The Pensions Trust Fund (KWAP) must explain why it has become a “Bail-out Fund” in acquiring  the  lion’s share of 48 per cent of  Time dotCom’s IPO resulting in the colossal loss of RM345 million in six days of trading

Media Conference Statement
by Lim Kit Siang

(Kuala Lumpur, Tuesday): In the past one week of public controversy over the RM1.88 billion Time dotCom IPO bailout  scandal by  various government-linked funds and agencies, the biggest “bailor”, the Pensions Trust Fund (KWAP) has kept a stony silence.

The time has come for the Pensions Trust Fund, the second largest  provident and pension fund  in the country after the Employees Provident Fund (EPF), to explain why it has become a “Bail-out Fund” in  acquiring  the lion’s share of 48 per cent of Time dotCom’s IPO issue of 571.7 million shares or 63.9% of the unsubscribed IPO portion of 428.83 million shares, ploughing some six per cent of its total funds by taking up 273.86 million shares of the unsubscribed portion of the Time dotCom IPO at the cost of  M903.74 million.

The Time dotCom IPO was an utter flop, with applications for only 142.86 million shares, or 25% of the total 571.7 million shares made available for public subscription. Excluding shares that were privately placed or subject of restricted offer for sale, individual investors applied for  only 29.738 million shares  or a mere pittance of 5.2% of the total number of  shares offered in the IPO.  This leaves  the IPO with 428.83 million unsubscribed shares, for which KWAP took 63.9 per cent at the IPO price of RM3.30 per share - which works out to the lion’s share of 48 per cent of the entire Time domCom’s IPO of 571.7 million shares.

The use of public funds to bail out the Time dotCom 75% IPO shortfall paying the IPO price of RM3.30 when the market had been quite unanimous in expecting a sharp plunge of its price on its public listing tantamounts to criminal negligence, criminal breach of trust and criminal misapplication of public funds.

From the very first day of its public debut in the stock market last Monday on March 12, 2001, Time dotCom had been on a daily plunge, closing on the first day  at RM2.43, RM2.28 (Tuesday), RM2.27 (Wednesday), RM2.17 (Thursday), RM2.12 (Friday) and RM2.04 yesterday.

As of yesterday, Time dotCom had lost RM1.26 or 38.2 per cent of its IPO price of RM3.30, and this means that KWAP had lost the astronomical sum of RM345 million in six days of trading - to enable Renong and in particular Tan Sri Halim Saad  to laugh all the way to the bank cash-rich by RM900 million at the end of the Time dotCom IPO exercise.

In acting as a “bailor-of-the-last-resort” for  the Time dotCom IPO, by acquiring 63.9% of the unsubscribed IPO portion of 273.86 million Time dotCom shares for
RM904 million on March 1, 2001, and incurring RM345 million losses in six days, KWAP had acted most imprudently and recklessly in disregard of its statutory charter to finance payments of pensions and gratuities for the 850,000 civil servants.

KWAP was established on lst June 1991 under Act 454, Pension Trust Fund Act 1991 to fund the payment  of pensions and gratuities of public employees. As at end-June 2000, KWAP funds stood at RM15,126 million, making it  the second biggest of the nine provident and pension funds (PPFs) in the country, bigger than SOCSO and the  Armed Forces Fund. Employees Provident Fund (EPF) is the largest provident fund in the country with  RM181 billion funds.

The sources of finance of the KWAP are:

Under the Pension Trust Fund Act, the Fund is administered by trustees known as  the Pensions Trust Fund Council comprising as chairman the Secretary-General of the Ministry of Finance and nine other members including an officer each from the Treasury, Bank Negara, Attorney-General’s Chambers, Accountant-General’s Department, Public Services Department, the Employees Provident Fund and three other members with business or financial experience.

The Accountant-General is responsible for the day-to-day administration and management of the affairs of the Fund.

Article 16 of the Act stipulates that the Fund’s annual audited account and annual report shall be laid before Parliament.

I have checked with the Parliament library as well as the National Library and both have confirmed that they have never  received any reports from the KWAP.

In view of the highest-level representation of the trustees, with  the Secretary-General of the Finance Ministry and the Accountant-General both directly responsible for the management and investment decisions of the KWAP, it is even more incumbent upon the KWAP to be exemplary in its accountability  and transparency as an example  to other government statutory bodies and agencies - and KWAP should explain without any further delay why it had jeopardised the pensions and gratuities of 850,000 civil servants by being the “bailor-of-last-resort” for the Time dotCom IPO fiasco.

Will the trustees who had decided to  invest RM903.74 million of KWAP funds to take up 63.9 per cent of the unsubscribed Time dotCom IPO be prepared to accept responsibility for the RM345 million loss suffered by KWAP in the past six days of trading?

Last December, it was reported that the Malaysian government would use KWAP to buy the 29.09 per cent stake of MAS at RM8 per share although the market price was RM3.68 from Tan Sri Tajudin Ramli - another government bail-out costing RM1.79 billion.  An explanation from KWAP on this matter is called for.

I have lodged a police report on the KWAP taking up  273.86 million of the unsubscribed  Time dotCom IPO  shares for RM903.74 million so that the police can initiate investigations on possible criminal breach of trust and misapplication of public funds to protect the interests of public funds as well as the pensions and gratuity interests of the 850,000 public servants.


*Lim Kit Siang - DAP National Chairman