Kuala Lumpur, 7 October 2010
SC cautions Mudajaya

The Securities Commission Malaysia (“SC”) has reviewed the transactions relating to Mudajaya Group Berhad’s (“MGB”) investment in the Independent Power Plant (“IPP”) Project in India, in particular the transfer of funds between related entities. The SC had also on 12 August 2010 sought a S320 report under the Capital Markets & Services Act 2007 from the auditors of MGB, Ernst & Young (“EY”), whose report was dated 9 September 2010.

Arising from the review, the SC had concluded that MGB had failed to make adequate disclosures on pertinent matters relating to its investment in the IPP project, and had therefore, as an immediate action, required Bursa Malaysia (“Bursa”) to issue a directive to MGB for additional disclosures to ensure that sufficient information was available for the market to make informed decisions. These necessary disclosures were subsequently made by MGB on 30 August 2010.

The SC views seriously the failure to make adequate disclosures by MGB prior to 30 August 2010, and had on 6 October 2010 issued a caution and reminder to MGB and its Board of Directors to strictly observe its disclosure obligations.

EY’s S320 report had also revealed movement of funds between MGB and related entities pursuant to the IPP Project that is characteristic of the practice known as ’round-tripping’.

The practice of round tripping has been raised as a concern in several jurisdictions.  In this regard, the SC will conduct a separate exercise to review the use and disclosures associated with the ’round-tripping’ practice.

The SC reminds all Boards of Directors and senior management of public listed companies to observe high standards of corporate governance in discharging their duties and responsibilities.