More about myself and answering recent comments

Before answering the recent comments (thank you those who have commented for taking the time to comment, I appreciate all comments). Let me tell you a bit more about myself.

I joined Premium Nutrients as an idealistic person. Here was the flagship company of NLFCS, an organisation with a noble purpose. I felt a part of something greater than myself, that I was not just working for myself or for money but for something pure and noble and great. By the time I left Premium Nutrients all my idealism and innocence had been killed. All the things I have witnessed had seeped it away.

A great many people capable people joined before and after I left. Many have left, a few have stayed. I have only the best things to say about all those who worked and continue to work there. They are my friends, people whose time and company I value. A lot of them knew the chairman personally, they told him what was happening but saw nothing being done. There were sons whose fathers where NLFCS members who came in and had only good things to say about the chairman but by the time they left, they were arguing with their fathers and as disillusionised as me. Here was the one man who had the power (the only one with the power) to do something and nothing was being done. The chairman had/has many sources of information about Premium Nutrients. He knows the senior management himself, there is an auditor from NLFCS who is an independent auditor who should inform him what is going on but with all this information being sent to the chairman and nothing being done, it becomes a soul destroying place to be in. A place you feel helpless. What I know has been eating me, so I though it is time to write about it.

Now to answer the comments :-


Below is the first comment I am going to answer. The comments are in bold and my response is not and are in italics and in red

Well, it seems like you dont' know about NLFCS and the history behind it. It is the only Indian organization that has benefited thousands of indians. Its sad to note that an Indian has to kill or downgrade their own kind. If it was mismanaged it would not have received accolades from the Government and the Prime Minister's Department.



I am asking specific questions about Premiun Nutrients and that should be answered in a specific manner. Yes I do know about the history of NLFCS. But this history is the past, we are talking about the present, what is happening now. You mention it is a pity that an Indian has to kill or downgrade their own kind. If I was living in another country with only one group of people and if I experienced the same thing I would still write about it. This is about right and wrong, nothing to do with my or your ethnicity. Yes NLFCS has won awards but below while responding to another comment I will state specific things that need to be answered. Specific things need specific answers. I sincerely believe that NLFCS could/should have done much much better.

If you know NLFCS, benefits received by their members matches no other cooperative in the country. In the era of NEP, NLFCS has survived without a helping hand from the government and this should be attributed to the management team. I would suggest that you check your facts beforehand. I suggest members who have benefited from the NLFCS to state their comment by setting the record straight. To the blogger, be useful to your community don't waste time spreading rumours. We should be proud that we have an organization such as NLFCS. 'VALGAI KOOTURUVU"

I think NLFCS should have done much better and will cite specific cases of value destruction below. I welcome all comments and will try to answer all of them to the best of my ability. I am not spreading rumours, I am being as objective as possible and will only use facts I recall. If anyone believes what I know is wrong please correct me. But correct the specific thing I am saying please, do not give me generalities because that leaves the question unanswered. Thank you for your comments, I appreciate them.

Now let me answer the second interesting comment I have received from a Mr. Thava, again I will break the comments in parts and answer each part separately, as above, the comments are in bold and my response is in italics :-

I am never a blogger nor do I pay attention to blogs. It is only by shear accident I stumbled on this blog on NLFCS. Normally I would not waste my precious time on commenting on statements which is neither honest nor fair. In fact it is very damaging and insulting to the entire Indian community.

I appreciate the time you took and your comments. Again as I mentioned above, this is not about my or your ethnicity, this is about what is right or wrong.

I am not sure how my postings are insulting to the 1m Indians in Malaysia. Do you speak for every single one of them? Shall we simply keep mum and ignore what I believe to be misdeeds just because someone is Indian?

As a member of NLFCS for the last five years I owe it to the Indian community to defend such irresponsible statements made by the blogger. I will forgive him for he has admitted himself that he “doesn't have much dealings with NLFCS” and his statements are made on what he has heard. Since he has invited comments from people in the know I shall put the facts straight.

You owe it to the Indian community? Let's keep things in perspective. Shall we say you believe you owe it to other NLFCS members?

Please state what you believe is irresponsible and please be specific. Otherwise such a sweeping statement has no value.

Thank you for forgiving me. I value forgiveness and if I do make mistakes I do ask for forgiveness (and corrections).

Thank you for your comments and I shall answer each part of your comments separately.

1) As a member (more importantly as an Indian) it gives me great pleasure to drive pass Wisma Tun Sambanthan with tamil words giving recognition to the founder of NLFCS. I cannot think of any other building 27 storey’s high owned by an Indian organization which is so majestic and so proud of its success. The blogger obviously is not aware of the immense contribution made by all under the leadership of Tan Sri Somasundram.

This is not a fact. These are your feelings so I can't comment on this.

2) The Blogger also stated that challenges are not encouraged and often strong arm tactics are employed in the appointment of NLFCS office bearers. As a member I cannot agree with this statement. I have attended regional elections where the office bearers were elected in an orderly and cordial manner with representatives from the Cooperative dept. present. I am pleased to say no one asked me to vote for anyone in particular and certainly not arm twisted. Brother you are wrong here too!

This is what I have heard and not something I have experienced. I shall separate hearsay from what I personally know more clearly next time. I would like to hear from more people about this. If I am wrong, then I am wrong. Not a problem. I am ready to acknowledge that I made mistakes. This is lesson to me to only use something that is verified, so those who agree or disagree with Mr. Thava about his comment above please do respond.

3) My experience in the last five years of NLFCS membership showed that they are not only a caring cooperative but also a responsible one too. Dividends and bonus shares declared beats all other investments I have. Also NLFCS boasts of scholarship grants, educational loan schemes, senior members assistance scheme, small business loans, assistance for widows etc. etc. It is no surprise to me for NLFCs winning the “ Anugerah Perdana” – for being the best co-operative in Malaysia!!. If my memory is correct, winning awards for excellence is not alien to NLFCS. Hey Brother, when all other races are envious of the work and the team TSS have built at NLFCS………. You chose to discredit him.WHY?????????????? . Be proud man.

Dividends and bonus shares declared beats all other investments I have.

I have no idea what your other investments are. Are you an investment professional? It is critical to use comparable metrics when comparing something. If you are member of 5 plantations based co-operatives and NLFCS has outperformed all of them, then you are comparing like with like and a measurement like that would have value. But you could have invested in 5 shares and lost money on all of them but your membership or "investment" as you call it in NLFCS could be the only thing that made money for you? I could have invested in plantations stocks and say they have gone up 40% then my membership in NLFCS would be my worst performing "investment". So I hope you understand why we need to compare similar things with similar things. Trying to measure NLFCS performance is particulary difficult because it is a unique entity. Do measure it against integrated plantation companies? You can't exactly because it is a co-operative and therefore its impetus would be different but this is the closest possible comparison. It has also diversified and each separate part needs to be measured against something similar i.e Premium Nutrients should be compared to similar companies, Apollo Medical Centre with a similar organisation and then only could you actually come up with a composite performance. By this measure, I state again NLFCS could/should have done much better.

Also NLFCS boasts of scholarship grants, educational loan schemes, senior members assistance scheme, small business loans, assistance for widows etc .

That is what NLFCS should do, it is a co-operative, and yes that is commendable. It has won awards but as I said above I have specific things that I will disclose and I would like them to be specifically answered. Below is a link to NLFCS's awards section to those who are interested

http://www.nlfcs.com.my/nlfcs.html

and one more award from another part of the website

> National Premium Award in 2007

This is not my area of expertise. Receiving any award of course is commendable and praise should be given where it is due. I have to state again that my primary experiences are with Premium Nutrients not NLFCS.

Mr. Thava, you mention that NLFCS is responsible? I have a riposte to that below.

Hey Brother, when all other races are envious of the work and the team TSS have built at NLFCS………. You chose to discredit him.WHY?????????????? . Be proud man.

Again ethnicity is brought in the picture. This is about right and wrong, not whether someone is Indian or not. The above is not an argument Mr. Thava. The only analogy I can think for this was when people in the US were protesting what was happening in Iraq, they were called traitors to the US. So should they not have protested? Were they traitors to the US? Not an good analogy I agree but I can't think of any other at the moment.

I also believe I made an error in how I approached this. I should never have put anyone's name down, just their title/position. This is a critique of people who are in positions of responsibility and the authority/responsibility that flows from that. It is not about any one individual or personalities. It is about anyone who is in positions of responsibility not because that person is so and so. So I will only mention positions and leave names out of any future postings.

4) I do not understand your statement calling for surprise audit by Tun Sambanthan’s daughter. For your information Co-operative bodies are audited not only by a firm of chartered accountants but also by the ministry of Entrepreneur and Co-operative Development. Let me assure you that if there is mismanagement it would be highly unlikely for NLFCS to win the national awards. Furthermore, please do not underestimate or insult the directors who spend considerable time in ensuring the success of NLFCS. Some of the directors are eminent people and leaders in their own area of expertise.

You are commenting on a comment left by someone else like yourself. Anyone is free to comment and your point 4 above should therefore not be attributed to me, so I can't say anything about it.

I would however like to point out that you should separate personalities/people from their responsibilities as directors, they are not the same thing. All directors owe a standard of care irrespective of who they are. That is their duty and the responsibility they have agreed to by accepting the position.

I will talk about chartered accountants and Premium Nutrients in more detail below.

5) The latest accounts of NLFCS s show a growth of approximately 10%. This was achieved despite giving generous payouts to its members. You will be pleased to know that members’ funds stood at a whacking 380 million ringgits as at 31st December 2007. I am sure this does not reflect the true picture of NLFCs assets. I won’t be surprised that with proper valuation the assets, members funds will top 1 billion ringgits! Surely this cannot be by accident. It must be through hard work and dedication and certainly NOT by mismanagement.

380m, hmm, seems a lot doesn't it? As I mentioned above you need to compare like with like. For a plantation based co-operative, with the assets it started out with I think it could have become much bigger.

The latest accounts of NLFCS s show a growth of approximately 10%. This was achieved despite giving generous payouts to its members

You must acknowledge that CPO prices are hitting all time highs so this will positively affect NLFCS's bottom line too but I have no idea to what extend. You need to separate the effect of high commodity prices from management and performance. If say commodity prices have remained static for the last year then what would the performance be? I am just throwing out ideas on how things are made measurable, in response to the above Mr. Thava, because yours was a blanket statement. I would need more information and therefore I can't comment further.

a whacking 380 million ringgit

:) As an aside since we are talking about figures the chairman had a direct stake of 36m shares in Premium Nutrients as at its reverse takeover/IPO (this is public information). At it's IPO price of 0.50sen that was worth 18m ringgit which is about 4.74% of the 380m you mentioned above. Right now the chairman has 43.5m shares and since the price is now 0.18sen they are worth 7.83m ringgit which is about 2.06% of 380m. I have no idea how the chairman came to hold so many shares or at what price he bought them but would like to know.

I am sure this does not reflect the true picture of NLFCs assets. I won’t be surprised that with proper valuation the assets, members funds will top 1 billion ringgits!

I don't know why you think the valuation being done right now is not "proper". Why is it not proper and why do you think a "proper" valuation will potentially increase the asset by 620m? That is a 163% increase over the current asset value! Your statement has no basis I'm afraid.

And valuations are pretty tricky things as I will show below.

6) As a great leader, TSS is conscious of the fact that NLFCS should continue their progress well into the 21st century. He has identified an able person in Dato Sahadevan to lead them in the coming years. Sign of a good leader I would say.

This is your opinion. I disagree, there should be a clear succession plan with second and third line managers ready to take over to, with succession plans in all divisions, so that capable people are always being groomed. Now everything is haphazard and no one knows when anything is going to happen. This is my opinion

Again I reiterate, this is not about personalities. This is about right and wrong and responsibilities, whoever they may be.

7) Brother, You have published words publicly and should be responsible. Your words certainly hurt me. Before I part let me conclude with Thiruvalluvars words.

" Speak only such words as are worth saying; refrain from profitless and worthless words"

I can't understand why my words have hurt you Mr.Thava so I can't offer an apology for something I don't understand. It is clear you have taken this personally and for some reason believe you are speaking on behalf of the 1m Indians in Malaysia. I am not sure how you have made yourself their spokesperson. They have their own voices.

I believe my words are worth saying, that is why I am saying them. You disagree of course and it is good and healthy thing to disagree.

Right, now we come up to the rest of this posting, I mentioned above I will give an example of value destruction, say something about responsibility and mention something about chartered accountants and valuations. Right let me start then with some publicly available information.

Value Destruction and Responsibility

These are simple calculations done with publicly available information

At the time of Premium Nutrients listing, NLFCS had 63m shares which listed at the IPO price of 0.50sen (on 01/08/03), so those shares are valued at 31.5m at that time. Right now the Premium Nutrients share price is 0.18sen. That is a lost to NLFCS, to all members of 20m! That's pretty spectacular.

This is before I take into account all the shares NLFCS has continued to buy and sell in Premium Nutrients. As at the end of Dec 2007, NLFCS has 108m shares in Premium Nutrients and all the while the share price has been going down! I will be making a more detailed study of this later.

The above doesn't even take opportunity cost i.e if that 31.5m was put in a bank or invested in something else.

So at minimum 20m has been lost over a period of 4 years. Should not someone be responsible for this, 20m ringgit gone? Premium Nutrients is doing bady, why? NLFCS as the largest shareholder should and should have taken steps to protect its investment and done so much earlier.

The 2nd question regarding this is who authorised the continued buying of Premium Nutrient shares? Another 45m since listing. What is the rationale behind this? This buying and selling Premium Nutrient shares has been going on since the listing so it is something that has been happening for the last 4 years.

Another example of value destruction again at Premium Nutrients was the management agreement they had with Seven M Management prior to Premium Nutrients listing. Seven M would get a percentage of gross profit for managing Premium Nutrients. Gross profit is just the Sales of the company less the cost of sales. So all other cost is not included in this calculation. So the company could make a net loss and still pay out management fee! I think the percentage was 10% (I can't be sure of the percentage). So Premium Nutrients with a turnover of a few hundred million, that would amount to tens of million in just one year. The management fee was paid yearly. For a cashflow poor/tight company like Premium, how was this tens of million going to be paid?

The below is a recollection so this bit I can't vouch 100%

Well, what I know happened, was that NLFCs put in money into Premium Nutrients either as a loan or via some other mechanism (more shares?) and then this money was paid out to Seven M and also as dividends back to NLFCS. I have no idea whether this was the standard method or a one-off.

This was millions paid yearly from Gross Profit! This money could have gone back to NLFCS as dividends or be reinvested in Premium Nutrients and that company needs that reinvestment.

So some questions raised here are, who agreed to the management fee structure? Why? The normal thing to do if they found someone exceptional to lead the company and had to have him was to pay him/her a high salary and a performance bonus based on the company hitting certain benchmarks. This would have saved millions. Another case of value destruction

The 2nd thing is, who is 7 M Management, who are the ultimate beneficiaries and where did all that millions end up at?

This management structure could not of course survive Premium Nutrients attempt at getting a listing. How could it? So why is something not acceptable for a potential listing acceptable before the listing? There should be the highest standards.

Premium Nutrients attempted to get a Main Board listing but did not meet the requirements was trying for a second board listing and ended up with a reverse takeover. This is the FLAGSHIP company of NLFCS. It was set up as an example/model company for the Indian community. It should have never have come to this. This millions could have gone back to NLFCS as dividends or be reinvested in Premium Nutrients, a company that badly needed investment.

The directors, as stewards of the company are responsible for this.

This is hearsay, but I was informed that the impetus for the listing was that a number of shareholders (Forad Mangement? Picavest?) were looking for a way to cash out of their investments and have been doing so for a while.

So I hope the above covers the value destruction and responsibility bit that I mentioned I would talk about.

Chartered accountants and valuations

The accountants before KPMG at Premium Nutrients were fired. KPMG resigned. Accountants do not simply resign. They are paid fees so it is a lost of income to them. See the announcement below. Why did the audtiors resign? and the Group Financial Controller and senior accounting staff?

Company Name
:
PREMIUM NUTRIENTS BERHAD
Stock Name
:
PREMIUM
Date Announced
:
09/05/2006
Type
:
Announcement
Subject
:
PROPOSED CHANGE OF AUDITORSContents :The Board of Directors of Premium Nutrients Berhad ("the Company") wish to announce to the Exchange that Messrs. KPMG has notified the Company that they desire to resign as Auditors of the Company and its subsidiary and associated companies. Their resignation will only take effect immediately on the appointment of the another firm of Auditors.The Board of Directors nominated appointment of Messrs Raki Thomas & Ramanan, Chartered Accountants, as Auditors of the Company for the financial year ended 31 December 2005 in place of the resigning Auditor, Messrs. KPMG, to hold office until the conclusion of the next Annual General Meeting of the Company at a remuneration to be fixed by the Directors.RATIONALE FOR THE PROPOSED CHANGE OF AUDITORS. The proposed resignation of Messrs. KPMG will create a vacancy in the office of the Auditors of the Company. The proposed appointment of Messrs. Raki Thomas & Ramanan, Chartered Accountants, is to fill the casual vacancy in the office of the Auditors arising from the proposed resignation of Messrs. KPMG.APPROVAL REQUIREDThe proposed Change of Auditors is subject to the following approval being obtained:-Shareholders of the Company for the Proposed Change of Auditors at a forthcoming extraordinary general meeting to be convened.DIRECTORS' AND SUBSTATIAL SHAREHOLDERS' INTERESTSNone of the Directors and substatial shareholders or persons connected to the Directors and/or substatial shareholders of the company has any interest, direct or indirectm in the Proposed Change of Auditors.EXTRAORDINARY GENERAL MEETINGAn Extraordinary General Meeting of the Company to seek shareholders' approval on the Proposed Change of Auditors will be convened later and a Circular to Shareholders will be issued in due course.

And this? The group financial controller and senior accounting staff resign

General Announcement
Reference No PN-060502-57389
Company Name
:
PREMIUM NUTRIENTS BERHAD
Stock Name
:
PREMIUM
Date Announced
:
02/05/2006
Type
:
Announcement
Subject
:
PREMIUM NUTRIENTS BERHAD ("THE COMPANY")- REQUIREMENT OF PARAGRAPH 9.26(3) (B) OF THE BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS ("BURSA SECURITIES LR")Contents :The Company wishes to announce that pursuant to the requirement of Paragraph 9.26 (3)(b) of the Bursa Malaysia LR, the Company has not issued the Annual Audited Accounts for financial period ended 31 December 2005 pursuant to Paragraph 9.23 of the Bursa Securities LR (collectively "Annual Audited Accounts")The delay of the issuance of the Annual Audited Accounts was due to the fact that the Group Financial Controller of the Company resigned in February 2006 and also some of the senior accounting staff in one of the subsidiaries also resigned. The expected date of issuance of the aforesaid Annual Audited Accounts will be latest by 15th June 2006 or earlier. The consequences of non-compliance of the requirement under paragraph 9.23 of the Bursa Securities LR may subject to the enforcement of the action including the possibility the Company being suspended and/or delisted by Bursa Malaysia Securities Berhad pursuant to Paragraph 16.02 and 16.09 of the Bursa Securities LR respectively.
© 2008, Bursa Malaysia Berhad. All Rights Reserved

And then this

Company Name
:
PREMIUM NUTRIENTS BERHAD
Stock Name
:
PREMIUM
Date Announced
:
03/05/2005
Type
:
Announcement
Subject
:
PREMIUM NUTRIENTS BERHAD ("Premium" or "the Company")- Explanation of the Deviation of 10% or more between the Profit After Tax and Minority Interest of the Audited Accounts and the announced Unaudited Results for the financial year ended 31st December 2004 pursuant to Paragraph 9.19(34) of the Listing RequirementsContents :The Board of Directors of Premium wishes to announce that the audited Group profit after tax for the financial year ended 31st December 2004 was RM6.028 million. The audited results was RM2.040 million lower than the unaudited results in the Interim Report for the same financial year announced on 28th February 2005 of RM8.068 million.The deviation stated above was mainly due to the following reasons:(Figures in thousands ('000)

1. During the course of audit the statutory auditors, Messrs KPMG insisted on making provision for doubtful debts amounting to RM608 (the directors were confident of recovering the full amount). They also insisted on writing-off some advances and old outstanding amounting to RM321.

2. An additional provision of RM689 was made for deferred tax.

3. There was a valuation difference of RM422 in the vluation of stocks of our Indian subsidiary. This difference arose due to difference in valuation standard adopted by Statutory Auditors for Indian company and Messrs KPMG, the statutory auditors for the Group. This announcement is dated 3rd May 2005.

Why valuations are tricky things (see above).

A RM2m difference in profit. KPMG insisted on writing off RM608,000 of debt, so instead of a liability, the profit and loss account would have been hit, so a reduction in profit of RM608,000.

Additional provison of RM689,000 for deffered tax.

A difference of RM422,00 in the valuation of stock in the Indian subsidiary. This would decrease the profit of that subsidiary.

That is why I say valuations are tricky things

THIS IS THE FLAGSHIP COMPANY OF NLFCS! THIS SHOULD NOT BE HAPPENING. THE ABOVE IS PUBLIC INFORMATION! FACTS THAT CANNOT BE DISPUTED! WHY IS THIS HAPPENING! AUDITORS, ACCOUNTING STAFF RESIGNING AND THE PROFIT HAVING TO BE RESTATED. WHY WAS NO ACTION TAKEN IMMEDIATELY, WHY DID IT TAKE ANOTHER 2 YEARS (AND AS THE SHARES SLID LOWER) FOR THE BOARD OF PREMIUM NUTRIENTS TO REPLACE (OR REDESIGNATE AS IT SAYS IN THE OFFICIAL ANNOUNCEMENT) THE MANAGING DIRECTOR?

This to me is pretty heart-wrenching stuff for something that has my sweat in it too. I think I understand why Mr. Thava feels hurts now, after writing this. This is the company that was meant to be the model listed company for Indians.

Finally someone else has commented while I have been writing this.

A Mr Gunasegaran

Dear blogger,I would certainly agree with Thava's statement on the success of NLFCs. You should see their success achieved and not to speculate what they could have achieved.As far as I know NLFCS have delivered the goods in championing for indians in a rather quite and passive way. They have built state of art tamil schools with no fuss or fanfare.What return are they expecting when they spent millions on schools? And what more when the plantaion house was about to be auctioned they came to the rescue. THey purchased it and put it into good use and kept the historic building within Indian hands. My friend this require forsight and to keep the wishes of Tun Sambanthan intact.Can you pls join me to wish them well......unless,of course you want to destroy the success just the same way as what happened to the dream of another great leader -Dato Kularajah( MCIS) Be responsible pls.

The things you mention above are commendable things and praise should be given where it is due, but as I said I am stating specific things that need specific answers.

Mr. Thava, Mr. Gunasegaran, we are coming from different perspectives. You are looking from the outside in and saying that everything is perfect in this forest. I am looking from the inside out and noticing that some of these trees are pretty sick. I hope we can meet in the middle.

This has been a rather long post, I apologise for any spelling or grammaritical errors.

God Bless Everyone Everywhere