By Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, at the meeting with MCA President and Transport Minister, Datuk Dr.Ling Liong Sik, at MCA Headquarters on the KSM-MPHBIF on Tuesday, 27th March 1990 at 10 a.m.:
The DAP’s position on KSM-MPHBIF has always been clear and unequivocal right from the beginning.
The KSM-MPHBIF was conceived as a one-counter unit trust where each unit was equal to one share in MPHB. In fact, when the KSM-MPHBIF was launched about 10 years ago, the selling line by MCA leadership was that loyal MCA members should ensure that the MCA project, the Multi-Purpose Holdings Bhd. (MPHB) should be protected from any possible take-over. As KSM had only 28.9 per cent stake in MPHB, which was not enough to ward off any take-over bid of MPHB, the KSM-MPHBIF was born to ask loyal MCA member in the KSM to contribute to an Investment Trust Fund for MPHB shares amounting to 19.7 per cent stake which together with the 28.9 per cent stake in MPHB shares would ensure that MPHB would always be un the control of the MCA leadership.
This beautifully-conceived plan collapsed as it did not take into account that the danger could come from the rot inside the KSM and MPHB, for the investment of 250,000 KSM co-operative members and the savings of the 166,000 depositors in KSM finance branches, were used more to serve the political objectives of party factions in the MCA than the best interest of the co-operative members and depositors. The same story applied to MPHB where officers were appointed on the basis of their factional loyalties in the MCA rather than on their professional competence and managerial excellence.
It was only a matter of time before KSM and PMHB ran into trouble and crisis, with KSM in receivership and MPHB taken over by Kamunting, which outbid Hume, 10 months ago in May 1989.
However, the receivership of KSM should never have affected the status of the KSM-MPHBIF, for the 19.7 per cent stake in the MPHB was not the property of KSM, but was held in trust by the KSM on behalf of 50,398 unitholders. KSM was purely the Manager of the KSM-MPHBIF- a role which should be taken over by the KSM Receivers when the MCA co-operative was put into receivership.
After KSM was put into receivership by Bank Negara in 1986, the MCA President, Datuk Dr.Ling Liong Sik, had repeatedly claimed that the MCA was finding a solution to the KSM-MPHBIF problem, although the people had wondered why the MCA leadership was taking so long to resolve it as the legal status of the ownership of the 19.7 per cent stake in MPHB by the 50,398 Investment Fund unitholders was never in question.
KSM might be put into receivership, resulting in the sale of KSM’s 28.9 per cent stake in MPHB to Kamunting Corporation Bhd. (KSB), but the 19.7 per cent stake of MPHB owned by 50,398 KSM-MPHBIF unitholders could never be put into receivership, or sold without their consent, as they were never the property of KSM, but had always been the property of the 50,398 unitholders.
When the KSM Receivers announced on March 14 the ‘share-for-share’ formula, whereby one ordinary share of MPHB would be exchange for every one Investment Unit, there was nothing great or extraordinary for it was something which was the right of the unitholders from the very beginning of their investment, and which should never have been jeopardised in an manner when KSM was placed in receivership. This is a legal and property right of the 50,398 unitholders which nobody could take away.
We do not oppose the ‘share-for-share’ exchange scheme announced by the Receivers and approved by the MCA leadership, although it could have questioned whether considering the holding costs of the investments of the 50,398 unitholders for the past 10 years, and the interests that were forgone, such a ‘share-for-share’ exchange was fair to the unitholders.
Our objection and difference with the MCA leadership in connection with the ‘share-for-share’ formula is how the 50,398 unitholders could get the best deal and highest price for their 110-year investment after the exchange of their investment units into MPHB shares.
Under the MCA approved formula, after the exchange of the MPHB shares for the Investment Fund units, the 147.98 million MPHB shares (representing 19.7 per cent stake in MPHB) would be distributed to the 50,398 unitholders, who can decide whether to keep or sell them on the open market.
If the 147.98 million MPHB shares are dumped on the open market for retail sale, it is bound to depress the price of MPHB shares. At present, the price of MPHB is in the region of $1.50 per shares. If the 147.98 million MPHB shares are dumped on a stock market which is on a downward cycle, its price may drop to $1 per share or even lower.
On the other hand, if the 19.7 per cent stake of 147.98 million MPHB shares are sold in one block, it could fetch a premium price. Kamunting paid $2.05 a share to acquire KSM’s 28.9 per cent stake in MPHB 10 months ago last May. KSM Receiver Mr.Khoo Eng Choo had said that three companies were interested in his block of 19.7 per cent stake in MPHB. He said not quote the price concerned although it is believed to be over $2 per share.
For very 10 per cent fall in the price of MPHB, the 50,398 unitholders stand to lose about $15 million for the entire block of 147.98 million MPHB shares.
Thus, if the 147.98 million MHPB shares are sold by retail individually at say $1 per share instead of at the premium price of $2 per share in one block, the 50,398 unitholders stand lose $147.98 million. Is the MCA leadership prepared to reimburse the 50,398 unitholders for such a colossal loss?
Our proposal therefore is that in the best interest of the 50,398 unitholders, after the exchange of the Investment Units into 147.98 million MPHB shares, at 19.7 per cent stake of MPHB shares should be sold in one block at premium price at over $2 a share.
The KSM Receivers have made an application to the Kuala Lumpur High Court to amend the Regulations of the Investment Fund “to provide for the rules and procedures for the proper and orderly dissolution of the Fund.”
The KSM Receivers should amend its present application to include a provision to entrust and empower the Manager of the Fund, after the exchange of the Investment Fund units into MPHB shares, to sell the 147.98 million MPHB shares in one block at premium price, and to distribute e proceeds of such sake to the unitholders.
The KSM-MPHBIF is not an ordinary trust fund. It is a trust fund with a higher collective purpose, to mobilise the funds of the ordinary Chinese people in the towns and new villages to safeguard the MPHB in the best interest of both the investors and the community.
For 10 years, the 50,398 unitholders had loyally responded to the appeal of the MCA leadership to pool their hard-earned life-savings to protect the MPHB form falling to of MCA control. But the MCA leadership had failed the 50,398 unitholders, for the purpose for which the KSM-MPHBIF was established had been defeated by the criminal breach of trust, abuse of power, mismanagement and negligence of MCA leaders.
Now that the Investment Fund is to be dissolved, the principle on which it was established should similarly be observed in its dissolution: namely, their collective resources should be mobilised to ensure that the 50,398 unitholders could get the best deal and highest price for the 147.98 MPHB shares, through its block sale at a premium price.
Otherwise, the MCA leadership would have further failed the 50,398 unitholders, prepared only to mobilise their resources and funds to establish the Fund 10 years ago, but no prepared to fully utilise their mobilised resources in the dissolution of the Fund to fetch the highest possible returns to the unitholders.
We must record our surprise and shock that the MCA leadership is not prepared to openly accept and support the principle that it is in the best interests of the 50,398 unitholders that the 147.98 million MPHB shares should be sold in one block at a premium price.
As the MCA leadership has claimed that it was involved in the process of the formulating the scheme announced by the KSM Receivers to resolve the KSM-MPHBIF issue, the MCA leaders must be held responsible for their failure to include in the scheme the provision that the 147.98 million MPHB shares could be sold en bloc at a premium price after the ‘share-for-share’ exchange. This raises the pertinent question: Whose interests are the MCA leaders serving- the 50,398 unitholders or somebody else?
We are even more surprised and shocked when MCA national leaders, including MCA President, Datuk Dr.Ling LIong Sik, publicly claimed that our proposal that the 50,398 unitholders should get the highest price available for the 19.7 per cent stake of MPHB shares through block sale could lead to the ‘destruction’ of the entire ‘share-for-share’ exchange formula. How is this possible, when nobody objects to the ‘share-for-share’ exchange, but only whether the 147.98 million MPHB shares should be sold en bloc at premium price, or sold individually by retail at very much lower price?
I had yesterday asked for the presence of the Kamunting Corporation Bhd. (KCB) Chief Executive, T.K.Lim, at this meeting, for there is anyone who would object to the sale of 147.98 million MPHB shares en bloc at premium price, then he would be the likely candidate.
After acquiring the KSM’s 28.9 per cent stake in MPHB in May last year, KCB had also initiated a series of highly-controversial asset-stripping exercises and cross-shareholdings in the Kamunting-Multi-Purpose Groups, and it has been estimated that the Multi-Purpose Group of companies currently own about 60 to 65 per cent of Kamunting.
It is only to be expected that KCB may regard any take-over of the 19.7 per cent stake of MPHB owned by the the 50,398 unitholders by any other company as a threat not only to its control of Multi-Purpose Group, but to Kamunting itself.
T.K.Lim has good reason to oppose any block sale of the 19.7 per cent stake of MOHB, but what good reason has the MCA national leaders to oppose the block sale of the 147.98 MPHB shares?
I can understand T.K.Lim opposing any block sale of the 19.7 per cent stake of MPHB, but I cannot understand how MCA national leaders could, by their action if not by words, take a position opposing the block sale of the 147.98 million MPHB shares.
Is the MCA national leadership sacrificing the interests of 50,398 unitholders, who had loyally invested their life-savings to protect the MCA, the KSM and MPHB in the past 10 years, for one person?
This is why I have asked for the presence of T.K.Lim, so that he could explain whether he opposes the sale of the 147.98 million MPHB shares in one block at premium price for the unitholders.
In this connection, the MCA President should explain whether there was a secret agreement during the time of the KCB purchase of KSM’s 28.9 per cent stake of MPHB that the 19.7 per cent stake of MPHB represented by the KSM-MPHBIF would not be sold in one block at premium price, so as not to jeopardise Kamunting’s control of MPHB?
We have come to MCA Headquarters to meet the MCA President to discuss the KSM-MPHBIF in response to his public invitation that I should give him my suggestions as to how to get the best possible deal for the 50,398 unitholders. I have not come here to ask Dr.Ling to transmit my proposal to Bank Negara, for I can do this myself, if this is at all useful.
What we have come is to find out why the MCA national leadership has not on its own proposed the sale of the 147.98 million MPHB shares en bloc at premium price for the best interests of the 50,398 unitholders and its refusal to publicly endorse such a position.