This is going to be a long post since there are a number of lengthy announcements/info to include.
I suggest reading the summary first.
Status Point is a 100% subsidiary of NLFCS while Premium Nutrients is a public listed company and a 32% associate of NLFCS.
Prologue
This really goes back to
http://reform-nlfcs.blogspot.com/2008/06/differences-for-2006-between-2006-and.html
and this
http://reform-nlfcs.blogspot.com/2008/06/reclassification-of-information-in-2007.html
and a little bit of this
http://reform-nlfcs.blogspot.com/2008/06/status-point-sdn-bhd.html
and this bit
Status Point Sdn Bhd
Latest Accounts as at 31-12-07
Paid Up Capital : 8,000,000
Operating Revenue : 17,438
Profit After Taxation : 1,151,623
Net Profit Margin : ?
Unappropriated Profit Brought Forward : -11,601,737
Unappropriated Profit Carried Forward : -10,450,114
Not sure how they made such a profit with such a low Operating Revenue Figure. If I can surmise, it is likely from extraordinary gains from the sale of an asset.
from here
http://reform-nlfcs.blogspot.com/2008/06/look-at-nlfcs-subsidiaries-and.html
I mentioned back in
http://reform-nlfcs.blogspot.com/2008/06/reclassification-of-information-in-2007.html
About the related party transactions and how they were suddenly turning up in the 2007 accounts for 2006. Basically backtracking on previous information/annual report without any explanations.
(If you look here http://reform-nlfcs.blogspot.com/2008/06/differences-for-2006-between-2006-and.html you can see other differences like interest income receivable from subsidiaries at the company level)
end of prologue
I will try to structure this the most informative way possible, highlighting key points.
First lets start with this announcement on the 08/08/08 from Premium Nutrients
You can view it yourself here (especially the excel files)
http://announcements.bursamalaysia.com/EDMS/annweb.nsf/LsvAllByID/482568AD00295D074825749F003585DD?OpenDocument
I have copied the excel files in pdf format and they can be viewed here http://reform-nlfcs.blogspot.com/2008/08/pkp-sales-to-nalfin-realities-and.html
Type : Announcement
Subject : RELATED PARTY TRANSACTIONS ("RPT")
Contents : Pursuant to paragraphs 10.08, 10.09 and Practice Note 12/2001 of the Listing Requirements of Bursa Malaysia Securities Berhad, Premium Nutrients Berhad ("Premium" or "the Company") wishes to announce that related party transactions ("RPTs") have occurred whereby the wholly-owned subsidiary of the Company, Premium Vegetable Oils Sdn. Bhd. ("PVO") had entered into several contracts with Nalfin Realities Sdn. Bhd. and Status Point Sdn. Bhd. for the sale of Palm Kernel Pellets.
Attachments : Nalfin.xls
status inv (2).xls
Announcement Details :
RELATED PARTY TRANSACTIONS (RPTs)
Contents:
1. INTRODUCTION
Pursuant to paragraphs10.08,10.09 and Practice Note No. 12/2001 of the Listing Requirement of Bursa Malaysia Securities Berhad, Premium Nutrients Berhad (“Premium” or “the Company”) wishes to announce that related party transactions (“RPTs”) have occurred whereby the wholly-owned subsidiary of the Company, Premium Vegetable Oils Sdn. Bhd (‘PVO’) had entered into several contracts with Nalfin Realities Sdn. Bhd. and Status Point Sdn. Bhd. for the sale of Palm Kernel Pellets (PKP) for total purchase price satisfied by cash as follows:
Name of Company Year of Transaction Amount (RM)
Nalfin Realities Sdn. Bhd. 2005 2,267,657.13
2006 2,466,106.56
Status Point Sdn. Bhd. 2006 9,718,431.80
2007 17,316,750.19
2008 8,231,369.79
2. DETAILS OF THE RPTs
Information on the sale of PKP is as per the attached appendices.
The prices, terms and conditions of the above RPTs as contained in the respective SPAs are determined on arm’s length basis and on normal commercial terms which are not more favourable to the related parties than those generally made available to the public buyers.
3. RATIONALE
The RPTs are in the ordinary course of business of Premium Group.
4. EFFECTS OF THE RRPTs
The effects of the RPTs on Premium are as set out below:-
(a) Share Capital and Substantial Shareholdings
The RPTs do not have any effect on the issued and paid-up share capital of Premium or the shareholdings of Premium’s substantial shareholders.
(b) Gearing
The RPT’s do not have any effect on the gearing of Premium.
(c) Earnings and Net Assets
The RPTs have have not had any material effect on the net assets of Premium Group for the financial years ended 31 December 2005, 2006, 2007 and are nnot expected to have any material effect on the net assets of Premium Group for the financial year ending 31 December 2008, but is anticipated to contribute positively to the future earnings of Premium Group.
5. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTEREST
National Land Finance Co-opertive Society Limited (“NLFCS”) is deemed interested in the RPT by virtue of it being a common substantial shareholder of Premium, Status Point Sdn. Bhd. and Nalfin Realities Sdn. Bhd.
Y Bhg. Tan Sri Dato’ Dr. K.R. Somasundram and Datuk Sahadivanaidu s/o Baliah are deemed interested in the RPTs by virtue of them being Directors of Premium and holding senior management posts in NLFCS and connected to Premium and PVO. Y Bhg. Tan Sri Dato’ Dr. K.R. Somasundram is also a substantial shareholder of Premium.
The interested directors have abstained from deliberations and voting at the Board Meetings for the RPTs. Accordingly, the said Directors and substantial shareholders and persons connected with them will abstain from voting in respect of their direct/indirect shareholdings in Premium, if any, on the resolutions to be tabled at an EGM to be convened for the RPTs, if required.
Save as disclosed above, none of the Directors and substantial shareholders of the Premium Group as well as persons connected with them have any interest, direct and/or indirect, in the RPTs.
6. STATEMENT BY THE BOARD OF DIRECTORS
The Board of Directors is of the opinion that the RPTs is in the best interest of the Group.
7. DOCUMENTS FOR INSPECTION
The transaction contracts/invoices are available for inspection at the Registered Office of Premium at Level 27, Wisma Tun Sambanthan , Jalan Sultan Sulaiman, 50000 Kuala Lumpur, during normal business hours from Monday to Friday (except Public Holidays) for a period of 3 months from the date of this announcement.
The second announcement is dated the 13/08/08 and is a reply to a query :-
You can view it here (I have italicised the response/answers)
http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/48256E5D00102DF4482574A4003220D7?OpenDocument
Type : Reply to query
Reply to Bursa Malaysia'sQuery Letter - Reference ID : ZO-080812-44667
Subject : Related Party Transactions
Contents : In connection with the query raised by Bursa vide letter 12 August 2008 (Ref: ZO-080812-44667), the information appended below is as follows:
Query Letter content : We refer to your Company's announcement dated 8 August 2008 in respect of the above matter.
In this connection, kindly furnish Bursa Malaysia Securities Berhad ("Bursa Securities") with the following additional information for public release:-
Whether the transactions in 2005, 2006, 2007 and 2008 are subject to the approval of shareholders.
To quantify the direct and indirect shareholdings of National Land Finance Co-operative Society Limited, Tan Sri Dato' Dr. K.R. Somasundram, Datuk Sahadivanaidu, Status Point Sdn. Bhd. and Nalfin Realities Sdn Bhd. in Premium or a negative statement.
To incorporate a statement that the interested directors and major shareholders have undertaken that they shall ensure that the persons connected with them will abstain from voting on the resolution at the general meeting.
A statement by the board of directors, excluding interested directors stating whether the transaction is in the best interests of the Company and where a director disagrees with such statement, a statement by the director setting out the reasons and the factors taken into consideration in forming that opinion.
Please furnish Bursa Securities with your reply via an announcement within one (1) market day from the date hereof.
Yours faithfully
SUZALINA HARUN
Head, Issuers
Listing Division
Regulation
WCY/ZOOS
c.c.Head, Market Surveillance Department
Securities Commission (via fax)
Announcement Details :
1. Based on Paragraph 10.09 – of the Listing Requirements of Bursa Securities relating to Recurrent Related Party Transactions, the transactions in 2005, 2006, 2007 and 2008 are subject to the approval of shareholders.
In this respect, the Board is in the midst of appointing the Adviser and an Independent Adviser.
2. The Direct and Indirect shareholdings of the related parties in Premium Nutrients Berhad as at June 30, 2008 are as follows:
Name of Related parties Direct Indirect Total Direct% Indirect%
National Land
Finance Co-operative
Society 108,275,312 Nil 108,275,312 32.13 Nil
Limited
Tan Sri Dato` Dr.
K R Somasundram 43,084,313 497,608 43,581,921 12.78 0.15
Datuk
Sahadivanaidu A/L Baliah 210,945 Nil 210,945 0.06 Nil
Subramaniam A/L
Seeenivasagam * 49,761 Nil 49,761 0.01 Nil
Status Point Sdn Bhd Nil Nil Nil Nil Nil
Nalfin Realities Sdn Bhd Nil Nil Nil Nil Nil
3. The interested Directors and Major Shareholders have undertaken that they shall ensure that the persons connected with them will abstain from voting on the resolution at the general meeting.
The Board of Directors, excluding interested Directors state that the related Party transactions are in the best interest of the Company.
*Mr. Subramaniam A/L Seenivasagam is deemed a related party as he is a common Director, being a Director in NLFCS and Premium Nutrients Berhad.
Summary
The enquiry by the Bursa Securities was brought about by the differences highlighted here
http://reform-nlfcs.blogspot.com/2008/06/differences-for-2006-between-2006-and.html
and here
http://reform-nlfcs.blogspot.com/2008/06/reclassification-of-information-in-2007.html
But the answers have opened a whole can of worms.
First lets examine the sale of PKP to Nalfin Realities and Status Point
PKP and PKM (Palm Kernel Pellets and Palm Kernel Meal respectively) are byproducts of the process of extracting palm kernel oil from palm kernels. They are an animal feed.
The announcement included excel details of the invoices which I have copied below
http://reform-nlfcs.blogspot.com/2008/08/pkp-sales-to-nalfin-realities-and.html
From Oct 2005 to Dec 05 Premium Nutrients sold 2.26m worth of PKP to Nalfin Realities
From Jan 06 to Mar 06 it sold 2.46m woth of PKP to Nalfin Realities.
Now, very conveniently
It no longer sold PKP to Nalfin Realities but started selling to Status Point, another NLFCS subsidiary right the next month.
From Apr 06 to Dec 06 Premium Nutrients sells 9.7m worth of PKP (or PKM) to Status Point (Status Point bought PKP from Premium in 249 separate transactions!)
From Jan 07 to Dec 07 it sold 17.3m! worth of PKM to Status Point (Status Point bought PKP from Premium in 331 separate instances, that is almost every day of the year!)
From Jan 08 to Jun 08 it sold 8.2m worth of PKM to Status Point (and ongoing?) (and Jan to June 08 Status Point bought PKP in 146 separate instances, almost everyday of the six months from Jan to June!)
This raises a number of questions.
Firstly as I have mentioned before Premium Nutrients has its own marketing division, why is it selling to its associate companies and foregoing the profit they make by selling it on its own?
Nalfin Realities is a holding/trading company, it doesn't use PKP/PKM, it just sells it on and makes profit on Premium Nutrients back.
More interestingly is the sale to Status Point
Now Status Point is described as
We are premium producers of all grades of Desiccated Coconut, Nata De Coco, Coconut Cream and Coconut Shell Flour. From here http://statuspoint.asiaep.com/status.htm
and also as
Manufacturing of Coconut products and other allied products based on coconuts.
from here http://reform-nlfcs.blogspot.com/2008/06/status-point-sdn-bhd.html
It has nothing to do with animal feed (pkp/pkm). So why on earth has it started buying 17.3m woth of animal feed in 2007 and continues to do so in 2008?
It becomes clearer if you look at Status Point's accounts for 2007
http://reform-nlfcs.blogspot.com/2008/06/status-point-sdn-bhd.html
The pertinent details are
Operating Revenue : 17,438
Profit After Taxation : 1,151,623
On revenue of 17,438 it made profit of 1.15m. That is because the buying and selling of animal feed could not be classified as part of its normal revenue. It looks like its entire profit was based of buying animal feed from Premium Nutrients and selling it on, profit that should have gone to Premium Nutrients in the first place.
Status Point has no expertise buying and selling animal feed, it is a company that is a manucfacturer of coconut products, who are actually the people doing the buying and selling? I believe the buying and selling of animal feed by Status Point from Premium Nutrients is the only thing keeping Status Point solvent. That to all intents and purposes Status Point is an insolvent, defunct company with revenue of 17,438 in 2007 and this fact is being kept hidden from NLFCS members.
This is deception! the common directors of these companies have used their control of these companies to shift profit to Status Point from Premium Nutrients thereby impoverising Premium Nutrient shareholders and giving a deceptive picture of Status Point's financial condition to NLFCS directors and to NLFCS members.
This has only come to light because the Securities Commission follow up on a discrepancy in the 2007 and 2006 accounts of Premium Nutrients which is listed company and a 32% associate of NLFCS. This begs the question of what else is happening in the other NLFCS companies that do not undergo public scrutiny?
The directors of Premium Nutrients might approve of this without knowing anything and the directors at the NLFCS level might not know what is going on, but the common directors of Premium Nutrients, NLFCs and Status Point are definitely a party to an attempt to keep Status Point afloat and paint a deceptive picture that NLFCS is doing better than it is. How long did they think they could do this? What else are they doing in all the other NLFCS companies?
The directors of Status Point as at 2007 can be found here
http://reform-nlfcs.blogspot.com/2008/06/status-point-sdn-bhd.html
They have to answer these questions. What is going on at Status Point? Why is it buying so much PKP/PKM (animal feed)? What else is it doing? Is it buying things from other parts of NLFCS. Is it still a manufacturing concern using coconuts to produce various products? Without this buying and selling on of PKP/PKM, would it still be solvent? How is the profits of 1.15m made of when the revenue is only 17,438 in 2007?
Because this is a Recurrent Related Party Transaction, it looks like Premium Nutrients will have to call an EGM to get shareholders approval of all this transactions (which they should have done in the first place but failed to do). Due to the conflict of interest, NLFCS, the chairman of NLFCS and a few other people can't vote (that is 44.98% of the shares!). Therefore this is a golden (and probably only) opportunity for Premium Nutrient shareholders to make your displeasure heard and felt.
And of course once again, no one is going to be accountable for anything.
P.S = Premium Nutrients has just released its interim financial report for 30/06/08. It's doing well, cumulatively 4.9m profit vs 3m last year.. If only it could concentrate on its own operations instead of doing the shifty things I have highlighted above which is a transfer of profit. Concentrating on itself will benefit everyone especially NLFCS who is the biggest shareholder.
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