MARK Mobius of Templeton Investment Management is drawing the line between what is good and bad treatment of minority shareholders. The privatisation of East Asiatic at $1.20 a share is not in the interests of the minority interests. It represents, in his view, bad corporate governance and it is bad for the reputation of the Hong Kong stock market, including the advising merchant bank to the independent shareholders, SBC Warburg. He is keen to avoid being painted as the Ugly American in Asia, intent on riding roughshod across cultural sensibilities. Mr Mobius is not about to wage war on apparently errant management in Asia, with an army of lawyers. The overall Templeton emerging markets investment philosophy remains intact. Mr Mobius still loves positive publicity and would normally refrain from criticising the managements behind the stocks he invests in. This investment philosophy is one of stock picking; buying good company shares cheaply and then waiting passively over five to 10 years for the expected returns to roll in. The group does not want to manage the companies. An investment assessment is made on the basis of track record, quality of management, share value and long-term gains potential. The aim is also not to get screwed. What Templeton wants is for company management, which accepts his money in return for shares, to meet their obligations in ensuring minority interests are catered for. Rules and regulations linked to listed securities under which these shares have been listed should ensure a level playing field is achieved by a system that acts without fear or favour in protecting the interests of investors. Critical in assessing the investment worth of a stock is liquidity. Liquidity is the gate through which an investor can enter or leave an individual investment story. When the management of a company suddenly declares a privatisation half way through the story, it is as if all the exits have been blocked. Minority investors become trapped, with no way out except the privatisation offer - the terms of which usually are determined by the controlling shareholders. It is one thing to live with the high risks linked to investing in emerging markets and medium-sized companies around the world; it is quite another, however, to be taken advantage of. Templeton, in a statement issued during the week, points out East Asiatic Co's net asset value per share in October 1987 was 34.9 cents. The $1.65 listing price of shares at the time was a 372 per cent premium to this. While the net asset value has actually increased over the period to 66.6 cents a share, the price being offered to cancel the shares in the privatisation offer is lower than the initial introductory listing price of eight years ago. The $1.90 price per share being suggested by Templeton as a fair cancellation price reflects a premium of 185 per cent over net asset value. When East Asiatic was listed, the shares were priced at a historic price earnings ratio 12.8 times. The current privatisation price represents an historic price earnings of 11.3 times. Given this, Mr Mobius is a bit puzzled why the advisers to the independent shareholders should find this kind of pricing in the privatisation fair for minority shareholders and, furthermore, why they should be recommending acceptance of the offer. He is interested to know exactly how Warburg manages to reconcile the valuations apparent at the time of the listing with the valuation placed on the shares under the privatisation offer. Warburg's recommendation might be seen as one that probably would not have stood up to severe scrutiny had it been made in a similar privatisation exercise in the United States or British environments. According to Mr Mobius, the privatisation requires 50 per cent approval of minority investors voting at a special meeting. He argues accepting the current offer is not in the interest of minority shareholders as it does not reflect fair value.