Imagine a referendum in which the leader of your country declares that his proposals have been approved, without telling you the voting figures. Ngai Lik Industrial wins our "most stubborn company of the year" award by refusing to disclose the figures for a poll we demanded at its AGM. It's such a shame for a company which has delivered eight consecutive years of profit growth.

No Light at Ngai Lik
29 August 2003

Our Project Poll, launched in March this year, is best known for requiring poll voting (1-share-1-vote) at shareholder meetings of all 33 members of the Hang Seng Index, plus HKEx, thereby counting investor votes, in most cases for the first time. But we have also been quietly requiring polls at non-index companies in which editor David Webb is an investor. One of these is Ngai Lik Industrial Holdings Ltd (Ngai Lik, 0332).

Requiring a poll is not as simple as it sounds, because we first have to withdraw 3 or 5 share certificates (depending on the country of incorporation) from the clearing system operated by Hong Kong Exchanges and Clearing Ltd (HKEx, 0388), then transfer them into 3 or 5 separate names, then get them stamped at the Inland Revenue Department, and finally get them registered at the registrar. A lot of footwork, some expense and a few weeks later, we are ready to require a poll.

So far this year, we have required polls in meetings of 14 non-index companies, in addition to meetings of 27 of the 34 companies formally in Project Poll (the rest have yet to hold AGMs). So if you look hard, you can figure out our portfolio! Of the 41 companies polled so far, only one, Ngai Lik, has refused to disclose the poll results.

Yes, believe it or not, you can have a vote without getting the voting figures. We received a letter from Ngai Lik Executive Director and Company Secretary Jim Yeung Cheuk Kwong (Mr Yeung), who told us:

"According to the bye-laws of the Company, the chairman of the meeting is not required to disclose the voting figures on a poll. For this reason and in compliance with the Company's bye-laws, the poll results will not be posted on the Company's web page".

It's what we call the "yah booh sucks" approach to investor relations, or "if we don't have to, then we won't, and you can't make us" - which is a great shame for a company which has done so well financially, delivering profit growth for 8 consecutive years. If they were to improve their transparency and investor relations, they could well attract a better P/E then their historic 9.2x and prospective 8.4x.

Mr Yeung went on to assure us that all the resolutions were passed. But this refusal to disclose the voting figures defeats a key purpose of a poll, which is to accurately measure the level of support or opposition from shareholders for each proposal. Not disclosing the figures has nothing to do with compliance with the Company's bye-laws, and everything to do with stubborn resistance to improvements in transparency. The bye-laws would not be breached by publishing the poll results.

Since the proposals of an AGM are proposals made by the board, there is an obvious conflict of interest if the Chairman simply declares that his proposals have been passed without providing voting figures, which should be independently verified by the registrar.

Listing Rules should be amended

In 21st century Hong Kong, the Listing Rules of the Stock Exchange (which is owned by HKEx) do not even require companies to announce the outcome of shareholder meetings, let alone the polling figures. Nobody even knows whether all the resolutions were passed unless they attended the meeting. It completely frustrates the highest level of corporate governance, namely the oversight of companies by shareowners. We call on the Stock Exchange to amend its Listing Rules to require electronic publication of the results and minutes of each shareholder meeting, including voting figures whenever a poll is taken, and as regular readers will know, we have also called on the Stock Exchange to require poll voting at every meeting, which is the only way to ensure that all investor votes are properly counted. Meanwhile, Project Poll requires this for companies in the Hang Seng Index.

Another meeting looms

We always try to work with our invested companies to improve their governance, rather than against them, and we did write to Mr Yeung and his Chairman before writing this article, inviting them to reconsider publishing the poll results (in which case this article would not be needed), but we did not receive a response.

Ngai Lik has another shareholder meeting coming up on 5-Sep-03 (see circular), this time to seek independent shareholder approval for a connected transaction to sell the motorcycle engine business to a company owned by family trusts of the Chairman and two other executive directors. We'll be voting in favour, but we will demand a poll, because to this day, the main board Listing Rules still do not require poll voting on connected transactions, despite this having been included in the first GEM Listing Rules 4 years ago. So our votes sent via the clearing system of HKEx won't be counted without a poll.

But will the Chairman, who has a financial interest in getting approval for the connected transaction, again simply declare the outcome of the poll without publishing voting figures which are independently certified by the registrar? That would raise obvious suspicions.

Breach of Listing Rules

Incidentally, we did pick up a little breach of the Listing Rules in the annual report which has so far gone uncorrected; Appendix 16.12 requires the biographies of directors and senior managers to state any relationships between them. We saw a striking visual resemblance between executive directors Ms Ting Lai Ling and Ms Ting Lai Wah, as well as in their names, and at the AGM, they confirmed that they are sisters, a fact not disclosed in the report. That also means that Ting Lai Wah is the sister-in-law of the Chairman, Mr Lam Man Chan, who is married to Ting Lai Ling.

©, 2003

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