Extension Of Exercise Period Of Warrants Not Automatic

Kuala Lumpur, 25 June 1998

The extension of the exercise period for warrants is not automatic and requires the approval of the Securities Commission (SC). Although this is known to public listed companies and their investment advisers, the SC wishes to inform the investing public of the policy so that warrantholders may make informed investment decisions.

Policy to extend exercise period of warrants
Under Section 68 of the Companies Act 1965, the exercise period for warrants cannot exceed five years. Warrants with a life span of more than four and a half years will not be eligible for extension.

The warrants, at the time of the application to the SC, should be "out-of-the-money", and there is a good possibility of the warrants being exercised after the extension.

The Deed Poll governing the warrants, and the prospectus or offer issued at the time of the warrants offering, should contain provisions allowing for extension of time to be made.

Any application for an extension to the SC should be supported by justification for the request for extension and legal opinion from a law firm stating that the extension of the exercise period for the warrants would not contravene any subsisting laws and the Deed Poll governing the warrants.

After SC has given its approval, the listed company should seek approval from Kuala Lumpur Stock Exchange (KLSE) for a supplementary Deed Poll to be issued to warrantholders to effect the extension.

The current policy on warrants does not allow for adjustments to the exercise price of warrants except when the adjustments are undertaken in the event of rights, bonus or other capitalisation issues, consolidation of shares or capital reduction. This is in line with market practices in several other jurisdictions. The SC has, in fact, initiated discussions on this policy with the Association of Merchant Banks in Malaysia (AMBM) and invited the association to come forward with a discussion paper for the SC to consider. To date the SC has not received any such submission.

Responsibilities of Public Listed Companies, Directors and Advisers
A public listed company should make an announcement of its intention to extend the exercise period for its warrants immediately after its Board has taken a decision on the extension. The announcement should contain a clear statement that applications to the relevant authorities would be made for approval.

The application to the SC for its approval should be made as soon as possible but in any event not later than two weeks from the date of the announcement.

The listed company has to make an immediate announcement after the approval by the SC for the extension of the exercise period for the warrants, which should include a clear statement that the revised exercise period does not exceed the five years allowed under Section 68 of the Companies Act 1965.

After the SC has given its approval for the extension, the listed company should seek approval from shareholders and warrantholders of the listed company.

Status of applications
To date, the SC has received and approved one application (Apex Equity Holdings Berhad) for extending the exercise period of warrants which complied with all the above requirements. The SC has not received any applications from other public listed companies.

The investing public should be aware that a listed company is allowed to apply to extend the exercise period of its warrants before its original expiry date if it complies with all the regulatory requirements. However, listed companies and their advisers have the responsibility to ensure that the interests of investors are taken into consideration when deciding whether or not they wish to apply for an extension of the warrant exercise period. In this respect, the SC advises that all public listed companies wishing to extend the warrant exercise period should apply well before the expiry date.

Warrantholders are advised to give careful consideration and understand the implications of their decisions when deciding on whether to exercise or sell their warrants. Warrantholders would not be entitled to any recourse or compensation for decisions which they have made.

Directors of a listed company, any persons connected with the directors as defined under the Companies Act 1965, or any principal officers of the listed company are reminded that they should, in their warrant dealings, adhere strictly to the requirements stipulated in the SC's "Policies and Guidelines on Issue/Offer of Securities" which govern dealings in securities by directors.

There have been numerous queries on matters pertaining to the policy on the extension of the exercise period of warrants. The SC hopes this announcement will address the issues raised. Given the present weak market conditions, the underlying shares of most of the warrants are trading at well below the exercise prices of the warrants. A warrant is an instrument which gives the holder an option to buy the underlying shares at a fixed exercise price.


Issued by the Securities Commission. For more information, please contact the Corporate Affairs Department at tel: (03) 250 7513 (Ann Teoh) or (03) 259 7184 (Sarina Ariffin).
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