Press Statement From Singapore Exchange Regarding KLSE Statement On CLOB

The Kuala Lumpur Stock Exchange ("KLSE") issued a statement on 31 December 1999, inter alia, announcing, the extension of the authorised nominee status of The Central Depository (Pte) Ltd ("CDP") for a final period of six months to end on 30 June 2000. The KLSE statement states that "With this final extension to 30 June 2000, CDP would have been given a total of 19 months to resolve the CLOB issue." The KLSE's suggestion that CDP has been responsible for the impasse is contradicted by the facts: (1) It unaccountably omits reference to the continuing unperformed contractual obligations of the Securities Clearing Automated Network Services Sdn Bhd ("SCANS"), which is a wholly-owned subsidiary of KLSE, under the duly signed, legally binding and enforceable agreement of 18 September 1998 between CDP and SCANS (the "CDP/SCANS Agreement"); and (2) it omits references to proposals of 5 July 1999 by Singapore Exchange Securities Trading Ltd ("SGX-ST", formerly known as Stock Exchange of Singapore Ltd) to KLSE, made without prejudice to its rights under the CDP/SCANS Agreement, for a staggered release of the Clob Securities. (1) Continuing Unperformed Contractual Obligations of SCANS: The core of the CDP/SCANS Agreement is Clause 2 (a) which expressly provides: "CDP shall unconditionally and irrevocably grant SCANS the power and authority to act as follows: (i) to accept all securities to be transferred from CDP and to be deposited into a securities account to be established by SCANS on behalf of CDP; (ii) to hold the said securities in custody and thereafter transfer the securities to the respective Depositors' interim securities accounts to be established and maintained by SCANS; (iii) upon request of the Depositors through their ADAs and/or ADMs, to transfer the said securities from the respective Depositors' interim securities accounts maintained by SCANS to the respective Depositors' securities accounts established or to be established by the ADAs and/or ADMs." CDP has provided SCANS with all information required under the Agreement. On 20 October 1998, MCD informed CDP that 172,419 interim accounts had been opened in the names of the persons appearing on the list furnished by CDP. Since then, CDP has repeatedly requested SCANS to provide the interim securities account numbers, so that account holders can complete the migration process. SCANS has failed and continues not to perform its remaining contractual obligations. CDP has been advised by its lawyers, Shook Lin & Bok Singapore, Charles Flint Queens Counsel and its Malaysian lawyers that the CDP/SCANS Agreement is contractually binding and legally enforceable. CDP reserves its legal rights to enforce specific performance by SCANS of its contractual obligations under the CDP/SCANS Agreement. (2) SGX-ST's without prejudice proposals to KLSE for a staggered release of CLOB Securities: The KLSE had expressed concerns that the en-bloc transfer of the Clob securities to the securities accounts of the beneficial owners may disrupt the Malaysian market. To address KLSE's concerns, SGX-ST wrote to the KLSE on 5 July 1999 on a without prejudice basis, to propose a staggered release over 12 months. The KLSE on 15 July and 5 August 1999 requested clarification, which SGX-ST provided on 23 July and 3 September 1999 respectively. SGX-ST stated in the correspondence that the proposal was open to discussion, including the timeframe and details of the staggered release if KLSE accepted the proposal in-principle. Having received no further comments or replies from KLSE, SGX-ST wrote to KLSE on 15 November 1999 requesting an expeditious response to its proposals. SGX-ST wrote again on 7 December 1999 to ask KLSE for its response by 7 January 2000. SGX-ST has received no response to-date. The KLSE statement seeks to clarify KLSE's role with respect to private sector offers for the Clob Securities: The KLSE press statement describes the role of KLSE and its subsidiaries as being solely to "ensure that the implementation procedures for any proposals are in full compliance with their rules and regulations". However, the press statement then sets out the criteria for any proposal. It must "comply with the securities laws of Malaysia, not cause disruption to the Malaysian market and make Malaysia the premier market for the trading of Malaysian securities". CDP has stated that as bare trustee for Clob investors, it will disseminate all private sector offers it receives which are in compliance with applicable law. It is for individual Clob investors to decide whether to accept any private sector offer. They are entitled to reject the private sector offers and ask for their shares to be transferred into individual investors' securities accounts with the MCD, as provided under the CDP/SCANS Agreement. These private sector offers do not provide a comprehensive solution for all Clob investors. Nor can they supplant the CDP/SCANS Agreement and SCANS' contractually binding obligations. CDP's legal advice is that it has full legal rights with respect to the CDP/SCANS Agreement and as depositor of the Clob securities under the Securities Industry (Central Depository) Act 1991 as amended. CDP seeks no special favours or privileges for itself or for Clob investors. It only asks for what it is entitled to, under international and Malaysian law.