From time to time, CLP has repurchased shares to optimise our capital structure and enhance our earnings per share. These repurchases were conducted having given due consideration to our cash position and distributable reserves, the alternative uses of funds such as dividend payments or allocations to new investments, and our share price.
Since 1998, the Company has undertaken opportunistic on-market share repurchases to optimise our capital structure and enhance earnings per share. Details of the share buybacks made by CLP are set out below:
In our notice for the 2003 AGM, we drew shareholders' attention to the fact that, should the Company repurchase about a further 11 million shares (representing 0.46% of our issued share capital), the shareholdings in CLP of the parties associated with the Kadoorie Family would thereby exceed 35%, the threshold at which they would be obliged to make a mandatory general offer for the remaining shares of the Company.
In October 2003, CLP formally applied to the Securities and Futures Commission (SFC) for a ruling that the Takeovers and Mergers Code does not preclude a whitewash waiver application in respect of a mandatory general offer obligation triggered by on-market share repurchases. We did so on the basis that, having consulted the Independent Non-executive Directors, it was in the interests of the Company and all its shareholders that the Company be able to continue its on-market share repurchases without creating a mandatory general offer obligation, or compelling the parties associated with the Kadoorie Family to sell down in anticipation of future share repurchases.
In our submission to the SFC, CLP expressed its concern that the repurchase of shares during or shortly after the disposal by the Kadoorie Family would be confusing to the market and may create an impression of lack of confidence by a major shareholder. It may also create a possible perception of market manipulation and give rise to risks of connected transactions, in the form of inadvertent repurchases of shares from parties associated with the Kadoorie Family.
Following an unfavourable ruling from the SFC, we appealed to the Takeovers and Mergers Panel. We submitted to the Panel that a whitewash waiver was permissible under the Takeovers and Mergers Code, was in the interests of the Company and its shareholders, and was in line with accepted practice in countries against which Hong Kong might benchmark itself such as Australia, the U.K. and Singapore.
In December 2003, the Panel applied the Code so as to turn down CLP's appeal, without commenting on the particular merits of the application. Extracts from our submissions to the SFC and the Panel's decision are as follows:
In November 2004 the SFC issued a Consultation Paper on a Review of the Codes on Takeovers and Mergers and Share Repurchases. This, amongst many other issues, invited views on whether the Codes should be amended to provide for whitewash waivers of general offer obligations triggered as a result of on-market share repurchases, accompanied by safeguards for shareholders. With the support of our independent non-executive directors, CLP has made a strong submission to the SFC arguing in favour of the possibility of such waivers.
Unfortunately, and notwithstanding established practice elsewhere, the SFC concluded that the existing rules would in substance be retained.
In these circumstances, we will bear in mind other means which will enable share repurchases to be effected. However, we recognise that share repurchases are but one route by which shareholders' value can be enhanced. For the time being, we have no specific plans with respect to repurchases.