Parliamentary Question: Update on Clob
Issues Raised in Parliament
ANSWER TO PARLIAMENTARY QUESTION ON:
Update on Clob
For Parliament Sitting on 03 Aug 1999
To ask the Deputy Prime Minister if he will give an update on the status of the Clob issue, and what are the possible solutions being considered to resolve the matter.
1. I last updated Parliament on the Clob issue in May. Since then, Mr Akbar Khan's cash offer has closed with 359 investors out of more than 172,000 accepting. Three more private sector offers have been announced, but none have obtained regulatory approvals and been formally made. Akbar Khan's Straits Fund Sdn Bhd is offering units in a closed-end investment fund in exchange for Clob investors' securities. It is not yet known at what price the Clob securities will be valued or how Clob investors are to trade these units. Tungku Abdullah's Bintang Melewar Sdn Bhd is offering Clob investors 3 options, including units in a closed-end investment fund, fund management services for larger investors, and custodial services for non-accepting investors. The third private sector offer is for Clob investors to swap their securities for an equal proportion of shares in Telekom Malaysia and United Engineers of Malaysia (or "UEM"). The two companies have said that they will purchase the Clob securities at a discount to market prices, and sell shares in Telekom Malaysia and UEM at a premium to market prices.
2. Any offeror intending to offer Clob investors shares or units in investment funds for their Clob Malaysian securities will need to issue a full prospectus in Singapore. This prospectus must be approved and registered with the Registry of Companies and Businesses ("RCB"). RCB verifies that the prospectuses comply with the disclosure requirements set out in Singapore's Companies Act, and will register the documents if it is in the public interest to do so. In evaluating the public interest, the Registrar will take into account all relevant factors and considerations. The Securities Investors' Association of Singapore ("SIAS") has urged the Registrar not to register prospectuses of offers until a comprehensive solution is in place for all Clob investors. The Registrar has stated that it will take into account the views of the SIAS, which is the only body representing investors, together with other information and views that it may receive regarding the offers.
3. The SES has stated that it will not stand in the way of private sector offers. However, there should be clear and reasonable arrangements for non-accepting investors to trade their shares on the KLSE. When the offers are formally made, investors should study the terms of each offer carefully before making a decision. The agreement between CDP and SCANS contains arrangements for Clob investors to transfer their securities to individual account with the Malaysian Central Depository, and thereafter trade these securities on the KLSE. SCANS continues to be in breach of this agreement, but investors should not feel pressured into accepting any offers if they are not satisfied with the offerors' terms.
4. The SES is continuing to explore all means of resolving the problem. It has been taking advice from lawyers on the legal position. The SIAS has also announced that it too is consulting lawyers, as the legal position of the Clob investors is different from that of the SES.
5. Meanwhile the SES has submitted a proposal of its own to the KLSE, suggesting a staggered release of the Clob securities over 12 months, without prejudice to its rights under the CDP-SCANS Agreement. The proposed mechanism will result in a daily release of Clob securities with the value of a mere 0.015% of KLSE's total market capitalisation. This effect on KLSE stock prices should be negligible. This is a fair solution which directly addresses Malaysian concerns that any solution to the Clob issue must not disrupt the KL market, and enables Clob investors to exercise their rights under Malaysian law to trade their securities. The two exchanges are currently in communication on the proposal. The SES will inform Clob investors as and when progress is made.