Interest Scheme – The Case Of CHGS
Posted on 17 February 2013
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Country Heights Growers Scheme
(CHGS), which was launched in 2007, is terminated prematurely on
8.2.2013 by the shareholders. News report from The Edge.
The shareholders “cried foul over the
early termination of the scheme, the underlying asset of which comprises
100,000 acres of oil palm plantation in Gua Musang, because they were
expecting returns of 12% of more based on the output of the plantation”,
as reported by The Edge (#950).
However, “an early termination was
imminent because the plantation was not yielding the expected fresh
fruit brunch, which meant that scheme manager (Plentiful Gold Class Bhd)
would not be able to fulfill the promised returns over the next few
years.” For the reasoning from scheme manager, read the another news
report from The Edge.
M Shanmugam, the managing editor at The
Edge Malaysia, highlighted the following corporate governance issues
involved, at his column article “Whither interest scheme?”
“Trustees are appointed to ensure the funds collected are accounted for and channeled towards the scheme, but they are liable if the scheme is not well managed.”
“The only means investors have to keep track of their investment is through the scheme’s prospectus that is updated every six months. There is no denying that there are serious flaws in these interest schemes.”
“Investors technically do not have a claim on the underlying asset until the scheme matures, which normally is some 20 years after they have invested. Investors also cannot change the management company if the scheme is not well managed.”
“What’s worse is that investments are illiquid, meaning that there is no active secondary market.”
http://tunheang.com/2013/02/17/interest-scheme-the-case-of-chgs/
