The 9.7 million EPF contributors should heed the advice of the Prime Minister and speak out against the imprudent or mismanagement of the EPF funds with the latest case of  over RM92.208 million losses suffered by EPF as a result of its RM269 million investment in 81.6 million Time dotCom shares

Media Conference Statement 
by Lim Kit Siang

(Penang, Friday): Two Sundays ago, on 4th March 2001, the Prime Minister, Datuk Seri Dr. Mahathir Mohamad made a call from Putrajaya to "the silent majority" to speak out against those threatening to overthrow the government through street demonstrations.

I will endorse Mahathir's call to "the silent majority" to make their position known if there is a campaign to topple the elected government by street demonstrations - but this has proved to be an illusion, as Parti Keadilan Nasional youth chief Ezam Mohd Noor has denied announcing any such intention although he has been charged with the offence of sedition.

What "the silent majority" should do is to heed the call by the Prime Minister to speak out against the imprudent or mismanagement of the EPF funds with the latest case of  over RM92.208 million losses suffered by EPF as a result of its  RM269 million investment in 81.6 million Time dotCom shares.

Yesterday, EPF Chairman Tan Sri Abdul Halim Ali denied that EPF had bought up any  unsubscribed portion of the dismal initial public offering (IPO) of Time dotCom Bhd, which was a big flop when only 25% of the 571.7 million shares at RM3.30 per share was subscribed, leaving 75% or  429 million shares to be taken up government-linked funds and agencies.

Although Halim claimed that EPF had not taken up any unsubscribed  portion of the Time dotCom IPO, it is clear that EPF had taken up 3.22 per cent of the subscribed portion of the IPO involving 81.6 million Time dotCom shares.

EPF would have paid  RM269 million for the 81.6 million Time dotCom shares at RM3.30 per share. Yesterday, Time dotCom crashed further at the stock market, closing at RM2.17, or 34.24 per cent below its IPO price of RM3.30 - which means that EPF has lost RM92.11 million in the past four days from this counter since its public debut on Monday.

The latest EPF loss of over RM92 million from its investment in Time dotCom has focussed anew public concerns about the expertise, professionalism, integrity  as well as accountability and transparency of EPF management of the massive RM180 billion EPF funds.

Although Halim had tried to explain the circumstances for the EPF's acquisition of 3.22 per cent of the Time dotCom IPO, he could not absolve or extenuate the colossal misjudgement of the EPF decision in taking up any portion of the Time dotCom IPO.

In fact, the Time dotCom IPO, which was to raise RM1.87 billion to enable Tan Sri Halim Saad to juggle with his astronomical Renong-related debts, was an even bigger flop as public subscription would plummet from 25 per cent to about 10 per cent if the placement of 84.2 million shares to certain investors (like EPF) and a turnkey contractor is stripped out of the subscribed portion.

The question Halim Ali must answer is why EPF agreed to take 3.3 per cent of the Time dotCom IPO when the IPO could only get about 10 per cent response from the public as it is universally regarded as not a good buy at RM3.30 a share - which is not a flattering reflection on the expertise, professionalism and quality of EPF investment decision-making.

This is the explanation given by Halim Ali on EPF's investment in Time dotCom:

"In 1996, EPF gave Time Telecommunications Holdings Bhd (renamed Time dotCom) a short-term loan of RM500  million at nine per cent interest secured by a corporate guarantee  and an undertaking to repay from the proceeds of Time dotCom's initial public offer (IPO).

"The loan was to have been repaid within a year or upon the IPO, whichever was earlier, but the regional crisis put paid to this  arrangement.

"Later, it was agreed that half of the outstanding loan would be  repaid in cash and the rest as Time dotCom shares at RM3.30 a share.

"This resulted in EPF owning 78.7 million shares or 3.11 per cent of  the total shareholdings.

"In addition, EPF collected another 2.85 million shares under a  restricted offer for sale of shares to all shareholders of Time  Engineering Bhd in January 2001.

"The EPF had earlier invested in shares in Time Engineering, a blue chip company, as part of its equity portfolio.
"The total present shareholdings of the EPF in Time dotCom is 81.6 million shares, representing 3.22 per cent in the company."

In justifying EPF's acquiring 3.3 per cent of the Time dotCom IPO, Halim  said:
"The EPF accepted the offer of conversion of part of the loan because it believed in the long term potential of Time dotCom, a key player in Malaysia's telecommunications industry.

"The formula also enabled the EPF to recover immediately the remaining half of the loan in cash, with interest, amounting to RM335.9 million. This was received in full on March 13, 2001.

"The decision of the EPF Investment Panel to accept these terms was based on sound financial considerations which included the opportunity to make a strategic investment in the telecommunications industry, while accepting the possibility that returns may not be immediate."

This must be the first time in Malaysian corporate history where a bad decision in subscribing to an IPO resulting in the loss of over RM92.208 million four days after its public listing could be justified as "sound financial considerations".

The EPF Management  had acted in disregard of the interests of the 9.7 million EPF contributors in agreeing to the conversion of half of the loan to equity at such indefensible and inflated  price which became the object of market ridicule, resulting in the biggest IPO flop in Malaysian history!

The EPF should have insisted on full recovery of its RM500 million loan with interest after the IPO - instead of allowing Halim Saad to end up with RM900 million in cash at the end of the Time dotCom IPO 75% underscription fiasco because of the full underwriting  guarantee by Commerce International Merchant Bankers Bhd. (CIMB) and others.

Furthermore, the  EPF should have declined the "restricted offer" to take up another 2.85 million Time dotCom share.

The 9.7 million EPF contributors are entitled to ask why they should be the "suckers" and sacrificial victims to have their EPF monies invested in the Time dotCom IPO at indefensibly inflated prices, resulting in over RM92.208 million losses in four days,  so that Halim Saad can laugh all the way to the bank with RM900 million cash at the end of the IPO exercise? Is the EPF
Management working for the 9.7 million EPF contributors or Time dotCom, Time Engineering, Renong and Halim Saad?

The Prime Minister, Datuk Seri Dr. Mahathir Mohamad when asked by reporters in Kuala Lipis yesterday about the EPF-Time dotCom issue, said EPF cannot be a "foolish" institution or it would not be "one of the largest funds in the world".

Mahathir seems to be wrong this time, as the EPF could not only be very "foolish" in investing in Time dotCom resulting in over RM92 million losses in four days, but other government agencies like the Pensions Trust Fund (KWAP)  and Pengurusan Danaharta Nasional Bhd could also be guilty of heinous  acts of folly in misusing public funds by  investing in Time dotCom
at  indefensibly inflated prices to allow certain tycoons like Halim Saad to become incredibly cash-rich!

The Danaharta explanation as to why it  holds about 80.05 million Time dotCom shares or 3.16 per of paid-up capital of Time dotCom is also unacceptable for  the same reasons faulting EPF's taking up 3.22% in the company.

The  Pensions Trust Fund (KWAP) has to date kept very mum about its taking up 273.86 million shares or 10.82 per cent of Time dotCom's unsubscribed IPO portion involving some RM904 million, which would have meant a loss of RM310 million - gravely jeopardising the pensions of 800,000 public employees.

I am giving KWAP 48 hours notice to give a full and satisfactory explanation, failing which a police report would be lodged against the KWAP for criminal breach of trust and criminal abuse of public funds to invest RM904 million to take up the unsubscribed portion of the Time dotCom IPO, when all market analysts expect the counter to nosedive on its public debut
- as it has done to crash by 34.24 per cent in four days.

The time has come for the 9.7 million EPF contributors to cease to be the "silent majority" and be the "outraged majority" and to protest at the lack of accountability and transparency, expertise and  professionalism in the management and investment of the RM181 billion EPF funds and they should register their protests, loudly and firmly, but peacefully, at the over 50 EPF offices all over the country.

A schedule will be drawn up for the EPF contributors to gather at the various EPF offices to allow the "silent majority" to speak out, and DAP and Barisan Alternative leaders would be present at these EPF offices to help channel their protests and concerns. I will try to be at as many of these EPF offices  as possible where EPF contributors can gather to let their protests and  concerns, whether about the EPF's indefensiible investments in Time dotCom or the lowest dividend in 25 years when 6 per cent EPF dividend was declared for last year, could be mobilised to be heard loud and clear.


*Lim Kit Siang - DAP National Chairman