At last, a Hang Seng Index constituent has moved to adopt a principal recommendation of Project Vampire, cutting its general mandate to issue new shares from 20% to 5%. Kudos to Johnson Electric for doing the right thing.

Johnson Electric voting advice
10 July 2003

Company: Johnson Electric Holdings Limited (JEH)
Stock code: 0179
Meeting type: Annual
Date of meeting: 21-Jul-03
Time of meeting: 11:00
Advice date:  10-Jul-03
CCASS voting cut-off 17-Jul-03 VOTE NOW
Notice of meeting Click here
Voting method: will require a poll, all proxies will be counted
How to vote: See our voting guide

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

Item Description Vote
1 Adopt the accounts FOR
2 Declare a final dividend FOR
3.a Re-elect Winnie Wang Wing Yee FOR
3.b Re-elect Richard Wang Li Chung FOR
3.c Re-elect Peter John Wrangham FOR
3.d Elect Arkadi Kuhlmann FOR
3.e Elect Oscar de Paula Bernades Neto FOR
4 Confirm the remuneration of directors FOR
5 Re-appoint PriceWaterhouseCoopers FOR
6 Fix the number of directors at a maximum of 15 FOR
7.1 Mandate the directors to issue additional shares (see comment) FOR
7.2 Mandate the directors to repurchase shares FOR
7.3 Mandate the directors to issue repurchased shares AGAINST

Comment: JEH nibbles at Vampire

JEH is currently one of HK's better-governed companies. After two recent appointments, more than half of its directors (6 out of 11) are independent non-executive directors, which is a rarity in Hong Kong. JEH is 59.6% controlled by the Wang family trusts, so it would make the INEDs more independent if the family undertook not to vote on the election and re-election of INEDs.

Kudos to JEH, as it is the first company in the Hang Seng Index to adopt a principal recommendation of Project Vampire, which calls for placings of new shares for cash under the general mandate to be limited to 5% of issued shares and a maximum discount of 5%, while allowing the traditional 20% general mandate for non-cash issues, such as shares issued in payment for acquisitions.

JEH has in fact proposed to reduce its general issue mandate from last year's 20% to 5%, full stop, without seeking a 20% mandate for non-cash issues for acquisitions. This means that any substantial acquisitions involving more than a 5% issuance will be subject to shareholders' approval, although the Wang family would be able to give such approval with their majority vote.

However, JEH has not included any limit on the discount for issues, whereas we recommend a maximum discount of 5% be included in the mandate. Company secretary Susan Yip Chee-Lan  told by e-mail today "we will consider to limit on the price discount not exceeding, may be at 3 or 5%, on the next 2004 mandate".

On balance, although JEH has not fully complied with Vampire recommendations, this year we will recommend in favour of the mandate (item 7.1), and next year, we will look for that discount limit to be included. The only other company in the HSI with a Vampire-compliant mandate is HSBC Holdings plc, which as a UK-listed UK-incorporated company has to comply with the UK Pre-emption Guidelines, currently the international best practice on which Project Vampire is based.


Item 7.3

We vote against item 7.3, which involves extending the issue mandate to include any shares repurchased under the share repurchase mandate. There is an important distinction between the two mandates: under the buy-back mandate, all purchases must be on-market and at market price, and any shareholder can participate in the market. But in a share placing, the only people who get to participate are those chosen by the company, and at a discount. For these reasons, there should be no link between the two mandates, and we do not approve of extending the issue mandate in this way.

©, 2003

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