Vampire bites CKI
18 May 2003

For the 5th time this season, investors in a Hang Seng Index company, this time Cheung Kong Infrastructure Holdings Ltd (CKI, 1038) have voted against the general mandate, as we show below. Thanks to our Project Poll, all 14 companies in the project so far have conducted  their votes on a poll, 1 share 1 vote, rather than a show of hands where proxies are ignored.

For readers not familiar with it, Project Vampire (Vote Against Mandate for Placings, Issues by Rights Excepted) urges shareholders to vote against the general share issue mandate unless it complies with our recommendations, based on international best practice, which are:

1. The mandate to issue shares for cash, other than by a rights issue, shall be in respect of not more than 5% of the issued shares a the time of the mandate
2. The discount for shares issued other than by a rights issue shall not exceed 5%.
3. The mandate to issue shares for other purposes, including acquisitions, shall be for not more than 20% of the issued shares

Despite being included in the index on the basis of its entire market capitalisation, CKI only has a free float of 15.17%, with 84.58% being held by Hutchison Whampoa Ltd (0013), 0.24% by Li Ka-shing's private trust, and just one director holding 100,000 shares.

One of the little mysteries of Hong Kong is why the Hang Seng Index committee continues to retain CKI when it's free float is worth only HK$5.1bn and parent HWL and in turn, its controller Cheung Kong (Holdings) Ltd are both already in the index. It certainly doesn't help the credibility of the index, but those who manage HSI-tracking funds have no choice but to scramble after the small CKI float in order to get their fair weighting.

Together, the insiders account for 1,906,681,945 votes, or 84.83% of the company. Assuming they voted in favour of their board's proposal, and deducting that from the votes "in favour" in the official poll results, then the voting of independent investors on the issue mandate was as follows:

In other words, public investors voted by a margin of 50.18% against the general mandate. Total votes cast were 47.95% of the free float, the highest yet in Project Poll. We are assuming that the "In favour"' vote did not include any group pension funds or other related entities that may not show up on the disclosure screen.

We hope investors will continue to voice their opposition to the general mandate. Eventually, issuers and regulators will get the message, and the market will be a safer place in which to invest.

© Webb-site.com, 2003

Organisations in this story

• CK Infrastructure Holdings Limited

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