"Practice Treasury Stock Cancellation, Not Just Words"… Yeongpung·MBK, Shareholder Proposal

Demand for Treasury Stock Cancellation and Cash Dividend at Korea Zinc
"Share Buybacks for Management Control Undermine Shareholder Value"
Proposal to Appoint Temporary Chairman... "Concerns Over Disruption at Regular Shareholders' Meeting"

The Yeongpung and MBK Partners alliance, which is engaged in a management rights dispute with Choi Yoon-beom, chairman of Korea Zinc, proposed discussing the appointment of a temporary chairman, treasury stock cancellation, and a dividend of 7,500 KRW per share at the upcoming Korea Zinc regular shareholders' meeting scheduled for next month.

On the 6th, Yeongpung and MBK announced that they submitted this shareholder proposal containing these matters to Korea Zinc and its board of directors on the 4th.

First, considering the disruption of the extraordinary general meeting held on the 23rd of last month, they requested the appointment of a new chairman. Yeongpung and MBK stated, "If Korea Zinc’s management proceeds with the regular shareholders' meeting, it will be difficult to guarantee its objectivity and fairness, and there is a risk of disruption extending to the regular shareholders' meeting."

The proposal also included strengthening shareholder returns. They first demanded the cancellation of treasury stock. A representative from Yeongpung and MBK Partners said, "Considering the various illegal acts committed by Chairman Choi Yoon-beom’s side using company funds, such as public rights offerings and mutual share voting restrictions, there is a high possibility that treasury stock will be disposed of without cancellation." They added, "Although there were multiple disclosures and even promises in court to cancel the treasury stock, failure to implement this and instead selling to friendly shareholders or using it for the benefit of specific shareholders would damage the value of existing shareholders’ stakes and cause serious harm to the company and its corporate governance."

To this end, they also requested converting the discretionary reserve fund equivalent to the acquisition cost of treasury stock, amounting to approximately 2.077 trillion KRW, into retained earnings. A Yeongpung and MBK Partners representative stated, "We opposed the public tender offer for treasury stock, but since it has already been carried out under Chairman Choi’s coercion, to resolve this and eliminate uncertainty caused by the non-cancellation of treasury stock, we propose converting the discretionary reserve fund corresponding to the acquisition cost of the treasury stock held into retained earnings and canceling all treasury stock held by the company within one week from the date of the regular shareholders' meeting."

Regarding dividends, they proposed a cash dividend of 7,500 KRW per share for the 51st fiscal year, in line with the previous year’s dividend payout ratio. Including the interim dividend, the total cash dividend for the 51st fiscal year (2024) would be 17,500 KRW per share. This is still below the 20,000 KRW per share paid in the 49th fiscal year (2022). Considering that Korea Zinc’s performance up to the third quarter of last year exceeded that of 2022, it is explained that the 2023 cash dividend payout ratio will also not be met.

Yeongpung and MBK stated, "The day after the shareholder proposal, Korea Zinc’s preliminary earnings announcement showed a 15.6% increase in operating profit for 2024 compared to 2023, but net profit turned to a loss in the fourth quarter, decreasing by 22.1% year-on-year." They added, "There was a non-operating loss of 200 to 300 billion KRW compared to the same period last year, and we will request additional explanations from Korea Zinc regarding this matter."

Additionally, they proposed submitting an agenda to appoint directors ranging from 5 to 17 members. This is to reappoint directors depending on the results of the ‘Shareholders’ Meeting Convening Permission Case’ and the ‘Injunction to Suspend Effectiveness of Shareholders’ Meeting Resolution Case’ raised by Yeongpung.

A representative from Yeongpung and MBK Partners said, "Chairman Choi’s illegal and unlawful acts have not only seriously damaged Korea Zinc’s corporate value but also infringed on shareholders’ legitimate rights and property rights, misusing company funds to secure his position, thereby destroying the essence of shareholder value." They added, "As the largest shareholder, we will form an independent and professional board of directors and do our best to restore Korea Zinc’s corporate and shareholder value."