Warrant Exercise Period Allowed To be Extended To 10 Years

Kuala Lumpur, 30 October 1998

An amendment to Section 68(1) of the Companies Act 1965 was recently passed by Parliament to enable options to have tenures of up to 10 years (Previously, tenures were up to five years). The Securities Commission (SC) wishes to announce that, because of the proposed amendment in the law and the present economic and market circumstances, warrants which are currently listed on Kuala Lumpur Stock Exchange (KLSE) are allowed to have their exercise periods extended up to a maximum of 10 years. In the light of the current situation, such extension of warrant exercise period on a longer-term basis would benefit both the listed companies and warrantholders and is consistent with the SC's recent decision to allow the tenures of warrants to be extended as announced previously on 25 June 1998. The said amendment to the Companies Act 1965 will come into effect upon the date of notification in the Gazette.

Procedures applicable to all listed warrants
There are currently 115 warrant counters listed on KLSE. To facilitate an orderly conduct of the warrant market and to allay any uncertainties and speculation on warrant-trading activities arising from the amendment to section 68(1) of the Companies Act 1965, issuers of all the warrants currently listed on KLSE are required to announce, immediately after their Boards have taken a decision but in any event not later than one month from the date of coming into effect of the said amendment, their intention as to whether or not to extend the exercise period of their warrants.

Any listed companies which intend to extend the tenures of their warrants must announce such intention within the one-month time frame. Those which do not do so would not be allowed to extend the exercise period of their warrants. By the same token, any listed companies which do not intend to extend the exercise period of their warrants must also make known the intention within the one-month time frame.

Steps to be taken for extension
Listed companies wishing to extend the exercise period of their warrants are required to comply with the following requirements, which represent a revision to the existing requirements as announced on 25 June 1998:-

i. The application to the SC for its approval 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, the prospectus or offer document issued at the time of the warrant offering and the Deed Poll governing the warrants;

ii. 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 the listed company made the announcement of its intention to extend the exercise period of its warrants;

iii. An appropriate announcement should be made by the listed company immediately after the approval of the SC for the extension of the exercise period of the warrants, which announcement should contain a clear statement that, notwithstanding the extension, the exercise period for the warrants would not exceed 10 years as allowed for under the amended section 68(1) of the Companies Act 1965;
iv. After the approval of the SC has been obtained for the extension of the exercise period of the warrants,-

approval of KLSE should be sought for a supplementary Deed Poll to be issued to warrantholders to effect the extension;
approval from the listed company's shareholders should be sought for the extension whereby at least 75% of shareholders present at the shareholders meeting should vote in favour of the extension; and
approval from warrantholders should be sought for the extension; and

v. The directors of the listed company, any persons connected with the directors as defined under the Companies Act 1965, or any principal officers of the listed company should, in their warrant dealings, adhere strictly to the existing requirements on dealings in securities by substantial shareholders and the requirements stipulated under Chapter 5 of the SC's "Policies and Guidelines on Issue/Offer of Securities" which governs dealings in securities by directors.

Extension allowed only once unless expressly stated in Deed Poll
The SC recognises that, in normal circumstances, variations to tenures of warrants could create uncertainties. Taking extraordinary measures is, however, necessary in facing the current difficult times. Notwithstanding this, the extension of the warrant exercise period could only be allowed once unless expressly stated in the Deed Poll. Thus, listed companies are reminded to decide carefully on the duration of the extension of their warrant exercise period.

New warrants
New warrants to be issued after the coming into effect of the amendment to section 68(1) of the Companies Act 1965 are not allowed to have their exercise periods varied in midstream, again, unless expressly stated in the Deed Poll.

Given the present weak market conditions, the underlying shares of most of the warrants are being traded at well below the exercise prices of the warrants. In this respect, investors and warrantholders are advised to give careful consideration to, and understand the implications of, their decisions when deciding on whether to purchase, exercise or sell their warrants. Warrantholders would not be entitled to any recourse or compensation for decisions which they have made.

The SC also wishes to state that 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.

SECURITIES COMMISSION MALAYSIA

Issued on behalf of the Securities Commission. For assistance, please contact tel. no. 03-2597164 (Karen De Cruz) / 03-2507550 (Nafizah Omar) or fax no. 03-2536184.