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Tokyo Broadcasting System

TBS’ Investment Securities

Given the size of TBS’ “strategic holdings” in relation to total assets, TBS is in reality operating a large asset management business alongside its core broadcasting business.  If TBS were held to the same standards as professional asset managers, or banks and insurance companies, in the business of managing financial assets on behalf of investors, depositors and policyholders, it would be liable for professional negligence and violation of normal risk management rules and regulations.

Professional asset managers would not be permitted to concentrate a portfolio such that one investment accounted for 35% of the portfolio (Tokyo Electron in this case).  To make matters worse, TBS’ “strategic portfolio” is not professionally managed. Rather, the portfolio has been static for many years, never adjusted to account for changing profitability, return on equity or other objective financial benchmarks. Seemingly, the most relevant criterion for inclusion in the “strategic portfolio” is a historical relationship with TBS.

TBS’ concentrated “strategic portfolio” is the equivalent of a gambler putting all their chips on just a few squares at the roulette table.  If there were to be a correction in the Japanese stock market, as occurred in 2008, TBS would be directly exposed to massive losses, magnified by the narrow base of its “strategic portfolio”.  TBS management could not avoid legal responsibility to shareholders for the breach of its duty of care. It is fair to say that the term “strategic” gives too much benefit to the level of rigour made in “constructing” this portfolio.

The size of TBS’ securities portfolio is unparalleled when compared to peers. While the changing dynamics of the broadcasting industry might require a conservative balance sheet, the extent of TBS’ excess capital is unprecedented among peers. We can find no compelling reason as to why TBS needs to hold such a large portion of its assets in investment securities.

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This fund is not an Alternative Investment Fund it must be read in conjunction with the Additional Information and Key Investor Information documents. Please ensure that you have read and understood both documents before taking any investment action.

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