From The Business Times, Singapore 26th February 2000

After nearly one-and- a-half years of at times bitter wrangling, the stock exchanges of Singapore and Malaysia have resolved the 20 billion ringgit issue of frozen Malaysian shares formerly traded on Clob International, Singapore's over- the-counter market.

A joint press statement late last night by the Singapore Exchange (SGX) and the Kuala Lumpur Stock Exchange (KLSE) said the two exchanges had, in two agreements signed yesterday, reached ""a comprehensive and amicable'' solution to the Clob issue.

The resolution to the Clob impasse will come as a pleasant surprise to Clob's 172,000 weary shareholders mostly retail Singapore-based investors. They now have to choose between two schemes to unlock their shares. The first one is by Akbar Khan's Effective Capital, which allows them to trade all their securities within 17 months for a fee of 1.5 per cent of the value of the securities as at Feb 15 this year. The scheme is an amended version of an earlier proposal submitted by Mr Khan, a Singaporean businessman known to be close to Malaysian leaders, late last December and which lapsed on Feb 22.

The other scheme worked out between Singapore's Central Depository (CDP) and Malaysia's Securities Clearing Automated Network Services (Scans) will allow investors to trade their shares at the end of 43 months from now for an 'administrative' fee of one per cent based on the last five trading days of the 31st month.

Trading of Clob's Malaysian shares came to an abrupt halt on Sept 15, 1998 when Malaysia imposed capital controls. The shares have remained frozen with the Malaysian Central Depository (MCD) since. The Malaysian government imposed an end-June 2000 deadline for the shares to be transferred to investors' individual accounts with the MCD, threatening to transfer the shares to the Malaysian Minister of Finance if the matter was not resolved by then.

The new proposal by Effective Capital, which was sent to the two exchanges yesterday, calls for the staggered release of the Clob securities over a 13-month period after an initial set-up period of three months starting March 31.

While the 1.5 per cent fee now being charged is a reduction from the 2 per cent proposed by Effective Capital under its earlier offer which lapsed on Feb 22, it is now based on Feb 15 prices - unlike the earlier scheme based on share values on Dec 22. The KLSE Index on Feb 15 was some 26 per cent higher at 995.52 points than the Dec 22 level of 787.91.

Effective Capital stands to make some 300 million Malaysian ringgit (S$135 million) in gross fees.

The release of the securities is now staggered over 13 months instead of 18 months under the earlier proposal.

The three-month set-up period is for the verification of information and the opening of individual accounts with the MCD by Clob investors through their chosen Authorised Depository Agent (ADA).

Singapore's CDP has agreed to disseminate Effective Capital's offer documents by March 6. The agreement between the CDP and Malaysia's Scans calls for the release of the Clob securities for trading on the KLSE after 33 months from the close of Effective Capital's offer on March 31.

There will then be a staggered release of the securities over another nine months and an administrative fee of one per cent based on the average securities prices over the last five trading days of the 31st month. The fee is to be paid by investors to Scans through the CDP.

"It is up to Clob investors to decide which of the two schemes to accept," the joint statement said. Investors have to submit their written acceptances of the Effective Capital offer to the CDP by March 27. Clob investors preferring the other scheme can submit their acceptances any time within 32 months from March 31. The remaining one month is to allow for the necessary administrative work.

The joint statement also noted that the two schemes met the KLSE's "duty to maintain an orderly and fair market for securities trading in Malaysia".

They also met the SGX and Clob investors' concerns for an alternative to Effective Capital's offer and "that the arrangements be legally binding on all parties involved".