TOKYO, March 14 /Xinhua-PRNewswire/ -- Safe Harbor Investment Ltd. (hereafter "Safe Harbor Investment") announced that Safe Harbor Master Fund L.P. (hereafter "Safe Harbor Fund"), a fund that is a shareholder in SNT Corporation, has filed shareholder proposals that will allow for an increase in the annual dividend to be voted on at SNT Corporation's 76th General Shareholders' Meeting in June 2007.
Safe Harbor Fund owns a 7.0% stake in SNT Corporation. Safe Harbor Investment, which manages Safe Harbor Fund, has attempted to build a friendly and cooperative relationship with SNT Corporation's management, and has proposed various plans for the benefit of the company and all shareholders since Safe Harbor Fund began its investment in SNT Corporation in August of 2005. However, after much effort, those plans have only been accepted in a limited way and not implemented in a way that truly improves SNT Corporation's corporate value. Therefore, Safe Harbor Investment has decided to bring one of the points in its plans directly to SNT Corporation's General Shareholders' Meeting.
One of the tenets of Safe Harbor Investment's investment management philosophy is that companies should maximize their return on equity (ROE). The return of capital improves ROE for the common interest of all shareholders, including pension funds and individuals saving for their retirement. Returning capital also gives SNT Corporation's investors an opportunity to reinvest their capital, including investing in Japanese companies that have a need for investment capital. SNT Corporation has publicly stated that its target ROE is 8%. This proposed dividend will help SNT Corporation get close to that goal.
Safe Harbor Investment has carefully analyzed the financial stability and balance sheet of SNT Corporation and believes its decision to propose a 70 yen dividend is appropriate based upon comprehensive consideration of the following factors, which are discussed in detail in the attached Supplemental Material:
-- the Company's public guidance in consolidated net profit for
FY 3/2007
-- un-exercised portion of the current share buyback program
-- mid to long-term financial stability of SNT Corporation's
consolidated balance sheet
-- short-term cash needs, and
-- the impact on SNT Corporation's parent-only balance sheet.
Safe Harbor Fund has made two proposals in order for the 70 yen per share dividend to be paid. First, a resolution has been proposed to move Y5,179 million from the "Reserve for Unspecified Purposes" (betto tsumitatekin) to the "Retained Earnings Carried Forward" (kurikoshi rieki jouyokin). Second, a resolution has been proposed for a distribution of a year-end dividend of 70 yen per share for FY3/2007.
A condensed version of the text of Safe Harbor Fund's proposal to management is attached to this press release in order to ensure that information about its proposal is fairly disclosed to management and all shareholders equally and in a timely manner.
About Safe Harbor Investment, Ltd.
The funds managed by Safe Harbor Investment Ltd. invest primarily in the securities of Japanese companies. Safe Harbor Investment Ltd. is the investment manager for Safe Harbor Master Fund L.P., an entity that beneficially owns shares of SNT's common stock.
IMPORTANT NOTE: This press release (hereafter "Release") is not an offer to acquire shares nor an invitation to tender shares in SNT Corporation and is not intended to solicit any shareholder to retain the fund or any party related thereto or any other third party as its/his proxy in exercising its/his voting rights at any general meeting of the shareholders of SNT Corporation, nor to provide any advice in connection with the exercising of the voting rights by any shareholder. This Release and the proposals are based on information available to Safe Harbor Investment as of the date of this Release. While Safe Harbor Investment has exercised reasonable care as to the information in this Release, Safe Harbor Investment makes no representation or warranty as to the accuracy or completeness of the information contained herein. Further, Safe Harbor Investment makes no representation or warranty as to the result of the resolution in respect of the proposals. Safe Harbor Investment, on Safe Harbor Fund's behalf, also reserves the right to withdraw or amend the proposals as circumstances change.
This Release is not intended to have an effect on the share price of SNT Corporation. Safe Harbor Investment and Safe Harbor Fund assume no responsibility as to any reaction from the market in response to the proposals or views expressed by the management of SNT Corporation. The proposals are intended solely to introduce the subject matter of the proposals for consideration by SNT Corporation's shareholders at the General Shareholders' Meeting.
SUPPLEMENTAL MATERIAL
Safe Harbor Fund has proposed a 70 yen per share dividend on the basis of Y47 yen per share of consolidated profit this year and the Y23 yen per share of the unexercised portion of the share buyback program. Safe Harbor Investment has carefully analyzed the financial impact of a 70 yen per share dividend on SNT Corporation's consolidated and parent-only balance sheets and believes such a dividend is very reasonable and conservative.
The Company's public guidance in consolidated net profit for FY 2007
According to the 3Q earnings release on February 8, 2007, SNT Corporation revised up FY 3/2007 consolidated net profit guidance to Y1,350 million. Safe Harbor Investment believes that to change SNT Corporation's capital structure gradually a 100% pay-out of this year's consolidated earnings is reasonable. This equates to approximately 47 yen per share.
Un-exercised portion of the current share buyback program
SNT Corporation announced its share buyback program on May 30th, 2007, which provides for a maximum buyback of 1,000,000 shares or Y800 million in value. The program will end on March 31st,2007. According to the company filing to the Kanto Local Finance Bureau on February 16, 2007, SNT Corporation bought back about Y123 million worth of shares as of January 31st, 2007. Safe Harbor Investment believes SNT can return the remaining balance of approximately Y677 million to shareholders as part of this year's dividend. This equates to approximately 23 yen per share.
Mid to long term financial stability, including a credit analysis, on the SNT Corporation balance sheet
A total dividend payout of 70 yen per share is approximately a Y2,015 million payment, which is equivalent to about 9.0% of shareholders equity of Y22,411 million and 24% of retained earnings of Y8,401 million. In terms of net debt to equity ratio, SNT Corporation has Y6,336 million of available liquidity on its balance sheet, which consists of cash and marketable securities while total debt amount is Y3433 million. Even after the pay out, SNT Corporation will have a net cash position. In addition, as of the December 31, 2006 consolidated financial statements, SNT Corporation has a long term investment portfolio worth Y3,593 million, Y3,316 million in non-core business short term loans and an approximately Y2,000 million (estimated by Safe Harbor Investment) in unutilized real estate holdings.
Short term cash needs
As described above, SNT Corporation has Y6,336 million of available liquidity on its balance sheet. Even after the payout, the cash balance should be approximately Y4,000 million, which represents 2.8 months of consolidated sales guidance for FY 3/2007, as of the December 31, 2006 consolidated financial statements.
Impact on SNT Corporation's parent-only balance sheet
Y2,015 million equates to about 9.4% of SNT Corporation's parent-only shareholders' equity of Y21,254 million and 28% of the retained earnings of Y7,199 million. On a parent-only basis, SNT Corporation had Y3,724 million in cash and marketable securities as of September 30, 2006.
ATTACHMENT:
CONDENSED VERSION OF SHAREHOLDER PROPOSAL TO SNT CORPORATION
(Translation of Original)
Proposal No.1
The Company shall transfer an amount of Y5,170 million from "Reserve for Unspecified Purposes" (betto tsumitatekin) to "Retained Earnings Carried Forward" (kurikoshi rieki jouyokin).
Rationale for Proposal No. 1
According to the Company's Semiannual Report and Annual Report submitted to the Kanto Local Finance Bureau on December 22, 2006 and June 29, 2001, respectively, the Company has retained earnings of Y5,179 million as a "Reserve for Unspecified Purposes" since the approval of a profit appropriation proposal in the Annual Meeting of Shareholders held on June 28, 2001. No reasonable and justifiable ground can be found for maintaining such reserve without specified purposes where no mid-term management or business plan has been presented to the shareholders, and such reserve has been unused for more than five years and unpaid to the shareholders. . Therefore, in order to prepare for maximization of the Company's ROE (return on equity) through return to shareholders, all of the amount that has been allocated as a reserve for unspecified purposes should be transferred to Retained Earnings Carried Forward.
Proposal No. 2
The Company shall distribute 70 yen per share as a year-end dividend for FY3/2007.
Rationale for Proposal No. 2
According to the Summary of Consolidated Financial Statements (kessan tanshin) for the Fiscal Year ending in March 2006, published on May 16, 2006, the Company sets a goal of 8% ROE, which should be achieved at an early date, not only through earnings growth, but also through a reasonable capital return to shareholders. A reasonable return to shareholders will not only help improve ROE and capital efficiency and be in the common interest of all shareholders including pension funds and individual shareholders, but it will also help improve efficiency of the overall Japanese economy as the returned funds can be reinvested in companies needing capital.
In determining the proposed Y70 per share dividend which is based on the Company's consolidated net profit for FY3/2007 (projected by the Company) and un-exercised portion of the current share buyback program, factors such as mid to long-term financial stability, short-term cash needs, and the impact on the Company's parent-only balance sheet. Therefore, the Company shall distribute 70 yen per share as a year-end dividend for FY3/2007, as its first step in improving capital efficiency through a reasonable return of capital to shareholders.
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