Federal Court's cart without a horse

Federal Court's cart without a horse
NH Chan | Jun 23, 09 11:51am
MCPXcomment On April 10, 2009, the Federal Court declared that the three Perak assemblymen who quit their parties are still members of the state legislature.

It ruled that the Election Commission (EC) is the rightful authority to establish if there was a casual vacancy in the Perak state legislature.

The five-member bench comprised Federal Court judge Alauddin Mohd Sherif, Arifin Zakaria, Nik Hashim Nik Abdul Rahman, S Augustine Paul and James Foong.

Following this, I wrote an article entitled ‘When justice is not administered according to law’. This is what I said: Was the Federal Court right? Before you can judge the judges of the highest court in the country, it is necessary for me to apprise you of the law applicable to the question which is the constitution of Perak.

I then pointed out that the law which is applicable is Article 31(5) of the Perak constitution which reads: A person who resigns his membership of the legislative assembly of this state or any other state shall, for a period of five years beginning with the date on which his resignation takes effect, be disqualified from being a member of the legislative assembly of this state.

I pointed out that an assemblyperson who resigns his membership of the legislative assembly is disqualified from being a member of the assembly for a period of five years from the date of his resignation.

I also showed that Article 33(1) says: If any question arises whether a member of the legislative assembly has become disqualified for membership, the decision of the assembly shall be taken and shall be final.

What this means is that, when a question arises as to whether a person is disqualified from being a member of the assembly, the decision (or ‘the vote’) of the assembly is final.

Incidentally, Article 35 stipulates that an assemblyperson can resign by simply writing to the speaker. This is what it says: A member of the legislative assembly may resign his membership by writing under his hand addressed to the speaker.

I concluded my article with this observation: The above is simple enough for all of us to understand. But then, all of us are wondering how on earth the Federal Court could have decided that the EC is the rightful entity to establish if there was a casual vacancy in the Perak state legislature.

Don’t you all feel superior to the Federal Court judges because you know the correct answer while the highest court has given a wrong decision? So you see, when you know how to judge the judges, you would be able to separate the wheat from the chaff among them. The chaff, you will discover, may not be up to your expectations.

Regurgitation in judgment

The dictionary meaning of ‘regurgitate’ is ‘repeat information without understanding it’. Almost everyone knows that it is the assembly who decides the question of the disqualification of a member of the legislature and not the EC. It is only when a member has been disqualified that there is a vacancy in the assembly.

Nik Hashim FCJ handed down a written judgment dated June 8, 2009 as the judgment of the court. The judgment appears to be oblivious of the fact that the general public is now aware of the law applicable. Since the people has been apprised of the law it would be foolish for any judge to give a judgment which is nothing but hogwash - it was crassly insensitive of the judges to try to pull the wool over the eyes of the knowing public.

But to our surprise, this is exactly what Nik Hashim FCJ did. As usual the Federal Court has missed the point again. Recently, we discovered it was Augustine Paul FCJ who has this propensity. Now it is Nik Hashim.

He said: The issue relating to question No.1 is whether it is the EC or the speaker who has the right to establish if there is a casual vacancy of the state legislative seats. To answer the question, we have to consider the provisions of Article 36(5) of the Perak constitution and section 12(3) of the Elections Act 1958, and the meaning of the words ‘casual vacancy’ and the word ‘establish’.

Article 36(5) of the Perak Constitution states: A casual vacancy shall be filled within 60 days from the date on which it is established by the EC that there is a vacancy”

Section 12(3) of the Elections Act reads: In relation to a vacancy which is to be filled at a by-election, a writ shall be issued not earlier than four days and not later than 10 days from the date on which it is established by the EC that there is a vacancy.”

A ‘casual vacancy’ is defined in Article 160(2) of the federal constitution to mean ‘a vacancy arising in the House of Representatives or a legislative assembly otherwise than by a dissolution of Parliament or of the assembly’.

The word ‘establish’ is defined in the Oxford Advanced Learner’s Dictionary (6th edition) to mean: ‘to discover or prove the facts of the situation; ascertain’.

And the Shorter Oxford English Dictionary defines the word ‘establish’ to mean ‘to place beyond dispute; to prove’.

Nik Hashim continued: In considering the Perak constitution, the provisions of the other state constitutions and the federal constitution need to be considered.

By comparison, the constitutions of Kelantan [Article 46(5)], Malacca [Article 19(5)], Pahang [Article 26(5)], Penang [Article 19(5)], Perlis [Article 55(5)], Sarawak [Article 2 1(5)] and Kedah [Article 53(5)] contain provisions similar to Article 36(5) of the Perak constitution which states that ‘A casual vacancy shall be filled within 60 days from the date on which it is established by the EC that there is a vacancy’; whereas the constitutions of Johor [Article 23(5)], Negri Sembilan [Article 56(5)], Selangor [Article 70(5)] and Terengganu [Article 44(5)] provide that a casual vacancy shall be filled within 60 days from the date on which it occurs.

And blah blah blah, the verbiage continues from page 11-18 of his 20-page judgment where he concluded: Hence we unanimously ruled that the decision of the respondent speaker declaring the three state seats of Behrang, Changkat Jering and Jelapang vacant was unlawful and therefore null and void as the decision was contrary to Article 36(5) of the Perak constitution. Accordingly, our answer to question No 1 is in the affirmative. Having answered the question we found that there is no necessity to answer question No 2.

Missing the point

Now that you know the law which is applicable, you are in a position to judge the five judges

What do you think of the quality of these judges of the highest court in the country? You must think that, after all the rigmarole and after all the effort in writing this 20-page judgment, they could have done better. But no, they still missed the point altogether. All of us ordinary folk knew the answer. But not these five judges.

Of course, the point is Article 33(1) of the Perak constitution which says that, when a question arises as to whether a person is disqualified from being a member of the assembly, the decision (meaning ‘the vote’) of the assembly is final. It is neither the speaker nor the EC who determines if a person is disqualified from being a member of the assembly.

If a person resigns his membership of the legislative assembly, he shall be disqualified from being a member of the assembly for five years from the date of his resignation; see Article 31(5).

Article 35 only says that a member can resign simply by writing to the speaker.

So, if any question arises as to the resignation of the three turncoat assemblymen - a person who resigns his membership of the assembly is disqualified for five years from being a member of the legislative assembly - the decision of the assembly by a vote being taken on their disqualification shall be final.

It is only after a member of the assembly has been disqualified for membership of the legislative assembly that a vacancy of the member’s seat in the assembly arises. It is only then that a casual vacancy arises. And by Article 36(5): A casual vacancy shall be filled within 60 days from the date on which it is established by the EC that there is a vacancy.

In my article which I wrote shortly after the oral decision of the Federal Court in early April, I had even pointed out the misreading of Article 36(5) by the highest court in the land.

This is what I said: A casual vacancy means an occasional vacancy which can be filled simply with a by-election. But the question whether the turncoat assemblymen have resigned or not will have to await the outcome of the decision of the assembly which decision shall be final: see Article 33(1).

It is only upon receiving the decision of the legislative assembly that the EC will be able to establish that there is a vacancy. As it turns out the Federal Court has put the cart before the horse - in this case, just the cart without the horse.

It has held that it is for the EC to establish that there is a casual vacancy without waiting for the decision of the assembly whether the three turncoat assemblymen have been disqualified for membership of the assembly by resignation.

Not administering justice according to law is this Federal Court’s besetting sin. The judges of this court have, therefore, breached section 3(l)(d) of the Judges’ Code of Ethics 1994 for bringing the judiciary into disrepute or bringing discredit to it.

This is a ground for their removal from office by virtue of section 2(2) of the Code of Ethics.

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NH CHAN is a former Court of Appeal judge famous for his ‘All is not well in the House of Denmark’ comment regarding judicial corruption. He was referring to the Kuala Lumpur High Court’s commercial division located in Wisma Denmark. The quote is based on Shakespeare’s ‘Something is rotten in the state of Denmark’. He now lives in Ipoh.

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Kilang Besi Labur RM9 Billion di Perak

KYM HOLDINGS BERHAD (“KYM” or “the Company”)
- PROPOSED DISPOSAL OF SIXTEEN (16) PARCELS OF LAND MEASURING
APPROXIMATELY 409 ACRES (OR 1,655,992 SQUARE METRES (“SQ. M”)) BY HARTA
MAKMUR SDN BHD, A 54% OWNED SUBSIDIARY COMPANY OF KYM TO VALE
INTERNATIONAL S.A. FOR AN AGGREGATE CASH CONSIDERATION OF RM101,874,578.41
(“ PROPOSED DISPOSAL”)
- PROPOSED GRANT OF OPTION TO VALE INTERNATIONAL S.A. TO PURCHASE FROM
HARTA MAKMUR SDN BHD AN ADDITIONAL THIRTEEN (13) PARCELS OF LAND
MEASURING APPROXIMATELY 756 ACRES (OR 3,061,372 SQ. M) FOR AN AGGREGATE
CASH CONSIDERATION OF RM93,759,024.15 (“ PROPOSED OPTION”)
(COLLECTIVELY TO BE REFERRED AS “THE PROPOSALS”)
1. INTRODUCTION
MIMB Investment Bank Berhad on behalf of the Board of Directors of KYM (“Board”) wishes to
announce that KYM and Harta Makmur Sdn Bhd (“HMSB” or “the Vendor”), a 54%-owned subsidiary
company of KYM, had on 11 June 2009 entered into a conditional sale and purchase agreement (“SPA”)
with Vale International S.A. (“Vale” or “the Purchaser”) for:-
(a) the proposed disposal by HMSB of sixteen (16) parcels of leasehold land measuring
approximately 409 acres (or 1,655,992 sq. m) located at Mukim of Lumut, District of Manjung,
Perak Darul Ridzuan (“Disposal Properties”) to Vale for an aggregate cash consideration of
RM101,874,578.41.
(b) the proposed grant of an option to Vale giving Vale the right (but not the obligation) to purchase
an additional thirteen (13) parcels of leasehold land located at Mukim of Lumut and Mukim of
Setiawan, District of Manjung, Perak Darul Ridzuan measuring approximately 756 acres (or
3,061,372 sq. m) (“Option Properties”) from HMSB for an aggregate cash consideration of
RM93,759,024.15.
2. DETAILS OF THE PROPOSALS
2.1 Background
The Disposal Properties and Option Properties (collectively, the “Properties”) comprises 29 contiguous
parcels of leasehold development land (with an unexpired lease period of 81 years) approved for resort
development which includes an 18-hole golf club known as Teluk Rubiah Country Club, a 54 room chalet
development known as Teluk Rubiah Resort and 142 units of bungalow lots.
Teluk Rubiah is located about 5 km south of Bandar Sri Majung, 9 km south west of Sitiawan town centre,
about 11 km south east of Lumut Town, 83 km due south west of Ipoh City Centre and about 288 km from
Kuala Lumpur City Centre. Teluk Rubiah is accessible from Manjung town via Jalan Semarak Api. The
entrance to Teluk Rubiah Country Club is about 5 km from Manjung town.
The Properties forms part of the KYM group of companies’ (“KYM Group”) master development area at
Teluk Rubiah measuring 4,889,129 sq. m (“Master Development Area”). Upon completion of the
Proposals and assuming Vale acquires the Option Properties, the KYM Group will retain 171,765 sq. m of
the Master Development Area.
HMSB is the registered and beneficial owner of the Master Development Area (including the Properties)
save for:-
(a) 128 units of bungalow lots where HMSB has entered into sale and purchase agreements with
various purchasers for the sale and construction of the bungalow units.
(b) 1 parcel of land (which forms part of the Master Development Area but not the Properties)
measuring in aggregate 39,463 sq. m disposed by HMSB to Ascotsun Sdn Bhd (“ASB”) via a
conditional sale and purchase agreement dated 16 December 2005.
(c) 2 portions of the parcel of land (which forms part of the Master Development Area but not the
Properties) measuring in aggregate 22,851 sq. m disposed by HMSB to Desa Kilat Sdn Bhd
(“DKSB”) via a conditional sale and purchase agreement dated 28 July 1999.
The Properties measures 4,717,364 sq. m comprises an undeveloped portion of 3,893,546 sq. m and
developed portion of 823,818 sq. m which is made up of the following:-
Average age
of buildings
(years)
Land area
(sq. m)
Built-up area
(sq. m)
(a) Teluk Rubiah Country Club 16 657,614 161
(b) Teluk Rubiah Resort 13 26,709 788
(c) 142 units of bungalow lots - 139,495 -*
823,818 949
* The construction of buildings for the bungalow lots have not commenced.
The net book value of the Properties based on the audited consolidated financial statements of KYM for the
financial year ended 31 January 2009 stood at RM185,250,890. Further details of the Properties are as
follows:-
Title details Area
(sq. m)
Disposal Properties
1 PN 210049, Lot No. 6918, Mukim Lumut, District of Manjung, Perak 27,977
2 PN 210051, Lot No. 6920, Mukim Lumut, District of Manjung, Perak 45,307
3 PN 210060, Lot No. 6926, Mukim Lumut, District of Manjung, Perak 12,342
4 PN 210063, Lot No. 6931, Mukim Lumut, District of Manjung, Perak 58,884
5 PN 210064, Lot No. 6932, Mukim Lumut, District of Manjung, Perak 97,198
6 PN 210065, Lot No. 6928, Mukim Lumut, District of Manjung, Perak 75,084
7 PN 210066, Lot No. 6933, Mukim Lumut, District of Manjung, Perak 11,760
8 PN 210068, Lot No. 6934, Mukim Lumut, District of Manjung, Perak 22,272
9 PN 210069, Lot No. 6935, Mukim Lumut, District of Manjung, Perak 40,595
10 PN 210073, Lot No. 6937, Mukim Lumut, District of Manjung, Perak 165,211
11 PN 210074, Lot No. 6938, Mukim Lumut, District of Manjung, Perak 887,750
12 PN 210075, Lot No. 6940, Mukim Lumut, District of Manjung, Perak 8,185
13 PN 210076, Lot No. 6941, Mukim Lumut, District of Manjung, Perak 16,404
14 PN 210077, Lot No. 6942, Mukim Lumut, District of Manjung, Perak 4,364
15 PN 210078, Lot No. 6939, Mukim Lumut, District of Manjung, Perak 13,347
16 PN 210079, Lot No. 6943, Mukim Lumut, District of Manjung, Perak 169,312
Sub-total 1,655,992
Option Properties
17 PN 210050, Lot No. 6919, Mukim Lumut, District of Manjung, Perak 1,228,297
18 PN 210052, Lot No. 6922, Mukim Lumut, District of Manjung, Perak 19,703
19 PN 210053, Lot No. 6923, Mukim Lumut, District of Manjung, Perak 44,077
20 PN 210054, Lot No. 6924, Mukim Lumut, District of Manjung, Perak 8,571
21 PN 210055, Lot No. 6925, Mukim Lumut, District of Manjung, Perak 35,785
22 PN 210056, Lot No. 32704, Mukim Sitiawan, District of Manjung, Perak 163,686
23 PN 210057, Lot No. 32705, Mukim Sitiawan, District of Manjung, Perak 169,547
24 PN 210058, Lot No. 32706, Mukim Sitiawan, District of Manjung, Perak 11,171
25 PN 210059, Lot No. 32707, Mukim Sitiawan, District of Manjung, Perak 6,777
26 PN 210062, Lot No. 6930, Mukim Lumut, District of Manjung, Perak 711,357
27 PN 210070, Lot No. 6936, Mukim Lumut, District of Manjung, Perak 254,355
28 PN 210071, Lot No. 32708, Mukim Sitiawan, District of Manjung, Perak 116,265
29 PN 210072, Lot No. 32850, Mukim Sitiawan, District of Manjung, Perak 291,781
Sub-total 3,061,372
Total 4,717,364
The Master Development Area were originally intended to be developed into an integrated resort
development comprising of a golf course, chalets, bungalows, service suites, corporate villas, hotel,
homesteads and resort commercial center with an estimated gross development value and cost of RM410.8
million and RM220.2 million respectively and expected to contribute total development profits of RM173.9
million to the KYM Group. The said development was approved by Perancang Bandar Dan Desa Perak
Darul Ridzuan on 4 February 1999. However, the implementation of the said development was delayed due
mainly to the onset of the Asian financial crisis in 1998 and consequential delay in implementing various
road infrastructure such as the Jelapang-Lumut Highway and the West Coast Highway which were
important to the successful implementation of the said development.
The Proposals entail:-
(a) the proposed disposal by HMSB of the Disposal Properties to Vale for an aggregate cash
consideration of RM101,874,578.41.
(b) the proposed grant of an option to Vale giving Vale the right (but not the obligation) to purchase
the Option Properties from HMSB for an aggregate cash consideration of RM93,759,024.15.
Vale intends to develop an industrial project which encompasses a private jetty on the Properties
(“Proposed Project”). In connection to this, Vale intends to enter into a conditional sale and purchase
agreement with Kemuning Wira Sdn Bhd to purchase a parcel of land measuring 151,673 sq. m adjacent to
the Properties (“SPA I”).
The Properties are currently charged to financial institutions (“Chargees”) for credit facilities granted to
KYM (“Charges”). Pursuant to the SPA, the Properties shall be disposed free from all charges and
encumbrances.
Out of the total 142 bungalow lots located on the Disposal Properties, HMSB has already entered into 128
sale and purchase agreements with various purchasers (“Bungalow Purchasers”) for the construction and
sale of the bungalow lots (“Bungalow Lots”) (“Bungalow SPAs”). The Bungalow SPAs were not able to
be completed due to frustration as certain approvals could not be obtained. Under the terms of the
Proposed Disposal, HMSB shall as soon as practicable take all actions, including furnishing and executing
such documents as may be necessary to reach settlement with the Bungalow Purchasers for the purpose of
enabling the Vendor and all the Bungalow Purchasers to execute settlement agreements where each of the
Bungalow Purchasers confirm and agree that they no longer have any rights, interests, title or benefit in,
under and to the Bungalow Lots or any part of the Disposal Properties.
In addition, HMSB had on 16 December 2005 entered into a conditional sale and purchase agreement with
ASB for the disposal of a parcel of land (which forms part of the Master Development Area but not the
Properties) measuring 39,463 sq. m (“ASB Land”) for a cash consideration of RM3,574,182. The said
transaction was completed on 26 May 2009.
2.2 Basis of arriving at the disposal consideration/option price
The total consideration for the Properties of RM195.6 million under the Proposals was arrived at on a
willing-buyer willing-seller basis after taking into account the market value of the Properties of RM170.4
million as assessed by TD Aziz Sdn Bhd using the comparison and cost methods of valuation vide its letter
dated 1 June 2009 (“Valuation Letter”).
2.3 Liabilities to be assumed pursuant to the Proposals
Vale/KYM Group will not assume any other liabilities pursuant to the Proposals.
2.4 Background information on the Purchaser
Vale is a member of the Vale S.A group of companies. Vale S.A is a global company headquartered in
Brazil, with a workforce of over 100,000 employees, including outsourced workers. Vale S.A is the second
largest diversified metals and mining company in the world and the largest publicly traded company in
Latin America by market capitalisation (approximately 100 billion United States Dollar).
The Vale S.A group of companies is the world’s largest producer of iron ore and pellets, key raw materials
for the steel industry, and one of the largest producers of nickel, which is used to produce stainless steel,
batteries, special alloys, chemicals and other products. Vale S.A is listed on the New York Stock Exchange,
Sao Paulo Stock Exchange, Madrid Stock Exchange and Euronext Paris.
(Source : www.vale.com)
2.5 Utilisation of proceeds
The gross proceeds arising from the Proposals of RM195.6 million will be utilised for repayment of bank
borrowings, settlement with the Bungalow Purchasers, settlement of outstanding charges in respect of the
Properties, working capital and to defray expenses for the Proposals. KYM presently has bank borrowings
of RM209.7 million as at 31 January 2009 out of which RM141.3 million was utilised for purposes relating
to the Properties.
2.6 Original cost and dates of investment
KYM acquired 90% equity interest of Tegas Consolidated Sdn Bhd (“Tegas”), the holding company of
HMSB which owns 60% equity interest in HMSB for RM12.7 million on 19 June 1996. As part of the said
acquisition, KYM has also repaid on behalf of HMSB an amount of RM60.0 million owing by HMSB to
the vendors of Tegas. The original cost and date of investment by HMSB in the Properties are not readily
available.
2.7 Risk factors
The completion of the SPA is subject to inter-alia, the fulfillment of various conditions precedent which
includes the approvals from various regulatory authorities. The non-fulfillment of any conditions precedent
may result in the SPA being terminated.
3. RATIONALE FOR THE PROPOSALS
The Proposals would enable the Company to achieve the following:-
(i) Reduction in bank borrowings and interest costs. Based on the unaudited consolidated financial
statement of KYM for the financial year ended 31 January 2009, the total bank borrowings of the
KYM Group stood at approximately RM209.7 million with an annual interest cost of RM15.9
million. The Proposals if fully implemented is expected to significantly reduce the KYM Group’s
bank borrowings and interest cost.
(ii) Unlock the value of its investment in the Properties and to streamline and rationalise the KYM
Group’s property asset base. The Proposals are expected to monetise and unlock the value of the
Properties for KYM.
4. SALIENT TERMS OF THE SPA
The salient terms of the SPA includes the following:-
(i) The Disposal Properties shall be purchased by the Purchaser free from any encumbrance, with
vacant possession, subject to the category of land use affecting the Disposal Properties as provided
for in the respective separate issue documents of title having been converted to “industrial”,
subject to the present state of the Disposal Properties and subject to all restrictions in interest and
conditions of title, whether express or implied, affecting the Disposal Properties;
(ii) The disposal consideration of RM101,874,578.41 under the Proposed Disposal (“Disposal
Consideration”) shall be payable by the Purchaser to a stakeholder as follows:-
(a) RM10,187,457.85, being 10% of the Disposal Consideration shall be payable within
fourteen (14) days from the date of the SPA; and
(b) the balance RM91,687,120.56 shall be payable within one (1) month after all conditions
precedent contained in the SPA have been satisfied (“Payment Date”);
(iii) The SPA is conditional upon the following conditions precedent being obtained or fulfilled by the
date falling four (4) months from the date of the SPA or such other date as may be mutually
agreed between the parties (“Cut-Off Date”):-
(a) The approval of the shareholders of the Vendor at an extraordinary general meeting
(“EGM”) for the disposal of the Disposal Properties;
(b) The approval of the shareholders of KYM at an EGM for the disposal of the Disposal
Properties;
(c) The approval of the Securities Commission (“SC”) and Equity Compliance Unit of the
SC in respect to the disposal of the Disposal Properties;
(d) The Vendor obtaining a letter from all the Chargees their redemption statement
confirming their approval or consent for the Vendor to enter into the sale and purchase of
the Disposal Properties and the redemption mechanism in respect of the Disposal
Properties as contemplated by the SPA and the escrow agreement to be entered into
between the Purchaser, the stakeholder, the Vendor and the Chargees (as the case may
be) and containing the undertakings by the Chargees to take all actions and execute such
documents as may be reasonably required by the Purchaser from time to time and until
such time that all the Charges are discharged, so as to procure and ensure that the
Charges are discharged as soon as practicable following presentation of the duplicate
copy of the Charge, discharge of charge in Form 16N of the National Land Code and the
withdrawal of lien-holders caveat lodged by the Chargees over the Disposal Properties by
the Chargees with the Land Office;
(e) The Vendor having obtained and furnishing to the Purchaser copies of the settlement
agreements in respect of the Bungalow Lots and the Purchaser being satisfied (in its
absolute discretion) with the termination of the arrangements in respect of the Bungalow
Lots and the Vendor having full rights to sell and dispose of the Disposal Properties to
the Purchaser in accordance with the provisions of the SPA;
(f) A letter of no objection or the written approval of the Foreign Investment Committee
(“FIC”) to the acquisition of the Disposal Properties by the Purchaser or its nominee (if
applicable);
(g) The written approval of the State Authority for the disposal by the Vendor of the
Disposal Properties to the Purchaser or its nominee (“State Authority Approval”). To this
effect, the application fee and all costs and disbursements for the State Authority
Approval shall be borne by the Purchaser who shall make payment subject to receipt of
supporting documents from the Land Office requiring payment of the same;
(h) Completion of financial, legal and technical due diligence on the Disposal Properties and
the Vendor and KYM to the satisfaction of the Purchaser. The Purchaser acknowledges
that the due diligence shall be for the purpose of confirming that the area and the
boundaries for the Properties shall be not materially different from as they are currently
in the existing separate issue documents of title and that the Vendor has good title in,
under and to the Properties and that there are no other persons having a right to all or part
of the Properties (whether pursuant to any agreements or by way of any powers granted)
and there are no existing impediments (including existing applicable approvals) towards
enabling the proposed amalgamation and sub-division of the Disposal Properties and for
its anticipated use in respect of the Proposed Project;
(i) The execution of the SPA I by all the parties thereto on terms which are acceptable to the
Purchaser (save where a breach has occurred under the SPA I, with the Purchaser having
duly performed its obligations under the SPA I, up until the SPA I becomes
unconditional) and the SPA I becoming unconditional;
(j) The approval from the relevant regulatory authority to convert the category of land use of
the Properties to “industrial” having been obtained and the issuance of the respective
separate issue documents of title with the category of land being “industrial” and with
such conditions and/or restrictions which are not materially different from the conditions
and/or restrictions imposed on the issue documents of title to the Properties as at the date
of the SPA (materiality being determined by the Purchaser in its sole discretion) and
where there are any conditions or restrictions on title, that such conditions and/or
restrictions do not in any way prevent the Purchaser from implementing or carrying out
the Proposed Project. The parties agree that the Purchaser shall be responsible to pay for
reasonable and duly evidenced costs and for the conversion premium and shall make such
payment following the Land Office having issued its approval and stating the amount of
premium payable in writing for the conversion;
(k) The payment and settlement by the Vendor of all outstanding quit rents, rates, premiums,
other outgoings or charges (if any) due and payable for and in respect of the Disposal
Properties up until the Cut-Off Date;
(l) Where applicable, the approval of any other authorities which may be required for the
completion of the transaction contemplated in the SPA;
(m) Delivery by the Vendor and the Government of Perak of an acknowledgement stating that
the Proposed Project and/or the execution, delivery, and performance by the Vendor of
the SPA is not in conflict with, and will not result in a breach or violation of, or constitute
a default under, any material agreement to which the Vendor or the Government of Perak
is a party and any previous authorization or right granted by the Vendor or the
Government of Perak and the Vendor providing written confirmation from Lumut
Maritime Terminal Sdn. Bhd. (“LMT”) and/or any other applicable entity that they have
no objections to the construction and operation of the jetty in connection with the
Proposed Project in a form acceptable to the Purchaser (in its absolute discretion), and the
execution of a Service Agreement, the terms and conditions of which have been agreed
between the Purchaser and LMT, to cover basically eventual interfaces with existing
terminals and maintenance and environment control of marine facilities, if required by
any applicable law or regulation or by the terms of LMT’s concession agreement with the
Perak State Government and/or any other applicable entity; and
(n) The Vendor having taken such actions including executing such documents and making
such applications (where necessary), as may be required by the Purchaser in its absolute
discretion, to resolve the transaction referred to in the agreement dated 28 July 1999 in
respect of the sale by the Vendor to DKSB of a portion, measuring approximately 22,851
sq. m, of the piece of land held under Title Number PN 210057 Lot 32705, Mukim of
Sitiawan, District of Manjung, State of Perak (“Desa Kilat Land”) to the satisfaction of
the Purchaser and the Vendor having delivered to the Purchaser such documentation
evidencing the relevant actions (including the withdrawal of all private caveats or
encumbrances, if any, entered on the Desa Kilat Land or the Properties or Option
Properties as the case may be),
(iv) The completion of the SPA and SPA I shall be inter-conditional unless waived in writing by the
Purchaser.
(v) On 11 June 2009, the Purchaser, HMSB and ASB have entered into an agreement to facilitate the
disposal of the ASB Land by ASB, the beneficial owner of the ASB Land to Vale and transfer of
the title of the ASB Land which is still registered to HMSB directly to Vale (“ASB Agreement”).
HMSB undertakes that it will not terminate the ASB Agreement and it shall further use its best
endeavours to procure that ASB will not terminate the ASB Agreement.
In the event, the SPA I and/or the ASB Agreement are terminated or no longer in full force and
effect (or a party to such agreements has issued a notice to terminate in accordance with the terms
contained therein), then the Purchaser shall have the right to terminate the SPA (if the Vendor fails
to remedy such breach within 14 days from the date of notice by the Purchaser).
(vi) The Proposed Option shall be exercisable for a period of twelve (12) months or such other period
as may be mutually agreed upon by the parties, commencing from the Payment Date (“Option
Period”). In consideration for the grant of the Proposed Option, the Purchaser shall on the
Payment Date pay to a stakeholder the amount of RM9,375,902.42 only being an amount
equivalent to 10% of the purchase price for the Option Properties (“Option Fee”).
In the event the Purchaser exercises the Proposed Option at any time during the Option Period by
giving the Vendor written notice of its exercise, the Vendor shall:-
(a) within fourteen (14) days from such notice, execute a sale and purchase agreement(s)
having substantially on the same terms and conditions as set out in SPA in relation to the
acquisition of the Option Properties (“Option Properties SPA”); and
(b) the Option Fee together with any interest accrued thereon shall be deemed to form part of
the purchase price for the Option Properties and dealt with in accordance with the
provisions of the Option Properties SPA.
In the event the Purchaser fails to exercise the Proposed Option during the Option Period, the
Proposed Option shall lapse at the expiry of the Option Period and the Option Fee shall be
released to the Vendor and any interest accrued thereon to the Purchaser within five (5) days
following the expiry of the Option Period.
5. EFFECTS OF THE PROPOSALS
5.1 Share Capital and Substantial Shareholders’ Shareholding
The Proposals will not have any effect on the share capital and substantial shareholders’ shareholdings in
KYM as the Proposals will be fully satisfied by cash and will not involve any issuance of securities in
KYM.
5.2 Earnings and Earnings Per Share
The KYM Group is expected to register a gain of RM49.6 million resulting from the Proposals (after taking
into consideration expected interest waivers of RM59.9 million by the Chargees for the redemption of the
Properties) during 2009 and/or 2010.
Nevertheless, the Proposals are expected to improve the earnings and earnings per share of the KYM Group
in the future financial years in view of the interest savings as detailed in Section 2.5 above.
5.3 Net Assets (“NA”), NA Per Share and Gearing
The proforma effect of the Proposals on the NA, NA per share and gearing based on the audited
consolidated financial statements of KYM for the financial year ended 31 January 2009 are as set below:-
Audited as at 31
January 2009
(I)
After the
Proposed
Disposal
(II)
After (I) and
the exercise of
the Proposed
Option
RM’000 RM’000 RM’000
Share capital 81,135 81,135 81,135
Share premium 35,803 35,803 35,803
Asset revaluation reserve 31,063 26,209 7,963
Accumulated losses (124,551) (92,802)* (52,611)^
Shareholders’ equity /NA 23,450 50,345 72,290
No of ordinary shares 81,134,500 81,134,500 81,134,500
NA per share (RM) 0.29 0.62 0.89
Bank borrowings 209,729 107,157# 29,803#
Gearing ratio (times) 8.94 2.13 0.41
Notes:-
* After taking into account estimated expenses in relation to the Proposals of RM0.8 million
advisory fees and net gain on disposal of RM27.7 million under the Proposed Disposal.
^ After taking into account the net gain on disposal following the disposal of the Option Properties
under the Proposed Option of RM21.9 million.
# For illustrative purposes, assuming RM120.0 million of the proceeds from the Proposals will be
utilised to repay bank borrowings (including those not related to the Properties) and expected
interest waivers of RM59.9 million by the Chargees for the redemption of the Properties.
5.4 Dividends
Any potential effect of the Proposals on the dividends to be declared for the future financial years will be
dependent on the dividend rate to be determined after taking into consideration the future financial
performance of the KYM Group.
6. APPROVALS REQUIRED FOR THE PROPOSALS
The Proposals are conditional upon the approvals being obtained from:-
(a) the SC pursuant to the SC’s Guidelines on Offering of Equity and Equity-Linked Securities (“SC
Guidelines”), if required
(b) the SC (Equity Compliance Unit)/FIC pursuant to the Guidelines on the Acquisition of Interests,
Mergers and Take-overs by Local and Foreign Interests issued by the FIC;
(c) the State Authority;
(d) the shareholders of KYM and HMSB at separate EGMs to be convened; and
(e) any other approvals by the relevant authorities/parties, if any.
The Proposed Disposal and Proposed Option are inter-conditional upon each other. The Proposals are not
conditional upon any other corporate exercises being undertaken by KYM (if any).
7. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS
None of the directors and/or major shareholders of KYM or persons connected to them have any interest,
direct or indirect, in the Proposals.
8. DIRECTORS’ RECOMMENDATION ON THE PROPOSALS
Having considered all aspects of the Proposals, the Directors of KYM are of the opinion that the Proposals
are in the best interest of the KYM Group.
9. ESTIMATED TIME FRAME FOR COMPLETION
Barring any unforeseen circumstances and subject to receipt of all relevant approvals, the Proposed
Proposals are expected to be completed by the fourth quarter of 2009. The submission of the application to
the relevant authorities for the Proposals is targeted to be made within three (3) months from the date of
this announcement.
10. COMPLIANCE WITH THE SC GUIDELINES
The terms of the Proposals does not depart from the SC Guidelines.
11. ADVISER
MIMB has been appointed as adviser for the Proposals.
12. DOCUMENTS AVAILABLE FOR INSPECTION
The SPA and Valuation Letter will be available for inspection at the Registered Office of KYM at No.12,
Lorong Medan Tuanku Satu, 50300 Kuala Lumpur during normal business hours on Mondays to Fridays
(except public holidays) for a period of three (3) months from the date of this announcement.
This announcement is dated 11 June 2009.

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