On 1 December 1999, the Minister for Finance by notification in the Gazette determined, in accordance with the Exchanges (Demutualisation and Merger) Act 1999 (Act No. 27 of 1999) (the "Act"), that the value of each Member Share is $5,000. Member Shares were issued to persons who, as at 1 December 1999, were SES shareholders, SIMEX shareholders, and registered owners of SIMEX seats. Pursuant to the Act, the number of Member Shares allotted to each such person on 1 December 1999 was calculated as follows:-
(i) SES shareholders received, in respect of each SES share held as at 1 December 1999, 1,200 Member Shares; (ii) SIMEX shareholders received, in respect of each SIMEX share held as at 1 December 1999, 23 Member Shares; and (iii) SIMEX seatholders received, in respect of each SIMEX seat held as at 1 December 1999, 34 Member Shares.
The Act also provides that offers of shares ("New Shares") shall, from time to time after 1 December 1999, be made at such price and on such terms as the Minister for Finance may direct. The Exchange is considering undertaking an Offering in accordance with the provisions of the Act. One of many options being considered by management is a private placement of New shares, followed thereafter by an inital public offering. However, a formal decision has not been made.
When a decision is made, New Shares will be offered to investors at a price per New Share to be notified by the Minister for Finance under the Act. Such price per New Share will be determined having regard to market conditions at the time of the Offer (the "Market-Determined Price"), and may not be equal to $5,000 per share.
The Offer will have a dilutive effect on the value of the Member Shares. However, to ensure that the original value received by members for their Member Share is maintained at the prescribed value of $5,000, the adjustment mechanism will issue additional New Shares to persons who were holding Member Shares before the Offer (that is, the persons who were allotted Member Shares on 1 December 1999, or persons to whom such Member Shares had been transferred before the Offer).
The Exchange will issue to each such person a number of additional New Shares which will ensure that a person holding one Member Share before the Offer will, after the Offer, hold a one Member Share and a number of New Shares, which together will have an aggregate value of $5,000 based on the Market-Determined Price. This will be the case even if a person acquires, at any time before the Offer, a Member Share at a purchase price exceeding $5,000 -- such person will, after the Offer, nonetheless be issued only such number of New Shares which will ensure that he holds a number of shares with an aggregate value of $5,000 (based on the Market-Determined Price).
Finally, SGX would like to point out that for the year ending 30 June 1999 (which is the financial year-end of the Exchange), its pro forma net profit after tax was $126.5 million, and not $300 million as has been reported recently.
