Let me begin today by explaining our purpose in holding this briefing.
Over the past eight months since our initial investment in SK Corp., we have communicated our vision through press releases and our website. However, given the recent actions of the directors, the time has now come for a stronger, broader voice from investors.
Today's press conference provides us with an opportunity to introduce ourselves formally and to express Sovereign's views to the Korean and international press in a more direct fashion.
We wish to work with other Korean minority investors in the belief that they share our view of the need to call for real, meaningful change at SK Corporation.
After all, this is an issue of vital importance to all minority SK Corporation shareholders. Let us state at the outset that we do not have all the answers regarding the future direction of this company. Sovereign is an investor, not a manager. We firmly believe that the issues facing SK Corporation involve ALL of the company's investors equally, of which Sovereign is but one.
I will speak more about this in a moment.
Today, before taking your questions, I would like to briefly explain who we are, what we stand for, and what we seek in our engagement with SK Corp.
Sovereign Asset Management has been active in global equity markets for over 20 years. We are a global, value investor that seeks to invest in world-scale companies that we think have the potential of becoming world-class businesses.
SK Corporation is one of these companies.
In all our investments, we seek to work constructively and supportively with management to create value for all shareholders equally.
We have never conducted a hostile takeover of any company.
And, very importantly, we have never sought or held a seat on any board of any of our investments anywhere in the world. And let me make very clear, we also have no intention of managing SK Corporation either.
Let me repeat, we are investors, not managers.
As an investor, our primary responsibility is to ensure that the company has a competent, ethical board of directors providing transparent leadership for the company.
So, you may ask why we have invested in SK Corp. This is a very important question, so let me address that.
We firmly believe that SK Corporation is a great company. It is one of the finest oil refiners in the world. It has a skilled workforce and solid business partnerships and relationships. Yet, it is not fulfilling its potential.
I think we can all agree, it is being let down by its current leadership. For example:
SK Corporation is not being managed to its full potential, and we believe that shareholders, irrespective of nationality, have every right to expect change.
We believe all shareholders should have an equal voice. We also think that any manager, anywhere in the world, who loses 4.4 trillion Won, ought to provide an explanation and be held accountable for the loss. We also think that any leadership responsible for this type of loss should take responsibility for their actions by resigning from their position.
As a result of 20 years' experience in global markets, Sovereign Asset Management has come to understand the central role which corporate governance plays in a modern economy.
It would appear reasonable to believe that SK Corporation had come to the same conclusion earlier this year. In fact, let me quote from their website a message that appeared in April 2003.
Remember, this is a quote from the company itself.
"We will endeavor to establish a world-class corporate governance and transparent management led by the board of directors in order to maximize shareholder value."
This is the type of company Sovereign prefers to invest in.
And there was more. Again, I quote:
"We will not provide any unreasonable support to any 'SK Group' related companies-including SK Global. We will become a model company."
Obviously, subsequent events have shown that these promises were only empty and cosmetic.
We think that not only investors, but SK's own employees, mid-level management and clients are being seriously let down.
Although the current leadership purports to control 15.9% of SK Corporation in reality their fully-diluted equity ownership is less than 6.5% of the company.
Current leadership is only serving its own interests as the facts demonstrate.
First, SK Networks still has an unexplained 4.4 trillion won deficit.
...Unexplained.
Three of the 10 directors of SK Corp., including two representative directors, have been found guilty by this nation's courts of accounting fraud. And one must ask, why haven't they resigned?
But as I said at the beginning of these remarks, as a minority shareholder, Sovereign Asset Management has not come here with all the answers. However, it is self-evident that a competent and ethical board of directors, providing transparent leadership is required to help SK Corporation fulfill its potential as a world-class company.
We believe that the Annual Shareholders' Meeting is the appropriate forum for all shareholders to determine whether it is time for a change.
The company clearly requires a revitalized board of directors who will better serve shareholders... All shareholders. Equally.
Sovereign is seeking to identify and support competent and ethical Korean directors to lead this company.
This must be done because shareholders deserve a choice in leadership. And with an equal voice, we can all decide who is best suited to lead this company. This is not only all shareholders' right, it is their responsibility, whether they hold 1 share or 1 million shares.
Thus, we strongly encourage other SK Corporation shareholders to vote at the Annual Shareholders Meeting next March, to determine the future of one of Korea's most important companies.
Please understand. We are just one of the shareholders who will have a say in the outcome of the AGM. Ultimately, it is the Korean minority shareholders who will determine the future of this world-scale company.
Sovereign's desire is to see SK Corporation led by directors of great competence and exemplary character. This is not a matter of personalities. It is a matter of principle. Thus, Sovereign is asking those three directors who have recently received convictions to make the right, business decision for the company. We once again call on them to resign, so that SK Corporation can focus its talents and energies on its potential to develop further as a world-class petrochemical company.
Finally, we would also call on the board of directors to refrain from distributing the company's Treasury stock in an inequitable or preferential fashion. The 10% of the company's shares, currently held in SK Corporation's Treasury, belongs to all shareholders, equally.
To conclude, Sovereign is an investor, not a manager. The future of SK Corporation will be determined by Korean minority investors. All that Sovereign can do is ensure that shareholders have a choice. If SK Corporation is to fulfill its potential as a world-class company, it will require new, ethical and competent leadership. It is time for a change.
Thank you for your attention, and I would now welcome your questions.
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