derivatives team. To that question, roughly, it should carry around 82% from Securities Market, 14% from Derivatives, and the rest comes from Islamic Market and some other income from our investment side. Queastion: Ms. Farhana, PNB. CFTC has allowed US clients to buy and sell FKLI. What proportion of year 2011 has it been contributing as the number of FKLI for year 2011 was not that exciting? Is it only for 1 quarter? Answer: The number is quite minimal at this point of time. However, what we are excited about is the opportunity that is presented. We believe that our team will explore the opportunity. Currently, it is more on the familiarisation of the platform and the training on the trading of FKLI itself. What the foreign traders are looking at is the platform itself which is of high integrity and they are comfortable to trade in it. This is the branch that we want to promote in our Regulatory front. The reason why the CFTC has approved US clients to trade FFKLI is because they have confidence and comfort to trade in that area. I think our job now is to market our Derivatives and I hope the number will show in