Swire Pacific Limited AGM 2003

Company:	Swire Pacific Limited (SP)
Stock codes:	0019 (A), 0087 (B)
Meeting types:	Annual, A-Share and B-Share
Date of meeting:	15-May-03
Time of meetings:	3 consecutive meetings starting 11:00
Advice date:	05-May-03
CCASS voting cut-off:	12-May-03 VOTE NOW
Notice of Meeting:	Click here
Voting method:	Webb-site.com will require a poll, all proxies will be counted, except Meeting 3, where we don't own B-Shares is up to you.

Note to journalists:
We have up to 4 proxy seats available inside this AGM. Please contact us if you want one.

Special note

This advice covers three meetings: the first meeting is the Annual General Meeting of all shareholders, the second is of A-Shareholders only, and the third meeting is of B-Shareholders only. Blame SP - they are the only company left on the SEHK with two classes of ordinary shares. The meetings take place one after the other, starting at 11.00.

The two classes allow the Swire family to maintain voting control with only a minority equity position. Each A-Share or B-Share has 1 vote, but 5 B-shares carry the same dividend and equity rights as 1 A-Share. This makes the B-Shares 5 times more powerful than the A-Shares. This is illustrated by the following table:

The table shows that the controlling shareholder has 29% of the equity but 52.2% voting control. However, they only have 4.4% of the A-Shares and 67.0% of the B-Shares, so they cannot determine the outcome of the A-Share meeting! For simplicity, we have ignored the Swire family's modest direct holdings.

We will give you all the recommendations for the 3 meetings first, and then the reasons.

Meeting 1 - AGM

Item	Description	Vote
1	Declare final dividends	FOR
2.a	Approve the re-election of all directors in a single resolution (only if passed unanimously)	AGAINST
2.b	If resolution 2.a is not passed unanimously, then:
	re-elect David Gordon Eldon	AGAINST
	re-elect Keith Graham Kerr	FOR
	re-elect James Wyndham John Hughes-Hallett	FOR
	re-elect David M Turnbull	FOR
	re-elect Davy Ho Cho Ying	FOR
	re-elect Clement Kwok King Man	FOR
	re-elect Marjorie Yang Mun Tak	FOR
3	Re-appoint PriceWaterhouseCoopers	FOR
4	Mandate the directors to repurchase shares	FOR
5	Mandate the directors to issue additional shares	AGAINST
6	Mandate the directors to issue repurchased shares	AGAINST
7	Approve Directors' fees (up to a total of HK$2m)	FOR

Note: the lack of numbering on the individual election resolutions adds to the confusion that voters may feel.

Meeting 2 - A-Shares only

Note: the controlling shareholder of SP, John Swire & Sons Ltd, only owns about 4.4% of the A-Shares, so you have a chance to outvote them. Webb-site.com will demand a poll.

Meeting 3 - B Shares only

Note: Webb-site.com has no B-Shares (they are not in the Hang Seng Index), so they are not in Project Poll. If you want your votes to count, then you will have to demand a poll yourself, unless the Chairman does the decent thing and calls for one.

Reasons AGAINST - Meeting 1 - AGM

Item 2.a

Resolution 2.a would only be appropriate if every shareholder was happy with the list of directors proposed for re-election. As we oppose one of the candidates, we will vote against resolution 2.a, and hence it will not be passed unanimously, and hence resolution 2.b will apply. Frankly, the inclusion of 2.a is a waste of time since on a poll there will almost certainly be some votes against it, so it is almost certain never to pass.

Item 2.b

We are in favour of all candidates except David Eldon (Mr Eldon). Mr Eldon is proposed for re-election as an independent non-executive director, but he has a conflict of interest because he is also Chairman of The Hongkong and Shanghai Banking Corporation Ltd (HSBC), which is listed by SP in its annual report as its only Principal Banker. SP's associate Hong Kong Aircraft Engineering Co Ltd (0044) also lists HSBC as its only Principal Banker.

These cross-directorships between Swire and HSBC constitute a further conflict of interest for Mr Eldon, so we cannot regard him as independent. This is not a new position for bankers at SP - he succeeded John Gray on 1-Jun-96, when Gray retired as Chairman of HSBC. It seems that HSBC has traditionally had a seat on the board of SP, which would be fine for SP if the company didn't claim that the occupant was independent. The same pattern is observed at Cathay Pacific.

Regular readers will know that we have opposed "independent" directorships at Hang Seng Bank, Hong Kong & China Gas and Bank of East Asia for the same reasons. We are not alone in this - the New York Stock Exchange has recently submitted proposals to the SEC which frowns upon a company's bankers from being considered as independent directors, and in the UK, the Higgs report on non-executive directors made a similar recommendation that the UK Combined Code on corporate governance be amended to make clear that those whose employers have "material business relationships" with a company should not be considered as independent of that company.

Items 5 and 6

Webb-site.com urges all investors to vote against the general issue mandate for all listed companies, for the reasons explained in Project Vampire, unless they comply with the recommendations set out in that article. The non-pre-emptive issue mandate allows management to choose the shareowners by allotment of shares. This corrupts the governance mechanism. Shareowners should govern management, not the other way around. If a company wishes to raise cash by issuing shares, then it should do so by rights issue.

Reasons AGAINST - Meetings 2 and 3

The A-Share and B-Share meetings each have a single proposal, namely to approve Resolutions 4 and 6 as set out in the AGM notice. We are opposed to resolution 6, and as it is not offered separately from resolution 4, we must recommend against the bundle, so we urge shareowners to vote against the resolution in both meetings.

Comment

SP, in common with HSBC Holdings plc, is in a small minority of companies that insist on referring to their directors by cryptic initials, as if they wanted to be "private" directors of a public company. For example, one of the directors is only named as "D Ho" - and it is only through research that we have discovered his full name of "Davy Ho Cho Ying". The proxy form just asks you to re-elect "D Ho" - there are probably hundreds of people fitting that description in Hong Kong alone.

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