TVB voting advice
19 May 2003
| Company: | Television Broadcasts Limited (TVB) |
| Stock code: | 0511 |
| Meeting type: | Annual |
| Date of meeting: | 28-May-03 |
| Time of meeting: | 11:00 |
| Advice date: | 19-May-03 |
| CCASS voting cut-off | 23-May-03 VOTE NOW |
| Notice of meeting | Click here |
| Voting method: | Webb-site.com 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 | Sanction a final dividend | FOR |
| 3 | Re-elect Li Dak Sum | AGAINST |
| 4 | Re-appoint PriceWaterhouseCoopers | FOR |
| 5.1 | Mandate the directors to issue additional shares | AGAINST |
| 5.2 | Mandate the directors to repurchase shares | FOR |
| 5.3 | Mandate the directors to issue repurchased shares | AGAINST |
| 5.4 | Extend the period during which the register of members may be closed in 2003 to 60 days. | FOR |
Note
TVB, thanks to the licensing conditions of the Broadcasting Ordinance, is the only company which has foreign ownership restrictions on its HK-listed shares. This makes it particularly complicated for shareholders to vote. Ahead of the AGM, registered shareholders get sent a declaration form, which they must complete and return. If they fail to do so, then they cannot vote on a poll. The deadline for declarations was 17-May-03, which might explain why they need to keep their register of members closed for so long (see resolution 5.4 above).
The declaration is that you are either "qualified voting controller" (QVC) or an "unqualified voting controller" (UVC) basically depending on whether you live in Hong Kong, and have done so for a continuous period of at least 7 years in the past. For shareholders who are corporations, a majority of the board must fulfil that criterion. Exceptions include the managers of SFC-authorised unit trusts.
For shareholders who are just nominees with no voting discretion, they must pass the form on up the line until it reaches a voting controller, who then completes it and sends it back. We have no idea how HKSCC Nominees Ltd, which holds most public shareholdings as nominee of the clearing system, handles this, or whether they even attempt to. As a result, we may discover, when we get our poll done, that in fact almost nobody in the public shareholder base is qualified to vote. Happily, your editor is a QVC. In this age of internet media without boundaries, cable TV, and satellite TV, it is about time Hong Kong dropped its protectionist ownership laws on broadcasters of free-to-air TV and let all shareholders vote without restriction.
Any UVC cannot vote more than 2% of the issued shares without the consent of the Broadcasting Authority, and even with such consent, may not vote more than 10% of the issued shares.
For those who do vote, on a poll, if more than 49% of the votes are cast by UVCs then they get scaled back to 49%, so that the QVC votes are at least 51% of the votes cast. That means each UVC ends up with a fraction of 1 vote for each share she voted.
Reasons AGAINST
Item 3
Li Dak Sum (Mr Li), aged 82, which is young by TVB standards (the Chairman is 95), is proposed for re-election as an independent non-executive director (INED). Mr Li is one of only two INEDs on the board, the minimum allowed under the Listing Rules, and has been a director since 1995. He is the Chairman of Sharp-Roxy (Hong Kong) Ltd, which markets Sharp products in HK & China. His company advertises on TVB and on 13-Dec-02 it was announced that in the 23-day period from 13-Dec-02 to 5-Jan-03 it had spent $2.42m (before deducting agency comission) on advertising with TVB.
The announcement said that transactions would be capped in future years at HK$5m per annum. Such transactions were to be reviewed by the INEDs from 2003 onwards, who must confirm in future annual reports that the advertising was on normal commercial terms, or where none exists, that they were fair and reasonable. The only problem is, Mr Li is one of the two INEDs. So that means that only one INED, 87 year-old Lee Jung Sen, would be able to make such a statement.
TVB is one of Hong Kong's most prolific producers, not just of TV shows and movies, but also of connected transactions - the directors' report contains nearly 5 pages of them, so the INEDs have an important role to play in giving opinions on whether these deals are fair and reasonable, and while Mr Li may be an excellent director, we cannot regard him as independent, due to his company's trading with TVB, so we vote against.
Items 5.1 and 5.3
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.
If your company offers new shares to other investors at a discount, but not to you, then your company is transferring value from your shares to the new investors. Their gain is your loss. That's why we believe an issue for cash should be done by rights issue, failing which it should be limited to 5% of existing issued shares and a maximum discount of 5%.
© Webb-site.com, 2003
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