CAPITAL MARKET AND SERVICES ACT 2007

MALAYSIAN CODE ON TAKE-OVERS

AND MERGERS 2010

PRACTICE NOTES

Issued: 15 December 2010

Updated: 4 July 2011

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 CONTENT

Page

PART I: GENERAL INTERPRETATION AND APPLICATION

INTRODUCTION 1

Practice Note 3
COMPANY 1

Practice Note 4
PERSONS ACTING IN CONCERT 2

Practice Note 7
CONDUCT OF PERSONS WHO INTENDS OR IS OBLIGED TO
MAKE A TAKE-OVER OFFER, EFFECT A MERGER, UNDERTAKE
A COMPULSORY ACQUISITION ETC. 4

PART II: MANDATORY OFFERS

Practice Note 9
DIFFERENT CLASSES OF VOTING SHARES OR VOTING RIGHTS 6

PART III: PARTIAL OFFERS

Practice Note 10
PARTIAL OFFERS 31

PART IV: ANNOUNCEMENTS, WRITTEN NOTICES AND DOCUMENTS

TO SHAREHOLDERS

Practice Note 11
SITUATIONS WHERE ANNOUNCEMENT IS REQUIRED 33

Practice Note 12
OFFER DOCUMENTS 37

Practice Note 13
MANAGEMENT OF THE AFFAIRS OF AN OFFEREE 39

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Practice Note 14
OFFEREE BOARD OF DIRECTORS COMMENTS ON THE
TAKE-OVER OFFER 39

Practice Note 15
INDEPENDENT ADVICE CIRCULAR 40

Practice Note 16
PROFIT FORECAST AND ASSET VALUATION 43

PART V: TERMS OF TAKEOVERS

Practice Note 17
ACCEPTANCE CONDITIONS 45

Practice Note 18
CONDITIONS OF VOLUNTARY TAKE-OVER OFFER 46

Practice Note 21
OFFER PRICE AND SETTLEMENT OF CONSIDERATION 46

Practice Note 22
NATURE OF CONSIDERATION 48

PART VI: TIMING OF TAKEOVER OFFERS

Practice Note 25
CLOSING OF TAKE-OVER OFFERS 50

Practice Note 28
EVIDENCE OF ABILITY TO IMPLEMENT TAKE-OVER OFFER 50

Practice Note 29
FAVOURABLE DEALS 50

PART VII: OBLIGATIONS OF OFFEROR

Practice Note 30
COMPARABLE TAKE-OVER OFFERS FOR MORE THAN ONE
CLASS OF SHARE CAPITAL 51

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Practice Note 31
TREATMENT OF CONVERTIBLE SECURITIES 51

Practice Note 32
COMPULSORY ACQUISITION 52

Practice Note 33
SALES AND DISCLOSURE OF DEALINGS BY OFFEROR AND OTHERS
DURING OFFER PERIOD 53

Practice Note 34
RESTRICTIONS IF TAKE-OVER OFFER LAPSE, FAIL OR
IS WITHDRAWN 53

Practice Note 35
RESTRICTION IF TAKE-OVER OFFER IS SUCCESSFUL 53

PART VIII: OBLIGATIONS OF OFFEREE

Practice Note 38
FRUSTRATION OF AN OFFER BY BOARD OF DIRECTORS OF
THE OFFEREE 54

Practice Note 39
DISCLOSURE OF DEALINGS BY OFFEREE 55

Practice Note 43
EXTENSION OF TIME 55

Practice Note 44
SCHEME OF ARRANGEMENT 56

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Part I
GENERAL INTERPRETATION AND APPLICATION

INTRODUCTION

1.1 In the administration of the Malaysian Code on Take-overs and Mergers,

2010 (the Code), the Commission may from time to time issue rulings in
the interpretation of the Code and on the practice and conduct of persons
involved in or affected by a take-over offer, merger or compulsory
acquisition as provided for under subsection 217(4) of the Capital Markets
and Services Act 2007 (CMSA).

1.2 These Practice Notes on the Code are issued by the Securities Commission
Malaysia (SC) pursuant to section 377 of the CMSA.

1.3 These Practice Notes are numbered against the corresponding provisions
of the Code.

1.4 Where any person is in doubt on the applicability of the Code or these
Practice Notes, he should immediately consult the SC.

1.5 Unless otherwise stated, a reference to a person includes persons acting

in concert.

1.6 Buy back scheme means a scheme by a company to purchase its own
voting shares or voting rights as prescribed under section 67A of
Companies Act 1965, the SCs Guidelines on Real Estate Investment
Trusts or any relevant governing statute or provision.

Practice Note 3
COMPANY

1.1 Any company intending to list in a foreign jurisdiction must consult the SC
on the applicability of the Code prior to making an application for its listing
in the foreign jurisdiction regardless whether the foreign jurisdiction has
any take-over provision.

1.2 Pursuant to section 219 of the CMSA, the SC may, on application, grant
exemption in writing to any particular person or take-over offer or to any
particular class, category or description of persons or take-over offers
from the provisions of Division 2, Part VI of CMSA, the Code and any
rulings made by SC. The SC in exercising its power may take into
consideration the following

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 (a) the offeree is a company incorporated outside of Malaysia and has
primary listing on a stock exchange in Malaysia and outside of
Malaysia; or

(b) the offeree is a company incorporated in Malaysia and has a

primary listing on a stock exchange outside of Malaysia and a
secondary listing on any stock exchange in Malaysia; and

(c) the offeree does not have any operations in Malaysia; and

(d) the applicant is able to demonstrate that the level of protection

available to Malaysian shareholders under the written law or code
regulating take-overs, mergers and compulsory acquisitions in the
other jurisdiction is equivalent to the level of protection provided
for under the Code.

Practice Note 4
PERSONS ACTING IN CONCERT

1.1 In determining whether a person is acting in concert, the SC will take into
consideration the following circumstances

(a) shareholders voting together on a resolution in one general

meeting or more;

(b) shareholders acquire shares or rights without each others

knowledge but subsequently coming together to co-operate as a
group; or

(c) shareholders making a requisition or attempting to make a

requisition for a board control-seeking proposal in a general
meeting.

1.2 In determining whether a proposal is a board control-seeking proposal

under subparagraph 1.1(c), the SC will have regard to the following

(a) the relationship between the proposed directors and the

shareholder who proposes to make the requisition. Factors to be
considered include any agreement, arrangement and understanding
between them in regard to the proposed requisition and whether
any of the proposed directors will be remunerated by any of the
shareholders who propose to make the requisition;

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 (b) changes in board composition;

(c) the nature of the mandate of the proposed directors;

(d) whether any of the shareholders who propose to make the

requisition will benefit directly or indirectly;

(e) the relationship between the proposed directors and the existing
directors; and

(f) the relationship between the existing directors and the shareholder
who proposes to make the requisition.

1.3 Any person who does not wish to be regarded as a person acting in
concert, shall immediately provide evidence to satisfy the SC otherwise, in
circumstances where

(a) SC had ruled that he is a person acting in concert; or

(b) the person had made prior admission that he was a person acting
in concert.

1.4 Child includes adopted child and step child and relative includes
siblings of parents (i.e. uncles and aunts), their children (i.e. cousins) and
children of siblings (i.e. nephews and nieces).

1.5 For the purposes of paragraph 216(3)(d) of the CMSA, a person and any
investment company, unit trust or other fund who manages the
investment of the said person on a non-discretionary basis are presumed
as persons acting in concert. For the purposes of this paragraph, a
person includes a beneficiary.

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Practice Note 7
CONDUCT OF PERSONS WHO INTENDS OR IS OBLIGED TO MAKE A
TAKE-OVER OFFER, EFFECT A MERGER, UNDERTAKE A COMPULSORY
ACQUISITION AND OTHERS

Appointment of advisers

1.1 For the purposes of subsection 7(1) of the Code, the following categories
of persons may act as an adviser in a take-over offer, merger and
compulsory acquisition -

(i) An investment bank;

(ii) A universal broker;

(iii) A 1+1 broker who is a holder of a Capital Markets Services License

carrying on the regulated activity of advising on corporate finance;
or

(iv) An Islamic bank (with regard to Shariah-compliant take-over offer

and compulsory acquisition application).

1.2 Notwithstanding paragraph 1.1 above, the SC may, on case-to-case basis,

approve any person who has the expertise and experience in corporate
finance matters to submit any application on take-over offer, merger and
compulsory acquisition to the SC. Such person must consult the SC at the
earliest opportunity before making any application on take-over offer,
merger and compulsory acquisition to the SC.

Standard of submission

2.1 Any adviser giving advice or submitting applications to the SC shall

(a) provide objective and fair advice which will enable the parties
concerned to exercise their judgment;

(b) provide advice which will ensure compliance with the provisions of
the Code;

(c) facilitate timely decision by the SC. All submissions and applications
made by the advisers must take into consideration the time charter

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 set by the SC for processing and considering the submissions or
applications;

(d) ensure adherence to the schedule of a take-over offer as provided

in the Code;

(e) take full responsibility for all information and statements made
relating to a take-over offer and compulsory acquisition guided
always by the need for transparency and disclosure;

(f) include a statement in an offer document or an independent advice

circular, that a person has given and has not withdrawn his consent
to publish his statement and his name in the offer document or the
independent advice circular, if relevant; and

(g) ensure compliance with the Guidelines on the Format and Content
of Applications under Division 2, Part VI of CMSA.

Consultation with the SC

3.1 All consultation with the SC must first be communicated in writing to the
SC through an adviser. In any such consultation, an adviser shall

(a) clearly define the issues in which they are seeking the advice of the
SC;

(b) be thoroughly familiar with the issues relating to the transaction

which will give rise to an obligation under the Code; and

(c) provide their views on the issues.

Failure to perform advisers duties

4.1 If an adviser fails to perform his duty efficiently and effectively or fails to
comply with the standard and contents of submission, the SC may return
the submission to the adviser.

4.2 Any person giving advice in a take-over offer, merger or compulsory

acquisition resulting in any breach of the provisions of the Code or
practice notes is responsible for the advice given. The SC may refuse to
accept or consider any future submission relating to a take-over offer,
merger or compulsory acquisition from such adviser.

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PART II
MANDATORY OFFER

Practice Note 9
DIFFERENT CLASSES OF VOTING SHARES OR VOTING RIGHTS

1.1 Where there are different classes of voting shares or voting rights of a
company carrying different rights to vote, each voting share or voting
right of the company carrying the right to more than one vote shall be
deemed to consist of such number of voting shares or voting rights.

Obligation of vendor disposing of his interests

2.1 Where a director has control in a company and as a result of his sale of
the shares, the acquirer triggers a mandatory offer obligation under
section 9 of the Code, the director must stipulate as a condition to the
sale that, the acquirer undertakes to fulfil his obligations under section 9.
This obligation extends to the director and the following

(a) a relative of the director;

(b) a related trust of the director;

(c) a company controlled by the director;

(d) a company controlled by the relative of the director; or

(e) a company controlled by the related trust of the director.

2.2 In relation to paragraph 2.1, the acquirer shall disclose his shareholding
and that of persons acting in concert with him to the seller to ascertain
whether paragraph 2.1 applies. However, no disclosure of shareholding
from the acquirer to the seller is necessary if the shares to be acquired
from the seller are more than 33%.

Obligation of offeror

3.1 In a mandatory offer, the offeror has no obligation to extend the take-
over offer to persons acting in concert with the offeror. However, where
an offeror extends the take-over offer to persons acting in concert with
him, the offeror shall adhere to the provisions of the Code.

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Acquisition of a company through an upstream entity

4.1 A mandatory offer applies to a person who intends to obtain or has

obtained control in an upstream entity which holds or is entitled to
exercise or control the exercise of, more than 33% of the voting shares or
voting rights of a downstream company and the upstream entity has a
significant degree of influence in the downstream company.

4.2 The upstream entity is deemed to have a significant degree of influence in

the downstream company when

(a) the acquisition of the upstream entity to which the Code does not
apply is a means to acquire control in the downstream company to
which the Code applies;

(b) the value in the downstream company constitutes 50% or more of

the assets, net assets, net tangible assets, market capitalisation,
shareholders funds, sales or earnings to the upstream entity; or

(c) one of the main purposes of acquiring control of the upstream

entity is to control the downstream company, which may involve,
among other things, a majority change in the membership of the
board of directors of the downstream company or a change in the
business direction of the downstream company.

4.3 An upstream entity includes

(a) the ultimate or immediate holding company of a downstream

company;

(b) a body corporate that is incorporated in or outside Malaysia;

(c) a unit trust scheme; and

(d) an interest which is defined under section 84 of the Companies Act

1965.

4.4 A downstream company includes

(a) a subsidiary or associate company of an upstream entity;

(b) a subsidiary or associate company of another subsidiary or

associate of an upstream entity; and

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 (c) a listed real estate investment trust.

Acquisition of voting shares or voting rights by persons acting in

concert

5.1 Under subsection 9(1) of the Code, a mandatory offer obligation will apply
to all members of a group of persons acting in concert if any member of
the group acquires voting shares or voting rights such that the collective
acquisition of the group triggers a mandatory offer obligation.

5.2 A member of a group of persons acting in concert person is under an

obligation to make a mandatory offer where the group already holds more
than 33% of the voting shares or the voting rights of a company and the
said member acquires voting shares or voting rights of the company
resulting in

(a) him having more than 33% of the voting shares or voting rights of
the company; or

(b) him acquiring more than 2% of the voting shares or voting rights of
the company in any six-month period (when the person already
holds more than 33% but not more than 50% of the voting shares
or voting rights of the company).

Vendor selling part of his controlling voting shares or voting rights

6.1 An acquirer acquiring between 20% and up to 33% from a controlling

vendor may have obtained control of a company.

6.2 In deciding whether an acquirer has obtained control of a company when

the vendor sells part of his voting shares or voting rights to the acquirer,
the SC may consider all surrounding circumstances of the acquisition
including

(a) any arrangement, understanding or transaction between the

acquirer and the vendor or between the acquirer and persons
acting in concert with the vendor in relation to the voting shares or
voting rights;

(b) the ability of the acquirer to exercise or control the exercise of the
retained voting shares or voting rights;

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 (c) the consideration for the acquisition of the voting shares or voting
rights;

(d) put or call options on the retained voting shares or voting rights; or

(e) the amount or value of voting shares or voting rights retained by

the vendor compared to the capital or fund size of the company.

6.3 The SC may, where it considers necessary, require the adviser to obtain a
written confirmation to the effect that the acquirer has not obtained
control of the company, from the following persons

(a) the acquirer;

(b) the vendor;

(c) the board of directors, where the acquirer or the vendor is a body
corporate; and

(d) the board of directors of the company whose voting shares or

voting rights are being acquired.

Changes in number of voting shares or voting rights of a company

7.1 When there is a change in the number of voting shares or voting rights of
a company, the calculation of the percentage of acquisition is as follows:

(a) the total number of existing voting shares or voting rights acquired
within the day should be based on the number of voting shares or
voting rights of the company at the beginning of the day; or

(b) the total number of new voting shares acquired following

conversion or exercise of convertible securities within the day
should be based on the enlarged number of the voting shares
arising from the conversion or exercise of the convertible securities
by the acquirer.

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Creeping provision

8.1 In deciding whether the acquirer has triggered the mandatory offer under
paragraph 9(1)(b) of the Code, any disposal of voting shares or voting
rights may not be netted off against purchases.

Dilution of holding of voting shares or voting rights

9.1 Where the holding of voting shares or voting rights is diluted as a result of
issuance of new voting shares or voting rights by a company, a person
who restores his holding in the company to the original level will trigger a
mandatory offer obligation if

(a) the holding has been reduced to 33% or less and thereafter, the
person acquires voting shares or voting rights to more than 33% of
the voting shares or voting rights of the company (based on the
enlarged voting capital or voting rights); or

(b) the holding has been reduced to more than 33% but not more than
50% of the voting shares or voting rights of the company and
thereafter, the person acquires more than 2% of the voting shares
or voting rights (based on the enlarged voting capital or voting
rights) in any six-month period.

Share buy back scheme

10.1 A mandatory offer obligation arises when

(a) a person obtains controls in a company as a result of a buy back

scheme by the company;

(b) a person (holding more than 33% but not more than 50% of the
voting shares or voting rights of a company), as a result of a buy
back scheme by the company, increases his holding of the voting
shares or voting rights of the company by more than 2% in any six-
month period;

(c) a person (holding more than 33% but not more than 50% of the
voting shares or voting rights of a company) acquires more than
2% of the voting shares or voting rights of the company when he
knows or reasonably ought to know that the company would carry
out a buy back scheme.

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Convertible securities

11.1 In general, the acquisition of convertible securities does not give rise to a
mandatory offer obligation but the exercise of any conversion or
subscription rights or options is deemed an acquisition of voting shares or
voting rights for the purposes of the Code.

11.2 The acquisition of an option is deemed to be an acquisition of voting

shares or voting rights and gives rise to a mandatory offer obligation
where the relationship and arrangements between the parties concerned
are such that the voting rights of those shares has passed to the person
acquiring the option.

Securities borrowing and lending

12.1 In a securities borrowing and lending transaction, the borrower of the

shares or rights is deemed to have acquired the voting rights attached to
the shares or rights under subsection 9(1) of the Code. When the
borrower returns or sells the shares or rights, he is deemed to have
disposed of the voting rights attached to those shares or rights.

12.2 A lender is deemed to have disposed of the voting rights attached to the
loaned securities. Upon the return of those shares or rights, the lender is
deemed to have acquired the voting rights attached to the shares or
rights.

12.3 A lender is exempted from a mandatory offer obligation arising from the
return of the voting shares or voting rights of the loaned securities, in the
following circumstances:

(a) if the lender holds more than 33% but not more than 50% of the
voting shares or voting rights of a company at the point of lending
out the loaned securities, and the lenders holding drops to 33% or
less or reduces by more than 2% of the voting shares or the voting
rights of the company in any six-month period as a result of lending
out of the loaned securities:

(i) the return of the loaned securities (without the lender

recalling the loaned securities) triggers a mandatory offer
obligation; and

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 (ii) the return of the loaned securities (without the lender
recalling the loaned securities) will not increase the lenders
holding (including subsequent acquisition, if any) to more
than 50% of the voting shares or voting rights of the
company;
or

(b) if the lenders holding drops to 50% or less arising from lending out
the loaned securities, his holding (including subsequent acquisitions
which does not trigger a mandatory offer obligation) together with
the loaned securities returned causes the lender to trigger a
mandatory offer obligation.

12.4 The exemption in paragraph 12.3 is conditional on the following:

(a) The lender informing the SC of the likelihood of him being

subjected to the Code when the loaned securities are returned to
him; and

(b) The lender providing a declaration, within three days upon the
return of the voting shares or voting rights, that the lender has
complied with either subparagraph 12.3(a) or 12.3(b) above.

Over-allotment option and/or price stabilisation mechanism

13.1 The return of the voting shares or voting rights in an over-allotment

option and/or price stabilisation mechanism is deemed to be an
acquisition. If the acquisition results in a shareholder obtaining control in
the company or the acquisition is more than 2% in any six-month period
(in the case where the major shareholder holds more than 33% but not
more than 50% of the voting shares or voting rights), the shareholder
triggers a mandatory offer obligation.

13.2 The shareholder is exempted from the mandatory offer obligation arising
from the return of the borrowed voting shares or voting rights pursuant to
the over-allotment option and/or price stabilisation mechanism, provided
the stabilising manager (under the price stabilisation mechanism) and the
shareholder submit the following information to the SC within 14 days
after the completion of the over-allotment option and/or price stabilisation
mechanism, whichever is the later:

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 (a) Changes to the interest of the said shareholder in the company
between the lending of the voting shares or voting rights and the
return of the voting shares or voting rights of the company; and

(b) A confirmation that

(i) the borrowed voting shares or voting rights have been

returned to the shareholder within five market days
following the date on which the voting shares or voting
rights were purchased from the market or the new voting
shares or voting rights were issued by the company to the
underwriter;

(ii) the placees were independent and not acting in concert with
the stabilising manager; and

(iii) the shareholder and persons acting in concert with him have
not been involved in screening or selecting the placees.

When a voluntary offer becomes a mandatory offer

14.1 A voluntary offer will become a mandatory offer if the offeror or persons
acting in concert acquires voting shares or voting rights (other than
through acceptances) which triggers a mandatory offer obligation.

14.2 If the terms or conditions of a voluntary offer are not in compliance with
the requirements of a mandatory offer, early consultation with the SC is
required.

Exemptions from a mandatory offer obligation

15.1 Under section 219 of the CMSA, the SC may grant an exemption in writing
from the provisions of the Code or a ruling made under subsection 217(4)
of the CMSA.

15.2 Any application for an exemption must be submitted to the SC before a

mandatory offer obligation is triggered.

15.3 The SC must be informed of any changes to the information submitted or

disclosed in the application as soon as possible.

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15.4 In considering whether an exemption should be granted, the SC shall
have regard to the objectives and conduct specified in subsection 217(5)
of the CMSA and under the Code.

15.5 In granting an exemption, the SC may impose any condition, restriction or

limitation as the SC deems fit.

15.6 Without limiting the discretion of the SC to grant an exemption under

section 219 of the CMSA, the exemptions stated in paragraphs 16 to 24 of
Practice Note 9 are proposals or transactions which the SC will, as a
matter of policy, consider granting an exemption.

15.7 The word offeree used in the context of an exemption refers to the
company where a potential mandatory offer obligation will be triggered
and the word offeror refers to the potential controlling holder of voting
shares or voting rights.

15.8 An exemption granted by the SC is valid for a period of 6 months, unless

otherwise stated.

15.9 Before making an application for an exemption under paragraphs 16.1 to

24.1, the offeror and his adviser shall consult the SC at the earliest
available opportunity.

Issuance of new securities

16.1 An offeror may apply for an exemption from a mandatory offer obligation
arising from the following proposals:

(a) the offeror is issued new voting shares or voting rights as

consideration for the sale or disposal of assets and/or interests by
him;

(b) the offeror subscribes for new voting shares or voting rights in
cash;

(c) the offeror exercises any conversion or subscription rights or

options into new voting shares or voting rights;

(d) where as an underwriter, the offeror receives new voting shares or

voting rights as a result of his underwriting obligation; and

(e) the offeror

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 (i) acquires new voting shares or voting rights for the purpose
of restoring his holding to the level prior to the issuance of
new voting shares or voting rights; and

(ii) the acquisition of new voting shares or voting rights is from

persons who will be allotted the voting shares or voting
rights as consideration for the sale or disposal of assets
and/or interests by them.

16.2 An offeror and his adviser must consult the SC before making an
application for an exemption under paragraph 16.1.

Whitewash Procedure

16.3 Where paragraph 16.1 applies, the SC may consider granting an

exemption if an offeror and persons acting in concert, seeking an
exemption under this paragraph, have satisfied the following conditions:

(a) there is no disqualifying transaction;

(b) approval has been obtained from independent holders of voting

shares or voting rights of the offeree at a meeting of the holders of
the relevant class of voting shares or voting rights to waive their
rights to receive the mandatory offer from the offeror and persons
acting in concert; and

(c) the names of the parties that have abstained from voting at the
general meeting have been submitted to the SC.

16.4 For the purposes of subparagraph 16.3(a), a disqualifying transaction

refers to

(a) for proposals under subparagraphs 16.1(a), (b), (d) and (e)

(i) a purchase of voting shares or voting rights of the offeree by

the offeror or persons acting in concert

(A) subsequent to negotiation, discussion, understanding or

agreement with the directors of the offeree in relation to
the proposed issue of new voting shares or voting rights;
and

15
 (B) before the completion of the transaction where the
exemption under this paragraph is sought and approved;
or

(ii) in cases where negotiation could only commence after

obtaining the relevant authoritys approval, a purchase of
voting shares or voting rights of the offeree by the offeror or
persons acting in concert

(A) in the six months prior to the date of the application

made to the relevant authority; and

(B) before the completion of the transaction where the

exemption under this paragraph is sought and approved;

(b) for circumstances under subparagraph 16.1(c) where the

exemption is sought for a one-off exercise or conversion of

(i) existing rights or options

(A) a purchase of voting shares or voting rights of the

offeree by the offeror or persons acting in concert

(aa) in the six months prior the date of seeking

consultation with the SC for the exemption; and

(ab) before the completion of the exercise of

conversion or subscription rights or options; or

(B) a purchase of the conversion or subscription rights or

options of the offeree by the offeror or persons acting in
concert

(aa) subsequent to the disclosure in the independent

advice circular; and

(ab) before the completion of the exercise of

conversion or subscription rights or options;

(ii) rights or options to be issued

(A) a purchase of voting shares or voting rights of the

offeree by the offeror or persons acting in concert
subsequent to negotiation, discussion, understanding or

16
 agreement with the directors of the offeree in relation to
the proposed issue of the rights or options; or

(B) a purchase of the rights or options of the offeree by the

offeror or persons acting in concert subsequent to the
issuance of such rights or options,

before the completion of the exercise of the conversion or

subscription rights or options; or

(c) for circumstances under subparagraph 16.1(c) where the

exemption is sought for a duration or the whole tenure of the rights
or options

(i) for existing rights or options

(A) a purchase of voting shares or voting rights of the

offeree by the offeror or persons acting in concert in the
six months prior the date of seeking consultation with
the SC for the exemption; or

(B) a purchase of the rights or options of the offeree by the

offeror or persons acting in concert subsequent to
disclosure in the independent advice circular and

(aa) before the completion of the exercise of the rights

or options;

(ab) before the expiry of the validity period for which

the exemption has been granted; or

(ac) where the exemption is no longer relevant as the

holding of the offeror and the persons acting in
concert (if relevant) is more than 50% of the
voting shares or voting rights of the offeree,

whichever is earlier; or

(ii) rights or options to be issued

(A) a purchase of voting shares or voting rights of the

offeree by the offeror or persons acting in concert
subsequent to negotiation, discussion, understanding or

17
 agreement with the directors of the offeree in relation to
the proposed issue of the rights or options; or

(B) a purchase of the rights or options of the offeree by the

offeror or persons acting in concert subsequent to the
issuance of such rights or options and

(aa) before the completion of the exercise of the

conversion or subscription rights or options;

(ab) before the expiry of the validity period for which

the exemption has been granted; or

(ac) where the exemption is no longer relevant as the

holding of the offeror and the persons acting in
concert (if relevant) is more than 50% of the
voting shares or voting rights of the offeree,

whichever is earlier.

16.5 For the purpose of the meeting of independent holders of voting shares or
voting rights mentioned in subparagraph 16.3(b), the following
procedures must be observed:

(i) the resolution for the exemption is separate from other resolutions
but may be conditional on other resolutions;

(ii) all interested parties are required to abstain from voting on the
resolution at the meeting;

(iii) the voting at the meeting is conducted by way of a poll. The result
of the poll must be confirmed by an independent auditor;

(iv) the holders of the relevant class of voting shares or voting rights of
the offeree are provided with competent independent advice
regarding the proposed exemption;

(v) the independent adviser who is providing the independent advice

has declared its independence to the SC;

(vi) the independent advice circular setting out details of the proposed
exemption has been consented to by the SC before being
dispatched; and

18
 (vii) the independent advice circular is dispatched to the relevant
holders at least 14 days before the meeting.

16.6 For the purposes of subparagraph 16.5(ii), interested parties include the
following persons

(a) the offeror and any person acting in concert;

(b) the directors of the offeree if they have any holdings which they
intend to retain and which they propose to use in the future in co-
operation with the applicant and persons acting in concert with the
applicant; or

(c) any person whose interest in the outcome of the voting will result
in some relationship and future co-operation with the offeror and
persons acting in concert with the offeror other than as a holder of
voting shares or voting rights of the offeree.

16.7 In cases involving underwriting or placing of an offerees voting shares or

voting rights, the offeror and any person acting in concert must submit to
the SC details of all the proposed underwriters or placees, including any
relevant information to establish whether or not there is a group acting in
concert, and the maximum percentage which they will hold as a result of
implementation of the proposal.

16.8 In considering an exemption, the SC will take into consideration whether

the holders of voting shares or voting rights of the offeree have passed
the relevant resolution in the meeting referred to subparagraph 16.5(i).

16.9 An exemption granted by the SC under paragraph 16.1 will be invalidated

once the offeror or the persons acting in concert have triggered a
disqualifying transaction. However, the exemption granted by the SC
remains valid for the period prior to the disqualifying transaction.

16.10 Where an offeror and persons acting in concert have obtained an

exemption from the SC, the offeror and the persons acting in concert shall
disclose to the SC

(a) the holding of the offeror and persons acting in concert in the
offeree within 7 days from the date of the completion of the
following

(i) the proposals as provided under paragraph 16.1;

19
 (ii) the expiry of the validity period for which the exemption has
been granted; or

(iii) the offeror and the persons acting in concert are holding
more than 50% of the voting shares or voting rights of the
offeree; and

(b) all dealings in the offerees securities by the offeror and persons
acting in concert for a period of 12 months after the completion of
the proposals, within 7 days from the date of the transaction.

16.11 The independent advice circular referred to in subparagraph 16.5(vi) must

contain and include all information and statements as required under
Schedule 3 of the Code. It must also contain a statement that the SC will
consider an application for an exemption if the independent holders of
voting shares or voting rights have agreed that the parties gaining control
over the offeree need not make a mandatory offer.

16.12 An application for an exemption from a mandatory offer obligation arising

from the exercise of the conversion or subscription rights or options shall
be made before the intended conversion date.

16.13 The SC may grant the exemption arising from the exercise of conversion
or subscription rights or options for a longer validity period up to the
expiry date of the conversion or subscription rights or options, subject to:

(a) the offeror and persons acting in concert disclosing in the

independent advice circular, the validity of the exemption, that if
granted, subsequent shareholders approval will not be needed
during the validity period; and

(b) the offeree disclosing in its annual and interim accounts and any
public document, including annual reports, prospectuses and
circulars, throughout the validity period and the conversion or
subscription rights or options remain outstanding, the following:

(i) The validity period for which the exemption has been
granted;

(ii) The number and percentage of voting shares or voting rights

and the conversion or subscription rights or options in the
offeree held by the offeror and persons acting in concert as
at the latest practicable date prior to the disclosure;

20
 (iii) The maximum potential voting shares or voting rights of the
offeror and persons acting in concert in the offeree, if only
the offeror and persons acting in concert (but not other
holders) exercise the conversion or subscription rights or
options in full;

(iv) There is no acquisition of voting shares or voting rights or

acquisition of the conversion or subscription rights or options
of the offeree (excluding issuance of new offeree shares
following the exercise of the conversion or subscription
rights or options, or where all offeree shareholders are
entitled to new offeree shares, rights, conversion or
subscription rights or options on a pro-rata basis) by the
offeror and persons acting in concert throughout the validity
period of the exemption; and

(v) A statement that a mandatory offer obligation will not arise

following the full conversion as the exemption has been
granted.

Rescue operation

17.1 An offeror may apply for an exemption from a mandatory offer obligation
where the objective of a proposal is to rescue the financial position of an
offeree.

17.2 The SC may reject an application for an exemption under this paragraph
where the objective of the proposal is to rescue the financial position of a
major shareholder of an offeree.

17.3 In reviewing an application for an exemption under this paragraph, the SC

may take the following into consideration for the granting of the
exemption

(a) the net tangible assets per voting share of the offeree is less than
50% of its par value;

(b) the offeree has a debt-equity ratio of more than 3:1;

(c) no dividend has been distributed for the last two consecutive years;

(d) any rights issue by the offeree would likely fail; and

21
 (e) the rescue operation would benefit the offeree.

17.4 Where the offeree is a listed real estate investment trust, the SC may
consider granting the exemption [in addition to subparagraphs 17.3(c),
(d) and (e)], if the total asset value is reduced by more than 50% of the
cost of acquisition of the fund.

17.5 Before granting the exemption, the SC may, where it deems necessary,
require the offeror to obtain an independent confirmation of the financial
position of the offeree. The appointment of the person providing such
independent confirmation must be approved by the SC.

17.6 The confirmation by the competent independent person must include a

report on the offerees financial position for the last three financial years
on the following:

(a) Financial indications, such as ratio analysis, earnings (loss) per

voting share, net tangible assets backing and total asset value and
cots of acquisition of the fund;

(b) Sources of funds and cash flow statements; and

(c) Other relevant transactions, such as dividend payment, liabilities

outstanding, legal suits pending, contingent liabilities and material
events.

Enforcement of security for a loan

18.1 The following persons, by reason of their holding of voting shares or

voting rights in an offeree as security for a loan, are exempted from the
requirement to undertake a mandatory offer:

(a) A registered person specified in the third column of Part 1 of

Schedule 4 of the Act;

(b) A registered person specified in the third column of item 1, Part 2

of Schedule 4 of the Act; and

(c) A holder of a Capital Markets and Services Licence who carries on a

business of dealing in securities.

18.2 Under paragraph 18.1, where a lender intends to enforce the security by
making an arrangement to transfer the voting shares or voting rights to

22
 itself, the lender will incur a mandatory offer obligation and may therefore
apply for an exemption.

18.3 The SC may consider an application under paragraph 18.2 for an

exemption if all of the following criteria are met

(a) the voting shares or voting rights of the offeree were not pledged
under circumstances where the lender had reason to believe that
foreclosure would be likely;

(b) the lender is able to justify to the SC that foreclosure is necessary;

and

(c) the lender undertakes to place the voting shares or voting rights of
the offeree within six months from the date of the foreclosure, or
such longer period as may be determined by the SC, so as to
reduce its holding to 33% or lesser in the offeree.

18.4 Any exemption granted to the lender will not apply to an acquirer who
acquires from the lender such voting shares or voting rights.

Placement of voting shares or voting rights

19.1 Pursuant to a restructuring exercise or issuance of new voting shares or

voting rights as consideration, an exemption may be sought by

(a) an offeror who obtains control in an offeree but makes a prior firm
arrangement or gives a written undertaking to the SC to reduce his
holding in the voting shares or voting rights of the offeree to 33%
or less; or

(b) an underwriter who obtains control in an offeree pursuant to him

underwriting the voting shares or voting rights in the offeree
(aggregated together with the existing voting shares or voting
rights already held by the underwriter).

19.2 For the purposes of subparagraph 19.1(a), a firm arrangement means the
following

(a) the proposal is conditional upon the placement of the excess voting
shares or voting rights; or

23
 (b) the offeror has entered into an agreement for placement of the
voting shares or voting rights of the offeree; and

(c) an underwriter has been appointed to underwrite the placement, or

in the absence of an underwriter, a placee has been identified for
the voting shares or voting rights of the offeree.

19.3 For the purposes of subparagraph 19.1(a) the written undertaking to the
SC must state

(a) that such placement will be undertaken as soon as practicable but

not later than three months after the acquisition; and

(b) an underwriter has been appointed to underwrite the placement.

19.4 An offeror declares that none of the parties who will be acquiring his
excess voting shares or voting rights is acting in concert with him.

19.5 For the purposes of subparagraph 19.1(b), the SC may consider granting
an exemption to the underwriter if

(a) the underwriting is in the normal course of business of the

underwriter; and

(b) the underwriter gives a written undertaking to the SC to place out

the voting shares or voting rights within six months from the date
of the approval of the exemption or such longer period as may be
determined by the SC.

19.6 Any exemption granted to an offeror or an underwriter, under paragraph

19.1 will not apply to an acquirer of the voting shares or voting rights of
the offeree from the offeror or the underwriter.

Written undertakings not to accept a take-over offer

20.1 An offeror may apply for an exemption from a mandatory offer obligation
if he is able to satisfy the SC that the remaining holders of voting shares
of an offeree have given written affirmations that they will not accept a
take-over offer, if such an offer is made.

20.2 The SC may consider an application for an exemption under paragraph

20.1 provided that

24
 (a) the offeree is an unlisted company; and

(b) where the offeror holds more than 50% of the voting shares of the
offeree, all the remaining holders of voting shares have provided an
undertaking in writing that they do not wish to accept a take-over
offer if one is made in accordance with the provisions of the Code;
or

(c) where the offeror holds less than 50% of the voting shares of the
offeree, an undertaking in writing by the remaining holders of
voting shares, holding more than 50% of the voting shares of the
offeree, that they do not wish to accept a take-over offer if one is
made in accordance with the provisions of the Code.

Acquisition of additional voting shares or voting rights by members of a

group acting in concert

21.1 An offeror may apply for an exemption from a mandatory offer obligation
in a situation where

(a) a group of persons acting in concert holding more than 33% but
not more than 50% of the voting shares or voting rights of an
offeree, and as a result of acquisition of voting shares or voting
rights from one or more members of the group, a member of the
group will control the offeree;

(b) a group of persons acting in concert holding more than 33% but
not more than 50% of the voting shares or voting rights of the
offeree and one member of the group who holds more than 33%
but not more than 50% of the voting shares or voting rights,
acquires more than 2% voting shares or voting rights of the offeree
in any six-month period from one or more members of the group;

(c) a group of persons acting in concert holding more than 50% of the
voting shares or voting rights of an offeree and as a result of
acquisition of voting shares or voting rights from either members of
the group or non-members, a member of the group will control the
offeree; or

(d) a group of persons acting in concert holding more than 50% of the
voting shares or voting rights of an offeree, and one member of the
group who holds more than 33% but not more than 50% of the
voting shares or voting rights, acquires more than 2% voting

25
 shares or voting rights of the offeree in any six-month period from
either members of the group or non-members.

21.2 The SC may consider granting an exemption for the application under
paragraph 21.1 after taking into account the following factors

(a) changes in the ultimate offeror;

(b) changes to the balance between the holding of voting shares or

voting rights of the group in the offeree;

(c) premium on the price to be paid for the voting shares or voting
rights of the offeree;

(d) the relationship between the persons acting in concert and how
long they have been acting in concert;

(e) whether one or more of the members of the persons acting in

concert will increase their voting shares or voting rights to more
than 50% in the offeree; and

(f) the details on how and when the seller obtained his interest in the
offeree.

21.3 In determining whether a premium will be paid for the voting shares or
voting rights of the offeree, the SC shall have regard to either

(a) the prevailing market price of the voting shares or voting rights of
the offeree, in the case of a listed offeree ;or

(b) the net assets and net tangible assets of the offeree, in the case of
an unlisted offeree.

Compulsory acquisition under the Companies Act 1965

22.1 A person may apply for an exemption from a mandatory offer obligation
where he intends to proceed with a compulsory acquisition under section
180 of the Companies Act 1965.

22.2 The SC may consider granting an exemption to the offeror if the offeror
gives a written undertaking to the SC that

26
 (a) he will implement the compulsory acquisition under section 180 of
the Companies Act 1965; and

(b) he has sufficient financial capability to undertake the compulsory

acquisition.

22.3 Where an offeror has been granted an exemption by the SC under

paragraph 22.1 but is unable to implement the compulsory acquisition
within six months from the date of the exemption granted, the exemption
will be invalidated and the offeror will be required to make a mandatory
offer under section 9 of the Code immediately.

22.4 Where an offeror has been granted an exemption by the SC under

paragraph 22.1, sections 13, 21, 22, 29, 34, 38, 39 and 40 of the Code
shall apply to the offeror and the relevant parties until the compulsory
acquisition is effected and completed.

National policy

23.1 An offeror may apply for an exemption where the acquisition which will
cause him to incur a mandatory offer obligation has been approved based
on national policy.

23.2 The SC may grant an exemption under paragraph 23.1 if the offeror
has obtained the necessary approval from the respective sector
regulators, whereby the offeror or a group of persons acting in concert
with him is allowed to increase or maintain their voting shares or voting
rights of the offeree to or at a specified threshold if any.

Share Buy Back Scheme

24.1 An offeror who triggers a mandatory offer obligation as a result of a share

buy back scheme may apply to the SC for an exemption.

24.2 The SC, however, will not grant an exemption if an offeror has previously
acquired voting shares or voting rights of the offeree with the knowledge
that the offeree intended to seek permission from its holders of voting
shares or voting rights to purchase its own voting shares or voting rights.

24.3 An exemption granted under paragraph 24.1 will expire upon

27
 (a) the expiry of the relevant shareholders approval under section 67A
of the Companies Act 1965, the SCs Guidelines on Real Estate
Investment Trusts or any relevant governing statute or provision;

(b) the date on which the company announces it has bought back such
number of shares as approved by shareholders at the latest general
meeting; or

(c) the date on which the offeree announces it has decided to cease
buying back its shares,

whichever is earlier.

24.4 When an exemption expires, a new application for an exemption will need
to be made, if needed.

Whitewash Procedure

24.5 Where an application for exemption is made under paragraph 24, the SC
may consider granting the exemption if the offeror and persons acting in
concert have satisfied the following

(a) there is no disqualifying transaction;

(b) approval has been obtained from the independent holders of voting
shares or voting rights of the offeree at a meeting of the holders of
the relevant class of voting shares or voting rights to waive their
rights to receive the mandatory offer from the offeror and persons
acting in concert; and

(c) the names of the parties that have abstained from voting at the
general meeting have been submitted to the SC.

24.6 For the purpose of the meeting mentioned in subparagraph 24.5(b), the
following procedures should be observed

(a) the resolution for the exemption is separate from other resolutions
but may be conditional on other resolutions;

(b) all interested parties have abstained from voting on the resolution
at the meeting;

28
 (c) the voting at the meeting is conducted by way of a poll. The result
of the poll has to be confirmed by an independent auditor;

(d) the holders of the relevant class of voting shares or voting rights of
the offeree are provided with competent and independent advice;

(e) the independent adviser who is providing the independent advice

has declared its independence to the SC;

(f) the SC has consented to the contents of the independent advice

circular setting out details for the proposed exemption before
dispatched; and

(g) the independent advice circular is dispatched to holders of the

relevant class of voting shares or voting rights of the offeree at
least 14 days before the general meeting.

24.7 For the purposes of subparagraph 24.5(a), a disqualifying transaction

refers to purchase of voting shares or voting rights by the offeror or
persons acting in concert before the expiry of the exemption granted with
the knowledge that the offeree intends to undertake a share buy back.

24.8 For the purposes of subparagraph 24.6(b), interested parties include the
following persons

(a) the offeror and persons acting in concert with him;

(b) the directors of the offeree if they have any holdings which they
intend to retain and which they propose to use in the future in co-
operation with the applicant and persons acting in concert with the
applicant; or

(c) any person whose interest in the outcome of the voting may result
in some relationship and future co-operation with the applicant and
persons acting in concert with the applicant other than as a holder
of voting shares or voting rights of the offeree.

24.9 In considering an exemption, the SC will take into consideration whether

the holders of voting shares or voting rights of the offeree have passed
the relevant resolution in the meeting referred to subparagraph 24.6(b).

24.10 An exemption granted by the SC under paragraph 24.1 will be invalidated

once the offeror or the persons acting in concert have triggered a

29
 disqualifying transaction. However, the exemption granted by the SC
remains valid for the period prior to the disqualifying transaction.

24.11 An offeror and persons acting in concert may acquire further voting shares
or voting rights of the offeree, if

(a) the offeror and the persons acting in concert are no longer subject
to subsection 9(1)of the Code;

(b) information in subparagraph 24.11(a) has been highlighted in the

independent advice circular; and

(c) announcement has been made on the holdings of the offeror and
persons acting in concert and that the offeror and persons acting in
concert are no longer subject to subsection 9(1) of the Code.

30
PART III
PARTIAL OFFERS

Practice Note 10
PARTIAL OFFERS

1.1 A person will be allowed to undertake a partial offer if the purpose of the
acquisition is to comply with regulatory requirements or to meet the
persons investment objectives. The SC may grant its consent under
subsection 10(1) of the Code if the person can demonstrate that the
acquisition is in compliance with section 8 of the Code. Consent would
normally be granted where a partial offer would not result in the offeror
and person acting in concert with the offeror holding more than 33%
voting shares or voting rights of an offeree.

1.2 An offeror and persons acting in concert, who have previously acquired
voting shares or voting rights of an offeree within a period of six months
prior to the proposed partial offer is prohibited from making a partial offer
which will result in the offeror and persons acting in concert holding more
than 33% of the voting shares or voting rights of the offeree.

1.3 An offeror who makes any take-over offer for all voting shares or voting
rights not already held by the offeror which carry dual consideration (i.e. a
certain consideration is offered by the offeror for part of each holder of
voting shares or voting rights holding and a lower consideration for the
balance) must seek the SCs prior approval.

1.4 In relation to subsection 10(5) of the Code, the SC may grant approval for
purchases of the voting shares or voting rights of an offeree within 12
months from the end of the offer period where

(a) a partial offer has resulted in the offeror holding not more than
33% voting shares or voting rights of the offeree;

(b) in a rescue operation (following the criteria in paragraphs 17.3 and

17.4 above) the purchase is necessary for the offeror to gain
control of the offeree; or

(c) The purchase of the voting shares or voting rights are conducted
via on-market transaction and the purchase price is lower than the
offer price.

31
1.5 Where paragraph 10(7)(c) of the Code is applicable, the approval of the
holders holding more than 50% of the remaining voting shares or voting
rights not held by the offeror or persons acting in concert must be
obtained. Such approval must be signified by means of a separate box on
the Form of Acceptance and Transfer, being given by holders of voting
shares holding over 50% of the voting shares not held by the offeror and
persons acting in concert with it.

1.6 The SC may grant an exemption to an offeror from complying with the
requirement under paragraph 10(7)(c) of the Code if more than one
offeree shareholders holding in aggregate more than 50% of such class of
voting shares or voting rights have given their undertaking to accept the
offer and the SC is satisfied that such exemption, if given, would not
prejudice the interest of the other remaining shareholders of the offeree.

32
PART IV
ANNOUNCEMENTS, WRITTEN NOTICES AND DOCUMENTS TO
SHAREHOLDERS

Practice Note 11
SITUATIONS WHERE ANNOUNCEMENT IS REQUIRED

1.1 For purposes of subsections 11(1) and 11(2) of the Code, the following
situations require an announcement

(a) By a potential offeror, where

(i) negotiations or discussions are about to be extended to

include more than a very restricted number of people
(outside those who need to know in the companies
concerned and their immediate advisers), e.g. when a
potential offeror wishes to approach a wider group of
people, including to arrange financing for the take-over offer
(whether equity or debt), to seek irrevocable commitments
or to organise a consortium to make the take-over offer;

(ii) when a controlling shareholder negotiates with a potential

offeror, and

(A) the potential offeree becomes the subject of rumours

or speculations about a possible take-over offer
before the potential offeror makes an approach to the
board of the potential offeree;

(B) there is an unusual movement in the price of potential

offerees voting shares or voting rights; or

(C) there is a significant increase in the turnover volume

of the voting shares or voting rights of the potential
offeree; and

(D) there are reasonable grounds for concluding that the

actions of the controlling shareholder (whether
through inadequate security or otherwise) have
contributed to the situation; or

(iii) upon the signing of the sale and purchase agreement in the
case where an acquisition of voting shares or voting rights is

33
 made via a sale and purchase agreement, and the acquirer
would trigger a mandatory offer obligation; or

(b) By a potential offeree, where

(i) a company is subject to rumours, speculations or unusual

price movement or turnover volume of its voting shares or
voting rights and there are reasonable grounds for
concluding that the company is a potential target of a take-
over offer;

(ii) when the board of the potential offeree approaches an

acquirer to acquire a controlling stake in the potential
offeree and

(A) the potential offeree becomes the subject of rumours

or speculations about a possible take-over offer
before the potential offeror makes an approach to the
board of the potential offeree;

(B) there is an unusual movement in the price of potential

offerees voting shares or voting rights; or

(C) there is a significant increase in the turnover volume

of the voting shares or voting rights of the potential
offeree; and

(D) the number of acquirers to be approached is about to

be increased to include more than a very restricted
number of people.

1.2 An offeror shall announce his firm intention to make a take-over offer
within two months from his first preliminary announcement unless an
extension of time has been granted by the SC.

1.3 Under subsection 11(4) of the Code, there is no requirement for the
potential offeree to name the potential offeror in the brief announcement.

1.4 Following the announcement of a potential take-over offer and when the
potential offeror has been publicly named, the potential offeree may
request that the SC impose a time limit for the potential offeror to clarify
its intentions with regard to the possible take-over offer. If a time limit for
clarification is imposed by the SC, the potential offeror must, before the

34
 expiry of such time limit, make an announcement under subsection 11(6)
or 11(7) of the Code.

1.5 Announcement under subsections 11(1) to 11(6) of the Code is to be

made by way of-

(a) a press notice; and

(b) if the securities of the offeree or the offeror are listed on the
relevant stock exchange of Malaysia, to the stock exchange in
Malaysia.

1.6 The SC may grant an exemption from complying with the six-month
period under subsection 11(6) of the Code.

1.7 The announcement under subsection 11(7) of the Code should only be
made when a person is certain that he can and will implement the take-
over offer.

1.8 The following situations require an announcement under subsection 11(7)

of the Code

(a) when an acquirer triggers a mandatory offer obligation under

section 9 of the Code;

(b) when the sale and purchase agreement to acquire voting shares or
voting rights which will cause the acquirer to trigger a mandatory
offer obligation becomes unconditional; or

(c) upon entering into any agreement in relation to a scheme of

compromise, arrangement, amalgamation or selective capital
reduction, which will cause the acquirer to trigger a mandatory
offer obligation upon the implementation of the scheme.

1.9 All persons privy to any confidential information, relating to a take-over

offer or contemplated take-over offer, must treat the information as secret
and should take responsibility to maintain confidentiality of the
information. Advisers must advise or warn clients on the importance of
not communicating or divulging confidential information.

Written notice

2.1 For the purposes of paragraph 11(9)(f) of the Code, the terms and
conditions of a take-over offer may fall into the following categories

35
 (a) those requiring regulatory approval;

(b) where specific action is required to enable the take-over offer to

proceed including shareholders approval to undertake the take-
over offer; and

(c) those giving the offeror the opportunity to withdraw if there is

material adverse changes in the offeree, which is not dependant on
the opinion or within the control of the offeror and persons acting
in concert.

2.2 For an unconditional mandatory offer in an upstream entity, a written

notice to a downstream company is to be dispatched concurrently with the
dispatch of the written notice to the upstream entity.

2.3 For a voluntary offer and a conditional mandatory offer in an upstream

entity, a written notice of the mandatory offer to the downstream
company is to be dispatched upon the fulfilment of all conditions of the
offer in the upstream entity.

Another person to make a take-over offer

3.1 For the purposes of paragraph 11(11)(b) of the Code, the board of
directors of the offeree is required to make an announcement on the
status of its effort in seeking another person to make the take-over
offer

(a) by the 14th day from the date of the written notice under
subsection 11(8) of the Code; and

(b) by the 7th day from the date of the offer document under section
12 of the Code, if it fails to identify another person to make a take-
over offer after the announcement under subparagraph 3.1(a).

3.2 When the board of directors of the offeree fails to identify another person
to make a take-over offer after the period referred under paragraph 3.1, it
shall make a final announcement by the 7th day before the first closing
date of the offer to state whether another person making a take-over
offer has been identified or otherwise.

36
3.3 Where the board of directors of the offeree announces that it has found
another person to make a take-over offer, the offeror identified shall make
an announcement pursuant to subsection 11(7) of the Code.

Practice Note 12
OFFER DOCUMENTS

1.1 An offeror must ensure that

(a) the market is well-informed of any conflict of interest situation in a

take-over offer;

(b) statements or advertisements issued are unbiased; and

(c) interested parties expressing any opinion or issuing any statement

with regard to the take-over offer do so in compliance with the
Code or ruling made by the SC.

1.2 A conflict of interest may arise where

(a) a person is a common director in the offeror and the offeree;

(b) a director of the offeree has more than 20% voting shares or
voting rights in the offeror, or a director of the offeror has more
than 20% voting shares or voting rights in the offeree, held either
directly or indirectly;

(c) there is a cross-holding of more than 20% of the voting shares or

voting rights between the offeror and the offeree; or

(d) a person holding more than 20% of voting shares or voting rights
in both the offeror and the offeree.

1.3 Subsection 12(3) of the Code requires the offeror to dispatch the offer
document to the offeree shareholders. Under this requirement, the offeror
must provide, among others, the form of acceptance and transfer for
securities of offeree and the procedures for acceptance of the take-over
offer, together with the offer document.

1.4 Where an offeror intends to invoke the compulsory acquisition provision,

the offeror shall state in the offer document its intention regarding the
outstanding convertible securities.

37
Approval by other relevant authorities

2.1 Where a mandatory offer has been announced under subsection 11(7) of
the Code and the offer requires approvals of other relevant authorities,
the offeror must ensure that all the necessary approvals are obtained as
soon as practicable before dispatching the offer document. If the
necessary approvals cannot be obtained in time, an extension of time to
dispatch the offer document should be sought from the SC.

Exemption from dispatching offer document

3.1 The SC may consider an application for an exemption from dispatching a

offer document under section 12 of the Code, if

(a) an offeree is an unlisted company;

(b) the offeree has no objection to the offeror making the application;

(c) the application for an exemption is submitted by the offeror to the

SC before triggering the mandatory offer obligation;

(d) there are less than 30 remaining holders of voting shares or voting
rights of the offeree;

(e) the remaining voting shares or voting rights of the offeree is 33%
or less; and

(f) the value of the remaining voting shares or voting rights of the
offeree based on the offer price is less than RM10 million.

3.2 An offeror who has been granted an exemption under paragraph 3.1 must
undertake the take-over offer by way of an offer letter which has been
cleared by the SC.

3.3 An offeror who has been granted an exemption under paragraph 3.1 must
post the offer letter to the remaining holders of voting shares or voting
rights of the offeree within 14 days from the date of the notice under
subsection 11(8) of the Code.

38
Practice Note 13
MANAGEMENT OF THE AFFAIRS OF AN OFFEREE

1.1 The disposal of the voting shares or voting rights between the offeror and
persons acting in concert shall not contain any favorable condition which
is not being extended to all offeree shareholders.

1.2 The Commissions consent is not required for an offeror to appoint a

person to the board of directors of an offeree

(a) after the sending of an offer documents; and

(b) before the sending of an offer documents

(i) where the offeror and the person acting in concert with the
offeror already hold more than 50% of the voting shares or
voting rights in the offeree in a mandatory offer; and

(ii) where there is no acceptance condition attached to a

voluntary offer.

Practice Note 14
OFFEREE BOARD OF DIRECTORS COMMENTS ON THE TAKE-OVER
OFFER

1.1 Where a take-over offer is made to holders of call warrants, the board of
directors of the offeree is not obliged to provide its comment with regard
to the take-over offer to the holders of call warrants.

1.2 Interested directors of an offeree may participate in the discussion on the

take-over offer but shall abstain from voting or making recommendation
on the take-over offer.

1.3 The board of directors of the offeree must provide a firm recommendation
on whether the take-over offer should be accepted or rejected and the
director who is also a shareholder of the offeree must act in accordance
with the boards recommendation, unless the director has a divergent
view.

1.4 Where any member of the board of directors of the offeree has a
diverging view, the director must disclose his diverging view in the boards
circular, including the basis for such view and must act consistently with
his view.

39
1.5 A director with a diverging view shall consult the SC if he intends to act
contrary to his earlier views.

1.6 Where there are diverging views between the board and the independent
adviser on the merits of a take-over offer or the recommendation being
made, the board is required to highlight such diverging views to the
shareholders and provide explanation, including the basis for acceptance
or rejection.

1.7 An offeree director who is also a shareholder of the offeree is required to

make a recommendation on the take-over offer unless this director is
prohibited from doing so under subsection 14(6) of the Code and he falls
under paragraph 1.2 of Practice Note 12.

1.8 In a revised take-over offer, the board of directors of an offeree is

required to

(a) announce by way of

(i) a press notice; and

(ii) if the securities of the offeree or the offeror are listed on the
relevant stock exchange of Malaysia, to the stock exchange
in Malaysia,

as to whether its earlier comments, opinions and recommendations

in relation to the original take-over offer to its shareholders have
changed; and

(b) if the revised take-over offer results in a change in its comments,

opinions and recommendations on the original take-over offer,
circulate its revised comments, opinions and recommendations on
the original take-over offer to every offeree shareholder, including
all offeree shareholders who have accepted the original take-over
offer, within 7 days from the date of the written notice under
paragraph 24(1)(b) of the Code.

40
Practice Note 15
INDEPENDENT ADVICE CIRCULAR

1.1 Before undertaking a reverse take-over offer under subsection 15(3) of

the Code, the offeror and his adviser shall consult the SC at the earliest
opportunity.

1.2 For the purposes of subsection 15(7) of the Code, an independent adviser
is required to submit a comprehensive draft independent advice circular
for the SCs consideration by the 20th day from the date of the notice.

1.3 In a revised take-over offer, an independent adviser is required to

(a) announce by way of

(i) a press notice; and

(ii) if the securities of the offeree or the offeror are listed on the
relevant stock exchange of Malaysia, to the stock exchange
in Malaysia,

as to whether its earlier comments, opinions and recommendations

in relation to the original take-over offer to its shareholders have
changed; and

(b) circulate its revised comments, opinions and recommendations on

the original take-over offer to every offeree shareholder, including
all offeree shareholders who have accepted the original take-over
offer, within 7 days from the date of the written notice under
paragraph 24(1)(b) of the Code, if the revised take-over offer
results in a change in its comments, opinions and recommendations
on the original take-over offer.

1.4 For the purposes of subsection 15(11) of the Code, an independent

adviser must not

(a) hold 10% or more of the voting shares or voting rights in the
offeror or the offeree at any time during the last 12 months from
the beginning of the offer period;

(b) have a business relationship with the offeror or the offeree, at any
time during the last 12 months from the beginning of the offer
period that contributes to more than 10% in revenue or profit of
the adviser;

41
 (c) have a representative on the board of directors of the offeror or the
offeree;

(d) have a representative from either the offeror or the offeree on the
board of directors of the independent adviser;

(e) be involved in the financing of the take-over offer;

(f) be a substantial creditor of either the offeror or the offeree, based

on the latest audited accounts or the latest management accounts,
if the latest audited accounts is more than six months;

(g) have a financial interest in the outcome of the take-over offer other
than outlined in paragraphs (a)(e) above; or

(h) be a main adviser in planning, acquisition, disposal or restructuring

of the offeror or the offeree at any time during the period of 12
months prior to the beginning of the offer period.

1.5 A person is deemed to be a substantial creditor for the purposes of

subparagraph 1.4(f), if

(a) the loan (including hire purchase, leasing and Islamic financing)
extended by the person to the offeror or the offeree represents
more than 10% of the loan outstanding in the offeror or the
offeree, six months prior to the beginning of the offer period until
the close of the take-over offer;

(b) the loan (including hire purchase, leasing and Islamic financing)
extended by the person to the offeror or the offeree, represents
more than 10% of the latest audited shareholders funds of the
adviser six months prior to the beginning of the offer period until
the close of the take-over offer; or

(c) the person is a lead banker in a syndicated loan extended to the

offeror or the offeree, in the last three years prior to the beginning
of the offer period until the close of the take-over offer.

1.6 The assessment under paragraph 1.4 is extended to the persons acting in
concert with the offeror, persons acting in concert with the offeree and
the persons acting in concert with the proposed adviser.

42
1.7 A main adviser who has been actively advising a company and
subsequently becomes an offeree, may still be eligible to act as an
independent adviser for the offeree on the offer provided that the offeror
and persons acting in concert are not directors or shareholders with more
than 20% interest in the offeree.

1.8 Where an adviser has declared its independence following subsection

15(11) of the Code, it must ensure that it remains independent
throughout the offer period.

1.9 Companies within the group of the independent adviser which are
connected persons under paragraphs 33(4)(b) or 39(5)(b) of the Code are
not prohibited from dealing for the accounts of their investment clients
subject to adherence to the principles of the Code. However, companies
within the group of the independent adviser should not purchase voting
share and voting rights of the offeror or offeree for their own accounts
subsequent to its appointment as an independent adviser and until the
closing of the take-over offer.

1.10 If an adviser is of the opinion that, notwithstanding its compliance with

the criteria in paragraph 1.4, its ability to act as an independent adviser
will be compromised in any way, it should refrain from acting as an
independent adviser.

Exemption from requirement to appoint an independent adviser

2.1 The SC may only consider an application for an exemption from appointing
an independent adviser after

(a) the offeror has been granted an exemption from dispatching an

offer document;

(b) the offeree shareholders have given written confirmations that they
have no objection to such a request for an exemption; and

(c) the directors of the offeree have confirmed in writing that the
offeree shareholders interests will not be prejudiced as a result of
the exemption.

43
Practice Note 16
PROFIT FORECAST AND ASSET VALUATION

1.1 The SC may consider an application by an offeree to carry out an informal

valuation, where the offeree has difficulty in obtaining within the time
available, an opinion of an independent named valuer to support an asset
valuation as provided under paragraph 16(4)(b) of the Code if the SC is
satisfied that

(a) the interest of the holders of voting shares or voting rights is best
served by permitting an informal valuation; and

(b) the informal valuation is substantiated by relevant indicators best

known to the board of directors of the offeree.

1.2 The time required for a valuation is not, however, a ground for an
application for an extension of time to dispatch the offer document or
independent advice circular.

1.3 An application to the SC for consideration under paragraph 1.1 is to be

made at the earliest opportunity after the board of directors of the offeree
has received a written notice of a take-over from the offeror. The
application should include full details of the take-over offer and the
rationale for the exemption sought.

44
PART V
TERMS OF TAKE-OVERS

Practice Note 17
ACCEPTANCE CONDITIONS

1.1 Where an offeror and persons acting in concert already hold more than
50% of the voting shares or voting rights of the offeree prior to making a
mandatory offer, the mandatory offer must not be subjected to any
acceptance condition or other condition.

1.2 A voluntary offer may include other conditions in addition to an

acceptance condition. However, where an offeror already holds more than
50% of voting shares or voting rights in the offeree, the voluntary offer
need not be subject to an acceptance condition.

1.3 In a voluntary offer, an offeror shall not aggregate the voting shares or
voting rights of persons acting in concert with him in determining the level
of acceptance, unless the person acting in concert with him is a joint
offeror for the voluntary offer.

1.4 An offeror who wish to have a higher acceptance level than 50% plus 1
voting share or voting right as allowed under subsection 17(5) of the Code
must clearly state the level of acceptances upon which the take-over offer
is conditional in the offer document.

1.5 Where an offeror imposes an acceptance level that is higher than 50%
plus 1 voting share or voting right, the offeror may only revise the initial
acceptance level to a lower level if

(a) the lower level is at least more than 50% of the voting shares or
voting rights of the offeree as required by subsection 17(4) of the
Code;

(b) the take-over offer is open for not less than 14 days following the
revision; and

(c) the offeror has stated in the offer document that he reserves the
right to revise the acceptance level to a lower level.

1.6 The offeror and his adviser shall consult the SC prior to revising the
acceptance to a lower level.

45
1.7 For the purposes of paragraph 1.5, the offeror is required to immediately
announce and provide a written notice to the offeree shareholders.

1.8 Where a take-over offer has been declared unconditional, the offer shall
remain unconditional throughout the offer period.

Practice Note 18
CONDITIONS OF VOLUNTARY TAKE-OVER OFFERS

1.1 An offeror of a voluntary take-over offer must identify and disclose all
conditions of the take-over offer when the firm intention to make an offer
is announced. The offeror is prohibited from attaching any new conditions
to the offer once the firm intention to make the offer is announced unless
consent is obtained from the SC.

Practice Note 21
OFFER PRICE AND SETTLEMENT OF CONSIDERATION

1.1 Where a mandatory offer is triggered via acquisition of voting shares or

voting rights through the exercise of rights or options, the offer price shall
be established based on the higher of

(a) the average of the high and the low of the market prices of the
voting shares or voting rights of the offeree on the day where the
conversion notice was submitted to the offeree. Where such day is
not a market day, the average of the high and the low of the
market price of the last market day shall be referred to; or

(b) the cost of such securities together with any costs of exercise, if
the rights or options were acquired in the 6 months before the
mandatory offer obligation arose.

1.2 An offeror and his adviser shall consult the SC, where the offer price of
the voting shares, voting rights or other securities of an offeree for a
voluntary take-over offer will be at a discount of 50% or more to the
market price of the securities.

1.3 If non-listed voting shares have been acquired by way of exercise of rights
or options, the offer price will be established based on the higher of the

(a) net tangible assets, price earnings ratio, discounted cash flow or
other relevant supported valuation; or

46
 (b) cost of such securities together with any costs of exercise.

1.4 For a mandatory offer, an offeror must make an application to the SC for
any downward adjustment to the offer price. The SC in considering such
application may take into account factors including

(a) the size and timing of the purchases by the offeror and persons
acting in concert;

(b) the view of the board of directors of the offeree; and

(c) whether any of the voting shares or voting rights have been
purchased from directors or persons connected with the offeror or
the offeree.

1.5 When holders of voting shares or voting rights of a class that is subjected
to the take-over offer are entitled under the take-over offer to retain a
dividend declared by the offeree but not yet paid, an offeror, in
establishing the offer price, may deduct the net dividend to which such
holders are entitled from the highest price he paid.

1.6 When an offeree undertakes a share consolidation, share split, or further

issue of shares, i.e. via rights, bonus issues, prior to or during the offer
period, the offeror in establishing the offer price may adjust the highest
price he paid to reflect the new voting shares or voting rights issued
following the share consolidation, share split, or further issue of shares.

1.7 If a take-over offer is to be made for voting shares or voting rights of a

listed downstream company, the offer price will be based on the higher of
the

(a) volume weighted average traded price of the downstream company

for the last 20 market days before the announcement of the take-
over offer made under subsection 11(7) of the Code;

(b) proportion of the price paid for the upstream entity over the
interest in the downstream company; or

(c) highest price paid for the voting shares or voting rights of the
downstream company in accordance with section 21 of the Code.

1.8 If a take-over offer is to be made for voting shares or voting rights of an

unlisted downstream company, the offer price may be based on the net

47
 tangible assets, net assets or other methods as long as the offer is fair to
the shareholders of the offeree.

1.9 Where there are no transaction for the voting shares or voting rights of
the downstream company in the last six months prior to a take-over offer,
an offeror has to provide the basis of the offer price of the downstream
company. If the offeror is in doubt, prior consultation with the SC is
required.

1.10 Where there is a share buy back scheme, the offer price is based on the
higher of the

(a) highest price paid by the offeror or persons acting in concert for
the voting shares or voting rights of the offeree in the six months
before triggering a mandatory offer obligation; or

(b) highest price paid by the offeree for its own voting shares or voting
rights in the six months before triggering a mandatory offer
obligation.

Practice Note 22
NATURE OF CONSIDERATION

1.1 For the purposes of subsections 22(2) and 22(3) of the Code

(a) the highest cash sum to be offered shall exclude stamp duty and
commission paid for acquiring such voting shares or voting rights;
and

(b) the calculation of the cash sum shall be based on the value of the
securities at the time of the purchase where the acquisition of
voting shares or voting rights by an offeror and persons acting in
concert is by way of exchange for securities.

1.2 For the purposes of paragraph 22(3)(c) of the Code, the SC may require a
cash alternative to be provided by the offeror where

(a) one remaining shareholder of the offeree holds more than 50% of
the remaining voting shares or voting rights of the offeree (other
than those held by the offeror and persons acting in concert); or

(b) a take-over offer is made to privatise a company.

48
1.3 For the purposes of subsection 22(4) of the Code, the independent valuer
must satisfy the criteria as set out in paragraph 1.4 of Practice Note 15.

49
PART VI
TIMING OF TAKE-OVER OFFERS

Practice Note 25
CLOSING OF TAKE-OVER OFFERS

1.1 Announcement of an extension to the first closing date of a take-over

offer must be made at least two days before the first closing date and
shall be open for a period of at least 14 days from the said first closing
date.

1.2 Any subsequent extension of time of the closing date shall be announced
at least two days before the closing date and shall be open for a period of
at least 14 days from the announcement.

1.3 For the purposes of subsection 25(7) of the Code, the alternative form of
consideration refers to other than cash consideration, such as share
exchange, exchange of convertible loan stocks etc.

Practice Note 28
EVIDENCE OF ABILITY TO IMPLEMENT TAKE-OVER OFFER

1.1 A financial adviser may make financial arrangement including underwriting

or placement of the offeree shares with a third party for the payment of
the acceptances when discharging his responsibility under section 28 of
the Code.

1.2 Where cash consideration for the offeree shares is satisfied by the
financial adviser or the third party, the acceptance should be included in
computing the level of acceptances under subsections 17(2) or (4) of the
Code.

Practice Note 29
FAVOURABLE DEALS

1.1 The provision of section 29 of the Code applies to parties having indirect
interests in the offeree share.

50
PART VII
OBLIGATION OF OFFEROR

Practice Note 30
COMPARABLE TAKEOVER OFFERS FOR MORE THAN ONE CLASS OF
SHARE CAPITAL

1.1 A comparable offer need not necessarily be an identical offer. In the case
of take-over offers involving two or more classes of listed voting shares or
voting rights, the ratio of the offer values should normally be equal to the
ratios of the weighted average market price of the listed equities within
three months prior to the beginning of the offer period.

1.2 An offeror may make an application for an exemption from complying with
paragraph 1.1 if advisers of the offeror and the offeree are both able to
justify to the SC on the basis and reasonableness of the new ratio. The SC
in considering such application may take into account factors including
whether

(a) the remaining holders of voting shares or voting rights of the

offeree will be treated fairly in the course of or as a result of a
take-over offer;

(b) the rights of the control is or will be exercised in good faith; and

(c) all holders of voting shares or voting rights of the same class of the
offeree will be treated similarly by the offeror.

1.3 Where a take-over offer is made for non-voting non-equity shares, a

comparable offer for voting shares or voting rights of the offeree is not
required.

Practice Note 31
TREATMENT OF CONVERTIBLE SECURITIES

1.1 For purposes of subsection 31(1) of the Code, an appropriate offer may
be effected by way of a scheme approved at a meeting of the holders of
the convertible securities.

1.2 A comparable offer price for convertible securities shall be based on the
offer price for the voting shares or voting rights, less the exercise price of
such convertible securities.

51
1.3 When a take-over offer is made to an offeree and there are outstanding
call warrants on the offeree, under the SCs Guidelines on Issuer Eligibility
Structured Warrants, it is the responsibility of the issuer of the call
warrants to inform the call warrant holders on the take-over offer, and to
ensure that necessary information on the take-over offer is received by
the call warrant holders in a timely manner.

Practice Note 32
COMPULSORY ACQUISITION

1.1 An offeror is required to make an announcement when the offeror and the
persons acting in concert have acquired amounts not less than nine-tenths
value of all the offer shares in the offeree.

1.2 Where an intention to invoke section 222 of CMSA is disclosed in the offer
document, the offeror shall make an announcement when he becomes
eligible to invoke the compulsory acquisition, by way of

(a) a press notice; and

(b) if the securities of the offeree or the offeror are listed on the
relevant stock exchange of Malaysia, to the stock exchange in
Malaysia.

1.3 The offeror must make another announcement on whether he is still

eligible to undertake the compulsory acquisition at the close of the take-
over offer.

1.4 For the purposes of subsection 222(2) of CMSA, an offeror

(a) is required to provide to a dissenting shareholder a written

statement of the names and addresses of other dissenting
shareholders within three market days from the date of receiving
the demand; and

(b) shall not invoke the compulsory acquisition within 14 days after
providing the written statement.

1.5 Where an offeror has entered into an agreement to acquire the voting
shares or voting rights before the offer period, such voting shares or voting
rights, shall be excluded from being considered as acceptance for the

52
 purpose of compulsory acquisition regardless whether the agreement has
become unconditional or otherwise during the offer period.

1.6 Where the offeror intends to carry out a compulsory acquisition as

provided for under section 222 of the CMSA, the offeror must consult the
SC before making an announcement of the offer under section 11 of the
Code.

Practice Note 33
SALES AND DISCLOSURE OF DEALINGS BY OFFEROR DURING OFFER
PERIOD, ETC

1.1 A nominee company who is a bare trustee of a pool of beneficial owners

of voting shares or voting rights in the offeror and does not have any
discretionary dealings for such shares, is excluded from subsection 33(4)
of the Code. However, such exclusion will not be applicable if the nominee
company's own beneficial interest is 5% or more of the voting shares or
voting rights of the offeror.

Practice Note 34
RESTRICTIONS IF TAKE-OVER OFFER IS WITHDRAWN, LAPSE OR FAIL

1.1 When a take-over is withdrawn, lapsed or failed, all acceptances received

under the take-over offer must be returned immediately by the offeror.

Practice Note 35
RESTRICTION IF TAKE-OVER OFFER IS SUCCESSFUL

1.1 For the purposes of section 35 of the Code, an acquisition is not

considered to be on more favourable terms than the previous take-over
offer if-

(a) it is an on-market acquisition; and

(b) the acquisition is not prearranged.

53
PART VIII
OBLIGATION OF OFFEREE

Practice Note 38
FRUSTRATION OF OFFERS BY BOARD OF DIRECTORS OF THE OFFEREE

1.1 The SC may approve an application for an exemption from the

requirements of paragraph 38(2)(a) of the Code where

(a) the issuance of the new voting shares or voting rights arises from
the exercise of convertible securities;

(b) the issuance of the new voting shares or voting rights will cause
the person who exercise the convertible securities to trigger a
mandatory offer obligation; and

(c) as a result, the person undertakes a competing offer at a higher

offer price than that of the existing take-over offer.

1.2 For the purposes of subsection 38(3) of the Code, the SC may approve an
application for an exemption if the board of directors of the offeree is able
to demonstrate that the action to be taken is acceptable to the offeror and
is in the ordinary course of business of the offeree.

1.3 For the purposes of paragraph 38(3)(b) of the Code, special

circumstances exist if the offeree has made certain commitments and the
non-performance of such commitments would adversely impact the
offeree, such as

(a) avoidance of adverse financial effect based on circumstances

known to the offeree;

(b) compliance with legislation or Government directives; or

(c) threat of legal action due to non-performance of the commitment

even though a formal contract has not been entered into.

1.4 For the purposes of subsection 38(4) of the Code, the SC may take the
following factors in determining whether an asset is material

(a) whether the value of the assets to be disposed or acquired, based

on the latest audited accounts, is 10% or more compared with the

54
 net tangible assets of the offeree (on a consolidated basis, if
applicable);

(b) whether the aggregate value of the consideration to be received or

given is 10% or more, compared with the net tangible assets of the
offeree (on a consolidated basis, if applicable); or

(c) whether the net profits from the disposal or acquisition of assets
(after deducting all charges and taxation but excluding
extraordinary items) is 10% or more compared with the total net
profit of the offeree.

1.5 Notwithstanding paragraph 1.4, a relative value lower than 10% may be
considered material if, in the opinion of the SC, the assets to be
disposed could adversely affect the earnings capability of the offeree that
would render the offeree less attractive to the offeror.

1.6 Where the board of directors of the offeree undertakes several

transactions in relation to its assets which separately are not of material
amount, the SC may aggregate such transactions as a factor in
determining whether the assets in relation to these transactions are of
material amount.

Practice Note 39
DISCLOSURE OF DEALINGS BY OFFEREE

1.1 A nominee company who is a bare trustee of a pool of beneficial owners

of voting shares or voting rights in the offeree and does not have any
discretionary dealings for such shares, is excluded from subsection 39(4)
of the Code. However, such exclusion will not be applicable if the nominee
company's own beneficial interest is 5% or more of the voting shares or
voting rights of the offeree.

Practice Note 43
EXTENSION OF TIME

1.1 For the purposes of section 43 of the Code, in considering granting the
extension of time, the SC may take into consideration the following

(a) justification provided for an extension of time;

55
 (b) the effort demonstrated by the offeror in trying to comply with the
prescribed timeframe;

(c) whether the delay is beyond the control of the offeror;

(d) whether the interest of the remaining shareholders will be affected

arising from the delay; and

(e) the reasonableness of the duration of the extension of time applied

for.

Practice Note 44
APPLICATION OF THE CODE

1.1 An offeror may apply for an exemption from the following provisions of
the Code

(a) subsection 11(7)-(14) on announcements;

(b) section 12 on offer document;

(c) section 14 on offeree board of directors comments on the take-

over offer;

(d) section 17 on acceptance condition;

(e) section 18 on conditions of voluntary take-over offers;

(f) section 19 on fulfillment of conditions;

(g) section 22 on nature of consideration;

(h) section 23 on duration of take-over offer;

(i) section 24 on revisions of a take-over offer;

(j) section 25 on closing of take-over offers;

(k) section 26 on announcements of acceptances; or

(l) section 37 on resignation of directors.

56
1.2 The SC, may grant an exemption from complying with the provisions
under paragraph 1.1 for take-over offer effected through a scheme of
arrangement, compromise, amalgamation or selective capital reduction,
if

(a) an offeror and the persons acting in concert collectively hold more
than 50% of voting share or voting right of the offeree;

(b) SC has consented to a circular to the shareholders of the offeree by

the board of the offeree;

(c) SC has consented to an explanatory statement prepared by the

offeror containing all information and statement specified under
section 12 and the First Schedule of the Code;

(d) SC has consented to an independent advice circular containing all

information and statement specified under section 15 and the
Second Schedule of the Code;

(e) an independent adviser is appointed to advise the shareholders of

the offeree, and the independent adviser satisfies the requirements
as provided under paragraph 1.4 of Practice Note 15;

(f) the scheme of compromise, arrangement, amalgamation or

selective capital reduction when implemented would comply with
the provisions of the Code and these Practice Notes; and

(g) all interested parties must abstain from voting on the scheme of
compromise, arrangement, amalgamation or selective capital
reduction.

1.3 Where take-over offer is effected by way of a scheme of arrangement,

compromise, amalgamation or selective capital reduction the following
requirements are to be satisfied

(a) the scheme is approved by at least 50% in number of shareholders

and 75% in value to the votes attached to the disinterested shares
that are cast either in person or by proxy at a duly convened
meeting of the holders of the disinterested shares; and

(b) The value of votes cast against the resolution to approve the
scheme at such meeting is not more than 10% of the votes
attaching to all disinterested shares of the total voting shares of the
offeree.

57
1.4 Where an offeror has been granted an exemption by the SC under this
practice note but is unable to implement the scheme of arrangement,
compromise, amalgamation or selective capital reduction within twelve
months from the date of the exemption, the applicant shall comply with
the requirements under subsection 34(2) of the Code.

1.5 The offeror and his adviser must consult the SC at the earliest opportunity
on the application of section 44 of the Code before undertaking any
proposed scheme of arrangement, compromise, amalgamation or selective
capital reduction.

58