Company Name: Microsoft Corp.
Public Availability Date: July 19, 2002
Document Sections:
INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER
[INQUIRY LETTER]
June 24, 2002
Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Microsoft Corporation Shareholder Proposal Submitted by Chi Yuen
Ladies and Gentlemen:
In accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934, as
amended (the "Act"), enclosed are six copies of (1) this letter and (2) the
proposal and statement in support thereof (the "Proposal") received by Microsoft
Corporation (the "Company") on May 30, 2002 from Chi Yeun (the "Proponent") for
inclusion in the proxy statement and form of proxy (collectively, the "Proxy
Materials") relating to the Company's 2002 annual meeting of shareholders. This
letter is intended to notify the Commission of the Company's belief that the
Proposal may be properly omitted from its Proxy Materials and to set forth the
Company's reasons for the intended omission.
Microsoft requests the concurrence of the Staff of the Division of Corporation
Finance (the "Division") that no enforcement action will be recommended if
Microsoft omits the Proposal from its Proxy Materials. The Company would
appreciate the Division's response to its request prior to August 22, 2002,
which is the date of the meeting of the Company's Board of Directors at which
the Proxy Materials will be approved. The Company expects to file definitive
copies of its Proxy Materials with the Commission on approximately September 16,
2002.
The Proposal reads as follows:
"RESOLVED: Shareholders request the Board declare a dividend of 50% of Year 2002
and subsequent years' earnings, with the level of dividends to be maintained at
least at Year 2002 level for subsequent years, that is, even if subsequent
years' profits were the lower (For Year 2002, EPS as estimated by S&P is
$1.84/share, it is suggested that the Board declare a dividend of $0.92/share)."
Microsoft has concluded that the Proposal may be properly omitted from its Proxy
Materials pursuant to Rule 14a-8(i)(13) of the Act. The specific reason why the
Company deems omission to be proper and the legal support for such conclusion
are discussed below.
THE PROPOSAL MAY PROPERLY BE OMITTED UNDER RULE 14a-8(i)(13) AS IT RELATES TO
SPECIFIC AMOUNTS OF CASH OR STOCK DIVIDENDS.
Rule 14a-8(i)(13) provides that a shareholder proposal is excludable if it
relates to specific amounts of cash or stock dividends. The Commission has
interpreted this Rule broadly such that the phrase "specific amounts of cash or
stock dividends" does not simply mean dividends in specific dollar amounts. See
Exelon Corporation (March 2, 2002); Duke Energy Corporation (January 9, 2002).
It is well established that a shareholder proposal that purports to establish a
formula or percentage for the payment of dividends may be excluded. See
International Business Machines Corporation (January 2, 2001); Lydall, Inc.
(March 28, 2000); H.J. Heinz Company (May 6, 1987); ITT Corporation (January 23,
1986). Moreover, shareholder proposals that have the effect of determining a
company's dividend policy by requiring a maximum or minimum dividend payment
have been found to be excludable under Rule 14a-8(i)(13). See Duke Energy
Corporation (January 9, 2002); General Motors Corporation (April 7, 2000); Loews
Corporation (December 22, 1986).
The Proponent's request for "dividend of 50% of Year 2002" clearly relates to a
specific amount of dividends: in fact, the Proposal provides that the Board
resolve to "declare a dividend of $0.92/share." In addition, the Proposal
attempts to establish a minimum dividend policy or payment in subsequent years
so as to maintain the level of dividends "at least at [the] Year 2002 level."
Based on the foregoing, the Company respectfully requests the Division's
concurrence that the Proposal may be omitted and that it will not recommend any
enforcement action if the Proposal is in fact excluded from the Company's 2002
Proxy Materials under Rule 14a-8(i)(13).
Pursuant to Rule 14a-8(j)(1), the Company by copy of this letter is notifying
the Proponent of its intention to omit the Proposal from the Proxy Materials.
Should you have any questions or comments regarding the foregoing, please
contact James Andrus of Preston Gates & Ellis LLP at (206) 224-7329. Please
acknowledge receipt of this letter and enclosures by stamping the enclosed
additional copy of this letter and returning it in the enclosed, self-addressed
stamped envelope.
We appreciate your attention to this request.
Sincerely,
MICROSOFT CORPORATION
By
/s/
John A. Seethoff
Assistant Secretary
Enclosures
cc: Chi Yuen
[APPENDIX]
Below is the 2001 "Voting" document that proves my Shareholder standing.
Note: The original has been mailed with the International Express Post on 30 May
2002
[STAFF REPLY LETTER]
July 19, 2002
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Microsoft Corporation
Incoming letter dated June 24, 2002
The proposal requests that the board of directors declare a dividend of 50% of
2002 and subsequent years' earnings and that it maintain that dividend amount
for subsequent years even if earnings fall in those years.
There appears to be some basis for your view that Microsoft may exclude the
proposal under rule 14a-8(i)(13). Accordingly, we will not recommend enforcement
action to the Commission if Microsoft omits the proposal from its proxy
materials in reliance on rule 14a-8(i)(13).
Sincerely,
/s/
Keir D. Gumbs
Special Counsel
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