Welcome!

News Feed Item

QVT Opposes Reappointing Investment Manager

HONG KONG, Dec. 26, 2012 /PRNewswire/ -- QVT Financial LP (together with its funds under management, "QVT") opposes and intends to vote against the reappointment of China Assets Investment Management Limited ("CAIML") as the investment manager of China Assets (Holdings) Limited (the "Company") at the upcoming Extraordinary General Meeting ("EGM") on 28 December 2012.

QVT opposes the resolution to renew the appointment of CAIML due to (1) CAIML's investment record, (2) the absence of any disclosed competitive bidding process with respect to the selection of the investment manager, and (3) the connections between the directors and management of CAIML and the directors and management of the Company.

1. CAIML's Investment Record

In the Company's circular dated 7 December 2012 ("Circular"), the Board of Directors of the Company (the "Board") compared CAIML's investment record to the performance of the Hang Seng Index ("HSI"). QVT believes that CAIML has underperformed the HSI while acting as the Company's investment manager: since the Company's initial public offering ("IPO") on 8 April 1992, the HSI increased by 767% on a total return basis through 30 November 2012, while the Company's Net Asset Value ("NAV") only increased by 87% and the Company's share price fell by approximately 57% during this period. (endnote 1)

Moreover, QVT believes that CAIML has also underperformed the HSI in recent years, and that the comparison of CAIML's investment record to the performance of the HSI by the Board in the Circular was not an appropriate comparison. In the Circular, the Board stated that it is "satisfied with the investment advice given by the Manager for reasons that include: — The Net Asset Value increased... representing an annual compound growth rate of 5.49% for 6 years period, compared with the HSI's annual growth rate of 3.64% over the same period." However, the HSI growth rate as calculated by the Board excludes dividends. Since the Company reinvested its proceeds during the six year period referred to above rather than make distributions to shareholders, QVT believes that the NAV growth rate should be compared to the annual growth rate of the HSI with dividends reinvested, which equals an annual rate of 7.00% during the six year period, exceeding the annual growth in NAV of the Company of 5.49% during this period. QVT calls upon the Board to explain why it chose to compare the NAV growth to that of the HSI excluding dividends instead of the HSI including dividends, and whether it is still satisfied with CAIML's performance when the more appropriate comparison to the HSI including dividends is considered. (endnote 2)

QVT believes that a straightforward approach to compare the Company's investment performance relative to the HSI is to measure the total return in HKD of the share price, NAV, and HSI since the Company's IPO and over the most recent 1-, 3-, and 5- year periods to 30 November 2012:


Company

Company

Hang Seng

Period                

Share Price

Net Asset Value

Index

Since IPO          

-57%

+87%

+767%

Since 30 November 2007    

-58%

-24%

-9%

Since 30 November 2009    

-35%

-16%

+11%

Since 30 November 2011    

-18%

-15%

+27%

(endnote 1)

In each of these periods, both the Company share price and NAV have substantially underperformed the HSI.

QVT notes, however, that since the Company's IPO, CAIML has been paid more than HKD 194 MM in management fees, which represents approximately 70% of the Company's market capitalization on 30 November 2012. On the other hand, the market capitalization of the Company has decreased by approximately HKD 356 MM over this time period. (endnote 3)

2. Lack of Disclosed Competitive Bidding Process

Surprisingly, despite the performance noted above and the fees paid to CAIML, QVT is not aware that the Board has tendered the management contract to a competitive bidding process over the twenty years since the Company's IPO. QVT is also surprised that the fee terms do not appear to have been renegotiated over these twenty years (prior to the recent introduction of a fee cap and high water mark), particularly in light of the Company's underperformance relative to the HSI, or over the past six years, as the global financial crisis led to increased pressure on investment management fee terms in general.

QVT believes that the Board should tender the management contract to a competitive bidding process, and hereby requests that the Board disclose when, if ever, it has done so in the past and if it has done so in relation to the current proposed renewal.

3. Connections Between CAIML and the Company

QVT believes that, consistent with good industry practice, the relationship between the Company and its investment manager should be entirely at arm's length. However, QVT finds that there are multiple points of connection between the directors and management of the Company and the directors and management of CAIML, including:

  • Mr. Lo Yuen Yat is a director of both the Company and CAIML;
  • Mr. Lin Jun How, the Vice President of CAIML, is the son-in-law of Mr. Lo;
  • Ms. Lao Yuan Yuan is the daughter of Mr. Lo, the spouse of Mr. Lin, a director of the Company, and a former director of CAIML;
  • Mr. Yeung Wai Kin owns 3% of CAIML and was a director of CAIML until 2011, has been a director of the Company since 1997, and is a director and Chief Financial Officer of First Shanghai Investment Ltd. ("FSIL"), where Mr. Lo is the Chairman and a c. 12% shareholder;
  • Mr. Chan Suit Khown, the Chief Investment Officer of CAIML, was a director of the Company until 2012, and is currently a director of a subsidiary of FSIL;
  • Mr. Zhao Yu Qiao has been a director of the Company since 2000, and in 2011 acquired a 28% shareholding of CAIML from FSIL; and
  • Mr. Wang Jun Yan owns 3% of CAIML and is also a director and shareholder of the fund manager of a fund in which the Company and FSIL are investors.

(endnote 4)

QVT is concerned that the multiple connections between the Company and CAIML may create the potential for conflicts of interests. QVT thus has a strong preference for an entirely independent investment manager.

For the reasons set forth above, QVT opposes and intends to vote against the reappointment of CAIML as investment manager of the Company at the upcoming EGM.

For media inquiries, please contact:
Shawn Pattison or Patrick Clifford
The Abernathy MacGregor Group 
+1 212 371 5999

Notes:

This Announcement is being issued for the purpose of expressing QVT's opposition, as a shareholder of the Company, to the reappointment of CAIML as investment manager of the Company. This Announcement does not constitute legal, investment or tax advice, and no offer, invitation or inducement to acquire or dispose of any shares or other securities in the Company is being made by or in connection with this Announcement.

If shareholders or potential investors are in any doubt as to any aspect of the Announcement or as to the manner in which they should vote at the EGM or other action that they should take, they should consult their own stockbroker, bank manager, accountant or other independent professional advisor and should rely solely on their own judgment, review and analysis.

QVT may, at its sole discretion, at any time in the future (in open market or privately negotiated transactions) buy or sell shares or trade in options, puts, calls or other securities relating to such shares. QVT reserves the right to take any actions with respect to its investments in the Company as it deems appropriate, including but not limited to, communicating with the management of the Company, the Board of the Company and other investors and third parties.

The information and opinions contained in this Announcement reflect QVT's internal analysis and opinions (and no one else's) of publicly available information. QVT makes no representation, warranty or undertaking, expressly or impliedly, as to the accuracy or completeness of the information contained herein. The information contained in this Announcement, including data that is attributed to specific sources, has not been verified by QVT or any other person. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information, the calculations, the opinions, or the estimates contained in this Announcement or on the assumptions on which they are based.

The information, calculations and opinions contained in this Announcement should be read as at the date of this Announcement and are subject to change without notice. QVT does not undertake to accept any obligation to provide access to any information, to update this Announcement or to correct any inaccuracies in it.

Endnotes:
(1) Sources for preceding paragraph/table: Bloomberg, Company releases. Key assumptions: the NAV of the Company at IPO equaled the "adjusted net asset value per share" and the share price of the Company at IPO equaled the share subscription price, both as disclosed in the Company's placing memorandum dated 8 April 1992; dividends for the HSI are reinvested at their respective ex-dividend dates; the dividend for the Company is reinvested at the closing price on the ex-dividend date when calculating the share price total return, and at the stated NAV on 31 December 1997 when calculating the NAV total return.
(2) Sources for preceding paragraph: Bloomberg, Company circular dated 7 December 2012.
(3) Sources for preceding paragraph: Bloomberg, Company releases.
(4) Sources for preceding paragraph: Company releases.

SOURCE QVT Financial LP

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessio...
IoT is rapidly becoming mainstream as more and more investments are made into the platforms and technology. As this movement continues to expand and gain momentum it creates a massive wall of noise that can be difficult to sift through. Unfortunately, this inevitably makes IoT less approachable for people to get started with and can hamper efforts to integrate this key technology into your own portfolio. There are so many connected products already in place today with many hundreds more on the h...
Andi Mann, Chief Technology Advocate at Splunk, is an accomplished digital business executive with extensive global expertise as a strategist, technologist, innovator, marketer, and communicator. For over 30 years across five continents, he has built success with Fortune 500 corporations, vendors, governments, and as a leading research analyst and consultant.
No hype cycles or predictions of zillions of things here. IoT is big. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, Associate Partner at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He discussed the evaluation of communication standards and IoT messaging protocols, data analytics considerations, edge-to-cloud tec...
Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more business becomes digital the more stakeholders are interested in this data including how it relates to business. Some of these people have never used a monitoring tool before. They have a question on their mind like “How is my application doing” but no id...
Announcing Poland #DigitalTransformation Pavilion
Digital Transformation is much more than a buzzword. The radical shift to digital mechanisms for almost every process is evident across all industries and verticals. This is often especially true in financial services, where the legacy environment is many times unable to keep up with the rapidly shifting demands of the consumer. The constant pressure to provide complete, omnichannel delivery of customer-facing solutions to meet both regulatory and customer demands is putting enormous pressure on...
CloudEXPO | DXWorldEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
DXWorldEXPO LLC announced today that All in Mobile, a mobile app development company from Poland, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. All In Mobile is a mobile app development company from Poland. Since 2014, they maintain passion for developing mobile applications for enterprises and startups worldwide.
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, led attendees through the exciting evolution of the cloud. He looked at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering m...
For far too long technology teams have lived in siloes. Not only physical siloes, but cultural siloes pushed by competing objectives. This includes informational siloes where business users require one set of data and tech teams require different data. DevOps intends to bridge these gaps to make tech driven operations more aligned and efficient.
The best way to leverage your CloudEXPO | DXWorldEXPO presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering CloudEXPO | DXWorldEXPO will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at CloudEXPO. Product announcements during our show provide your company with the most reach through our targeted audienc...
Everything run by electricity will eventually be connected to the Internet. Get ahead of the Internet of Things revolution. In his session at @ThingsExpo, Akvelon expert and IoT industry leader Sergey Grebnov provided an educational dive into the world of managing your home, workplace and all the devices they contain with the power of machine-based AI and intelligent Bot services for a completely streamlined experience.
@DevOpsSummit at Cloud Expo, taking place November 12-13 in New York City, NY, is co-located with 22nd international CloudEXPO | first international DXWorldEXPO and will feature technical sessions from a rock star conference faculty and the leading industry players in the world.
DXWorldEXPO | CloudEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.