European Commission. Dear Sir, Madam,

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1 Subject: SCGOP comments on EC Consultation Fostering an appropriate regime for shareholders rights Our reference European Commission Heerlen, DG Internal market Unit G4 02 december 2004 B-1049 Brussels Dear Sir, Madam, Enclosed please find the SCGOP-comments on the Consultation Document of the European Commission on Fostering an appropriate regime for shareholders rights. Kind regards ir. Jos T. van Niekerk director

2 SCGOP-Comments on the Consultation Document of the European Commission on FOSTERING AN APPROPRIATE REGIME FOR SHAREHOLDERS RIGHTS Do interested parties agree that the scope of the forthcoming proposal on shareholders rights should be restricted to companies whose shares are admitted to trading ( listed companies ), and that Member States could be invited to extend these facilities to non-listed companies? Yes. The diversity is large enough as it is. Having to account for the situation at non-listed companies only bears the risk of drafting too abstract rules. Apart from that in practice rules on corporate governance for listed companies also tend to have a positive effect on non-listed companies. Do interested parties consider that the forthcoming proposal for a directive should set up a framework to identify the person entitled to control the voting right as the last natural or legal person holding a securities account in the chain of intermediaries and who is not a securities intermediary within the European securities holding systems, nor a custodian? Yes. Without drastically changing the rules of national company law in general and the definition of a shareholder in particular, member states could be obligated to adopt a statutory provision defining who is the ultimate beneficial owner of shares combined with a statutory power of attorney for that person to vote the shares. In any case a consistent and harmonized system including the definition of the beneficial owner is necessary to solve the current logistical crisis on cross border proxy voting. The given definition of the person entitled to control the voting (as the last (etc.) ) seems sensible, albeit that the exclusion of holders of securities outside the EU could be regarded as an unfair distinction between the two categories that can also take away from the objective of the Directive as such. If in the current financial markets of ever further globalisation outside-eu shareholders cannot be reached, this will be an important setback for the succes of the Directive. At a minimum a securities intermediary should be obligated to alert its outside-eu clients to their EU-rights in this respect, and should also be obligated to appoint these client at their request as the persons controlling the voting rights. One could even argue that the words within the European securities holding systems in the proposed definition should be deleted. We understand this may create issues of territorial authority. We feel there must be ways around this problem however. Given the importance of the issue, it is advisable to further explore the possibilities. Conceivably applying these rules can be made a precondition for directly or indirectly doing business in this area in Europe. Should it also provide for a securities intermediary who is not admitted as a participant in a European securities system but holds shares on behalf of clients the possibility to designate his clients in its place as controlling the voting rights? And should it be compelled to designate the identity of its clients at the request of the issuer?

3 See previous question. Do interested parties agree with such provisions to allow the ultimate investor to exercise the entitlement to control the voting rights? Yes. The advantages outweigh the possible downsides. Do they also agree that the ultimate investor should in all cases be offered the possibility, either to provide the financial intermediary with voting instructions or to be given power of attorney by the same financial intermediary? Yes. See above. Do interested parties agree that securities intermediaries should be required to certify to the issuing company who the ultimate investor entitled to control the voting rights is and for how many shares? What do you think is the best option to allow for such an authentication and certification process? Yes. Again, the advantage of having a workable proxy voting system outweighs possible downsides. It also allows companies to contact their ultimate shareholders and communicate with them on corporate governance issues. However, their should be safeguards that this information cannot be improperly used in a proxy fight or similar situation of proxy solliciation. We furthermore agree with the Expert group on cross-border voting that the second approach as described under of the consultation document gives more certainty. Should the forthcoming proposal address the issue of which parties would have to bear the costs in this authentication? No. In principle it can be left up to the market to deal with this issue, albeit that it may be advisable to prohibit costs to be charged directly to investors. Indirectly they will in general already bear the costs. However charging these costs directly may vey well place an undesirable burden upon their willingness to vote. Do interested parties consider that the practice of securities lending create problems for the exercise of voting rights, in particular in a cross-border context that should be tackled at EU level? Should such provisions essentially aim at enhancing transparency and protecting the interests of long term investors? Regarding securities lending a balance needs to be found between on the one hand returns that can be made and on the other hand votes which need to be cast. In practice this is indeed an issue. Institutional investors should develop a sensible policy on this according to their own fiduciary duty towards their

4 beneficiaries. Their choices would be easier furthermore if the Directive would prescribe using a record date well before the date of the AGM, whereas much of the securities lending activity is around this date. Lenders and intermediaries should indeed be transparant and safeguards need to be built in to protect the interests of investors. In particular, measures to prevent abuses of securities lending such as the lending of shares with the single purpose of influencing the outcome of a vote are to be welcomed. Whereas securities lending provides extra return for pension funds, we see no reason for legislative restrictions in general. However specific legislative measures to rule out abuses are desirable. These measures could e.g. entail the prohibition of seclending for the sole purpose of voting. Do interested parties consider that there are problems associated with the holding of depositary rights that should be addressed in the forthcoming proposal for directive? If so should it allow holders of depositary receipts to be recognised as holding the rights attached to the underlying shares and that any specific exclusion from voting right should be removed? Yes. The holder of a depository right should be recognized as an ultimate investor just as any other. He is as much the beneficial owner as other shareholders. Do interested parties consider that the forthcoming proposal should contain provisions regarding the disclosure of GM notice and materials and some standards for the dissemination of such information? What should be these standards? For shareholders that want to adequately prepare before casting a vote or attending a general meeting, there is at present in practice very often only a unrealistically small window of a few days to analyse the relevant materials such as the annual accounts and other documents related to items on the agenda. Asking institutional investors to become more active in the field of corporate governance is for that reason in most cases almost asking the impossible. A more realistic period would be that all these materials would be put on the website and otherwise distributed as appropriate at least four weeks before the final date that votes can be cast in absentia. Should it also require issuers to maintain a specific section on their website where they would have to publish all General Meeting- related information? Should issuers websites or such GM dedicated sections of their websites contain also a description of shareholders and investors rights in relation to voting (voting by proxy or in absentia) and with regard to the GM (right to ask questions or table resolutions)?

5 Yes (on both questions). It is also for practical purposes highly desirable that a prescribed format is used by all companies allowing investors to very easily find their way to the relevant information. Compare in this respect the US forms such as 20-f. Do interested parties consider that the forthcoming proposal for a directive should deal with the way information is pushed by the issuer to the ultimate investor? If so, which of the two approaches (chain or direct) is preferable? Should the possibility be given to the ultimate investor to opt out of such identification system? For institutional investors the most efficient way to gather information on a particular GMS is via the website of the company. When it is safeguarded that all relevant information is accessable through that route (including annual accounts), then it is not necessary to push packages of information down through the chain of intermediaries to the ultimate investors. All that is necessary then is that the investor is notified that a GMS is upcoming and that the relevant information and materials can be found at the companies website, albeit that one could argue that at least the possibility should remain to receive hard copy document at request. What is necessary also in this respect, is that companies are obligated to always separate a section of their website for this information and that that section is structured in a predescribed standard format that is the same for all EU listed companies. This is necessary to safeguard the quality of the information as well as that it can be easily accessed by investors. Do interested parties consider that share blocking requirements represent a barrier to the exercise of voting rights, especially for cross-border investors? Yes. It presents a great barrier. In practice share blocking makes it impossible to combine a sensible voting policy with investment policies that institutional investors have. It leads to constant conflicts and will remain suppressing shareholder activity in the field of proxy voting if it is not abolished. Do interested parties agree that the forthcoming proposal should require the abolition of share blocking requirements and propose an alternative system States to determine which shareholders are entitled to participate and vote at the GM? Yes. See above. Do interested parties consider that Member States should be prevented from imposing requirements on companies regarding the venue of the GM that would act as a barrier to the development of electronic means of participation? Should

6 additional criteria be defined at EU level to enable shareholders participation to the GM by electronic means? Yes. In the light of the necessity to have as many shareholders participate in the GM, electronic means of participation should be strongly encouraged. Do interested parties consider that the forthcoming proposal for directive should define minimum standards on the way shareholders questions may be filed and dealt with at the GM? If so what should such minimum standards be? Every shareholder should be enabled to ask questions at the GM. However, to maitain a good order of the meeting some measures are desirable. Too often GM s are at present inorderly and take too much time, partly as a result of the fact that issues are being discussed that are of no or very little relevance to the company s situation. This is not an efficient use of the available time and resources for a GM and it forms a disencouragement for mainly institutional investors to start participating at the GM. In this respect measures should be considered such as limiting the alloted speaking time. Do interested parties consider that the forthcoming proposal for directive should define certain criteria concerning the maximum shareholding threshold for the tabling of resolutions and placing items on the GM agenda and the timing to file these ahead of the GM? If so, what should these minimum criteria be? Yes. The lower of one percent of the total sharecapital and a shareholding of at least 50 million euro in value seems a sensible threshold. Provided that GM s are announced sufficiently in advance, a timing of 30 days before the meeting seems realistic. Shareholders will need time to evaluate issues that usually come up in a late stage, also due to disclosures by the company. Do interested parties consider that the forthcoming proposal should oblige Member States to introduce in their national company law the possibility for all companies to offer shareholders the option of voting in absentia (by post, electronic or other means)? Yes. This is so self-evident that it really should need no further debate. If voting in absentia would not be possible in a practical and efficient way, than the hope of creating rigourous checks and balances will be vain. Do interested parties consider that the forthcoming proposal should contain provisions to further facilitate the use of proxy voting across Member States and to lift obstructive local requirements? If so, what should be the minimum criteria that should be defined at EU level, taking into account the constraints of cross-

7 border voting? Yes. All obstacles for coming to a system of electronic (cross border) voting should be identified and abolished. The succes of the Directive is strongly dependent hereof and this should therefore have a high priority. Do interested parties consider that companies should be obliged to disseminate the results of votes and minutes of the GM to all shareholders and/or to post these on their website within a certain period following the meeting? Yes. This is a necessary last step in the proxy voting process, without which there can be no control whether the process is conducted correctly. Do interested parties consider that the non-confirmation of vote execution hinders significantly the exercise of their voting rights? If so, do they consider the forthcoming proposal should address the issue by defining obligations on issuers and securities intermediaries to provide and pass automatic confirmation of vote execution along the chain from the issuer to the ultimate investor? Yes. See above. It could even be considered whether a direct confirmation to the ultimate investor is possible, now that he will be identified in the process.