Welcome!

.NET Authors: Pat Romanski, Elizabeth White, ChandraShekar Dattatreya, Trevor Parsons, Peter Silva

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.

@ThingsExpo Stories
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, and physical persons. In the IoT vision, every new "thing" - sensor, actuator, data source, data con...
Cultural, regulatory, environmental, political and economic (CREPE) conditions over the past decade are creating cross-industry solution spaces that require processes and technologies from both the Internet of Things (IoT), and Data Management and Analytics (DMA). These solution spaces are evolving into Sensor Analytics Ecosystems (SAE) that represent significant new opportunities for organizations of all types. Public Utilities throughout the world, providing electricity, natural gas and water, are pursuing SmartGrid initiatives that represent one of the more mature examples of SAE. We have s...
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happens, where data lives and where the interface lies. For instance, it's a mix of architectural styles ...
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series data. By focusing on enterprise applications and the data center, he will use OpenTSDB as an example t...
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and assessments, including a decade of leading incident response and digital forensics. He is co-author of t...
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges. In his session at @ThingsExpo, Jeff Kaplan, Managing Director of THINKstrategies, will examine why IT must finally fulfill its role in support of its SBUs or face a new round of...
One of the biggest challenges when developing connected devices is identifying user value and delivering it through successful user experiences. In his session at Internet of @ThingsExpo, Mike Kuniavsky, Principal Scientist, Innovation Services at PARC, described an IoT-specific approach to user experience design that combines approaches from interaction design, industrial design and service design to create experiences that go beyond simple connected gadgets to create lasting, multi-device experiences grounded in people's real needs and desires.
Enthusiasm for the Internet of Things has reached an all-time high. In 2013 alone, venture capitalists spent more than $1 billion dollars investing in the IoT space. With "smart" appliances and devices, IoT covers wearable smart devices, cloud services to hardware companies. Nest, a Google company, detects temperatures inside homes and automatically adjusts it by tracking its user's habit. These technologies are quickly developing and with it come challenges such as bridging infrastructure gaps, abiding by privacy concerns and making the concept a reality. These challenges can't be addressed w...
The Domain Name Service (DNS) is one of the most important components in networking infrastructure, enabling users and services to access applications by translating URLs (names) into IP addresses (numbers). Because every icon and URL and all embedded content on a website requires a DNS lookup loading complex sites necessitates hundreds of DNS queries. In addition, as more internet-enabled ‘Things' get connected, people will rely on DNS to name and find their fridges, toasters and toilets. According to a recent IDG Research Services Survey this rate of traffic will only grow. What's driving t...
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective storage designed to handle the massive surge in back-end data in a world where timely analytics is e...
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using the URL as a basic building block, we open this up and get the same resilience that the web enjoys.
We are reaching the end of the beginning with WebRTC, and real systems using this technology have begun to appear. One challenge that faces every WebRTC deployment (in some form or another) is identity management. For example, if you have an existing service – possibly built on a variety of different PaaS/SaaS offerings – and you want to add real-time communications you are faced with a challenge relating to user management, authentication, authorization, and validation. Service providers will want to use their existing identities, but these will have credentials already that are (hopefully) i...
"Matrix is an ambitious open standard and implementation that's set up to break down the fragmentation problems that exist in IP messaging and VoIP communication," explained John Woolf, Technical Evangelist at Matrix, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at @ThingsExpo, Robin Raymond, Chief Architect at Hookflash, will walk through the shifting landscape of traditional telephone and voice services ...
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at Internet of @ThingsExpo, James Kirkland, Chief Architect for the Internet of Things and Intelligent Systems at Red Hat, described how to revolutioniz...
Bit6 today issued a challenge to the technology community implementing Web Real Time Communication (WebRTC). To leap beyond WebRTC’s significant limitations and fully leverage its underlying value to accelerate innovation, application developers need to consider the entire communications ecosystem.
The definition of IoT is not new, in fact it’s been around for over a decade. What has changed is the public's awareness that the technology we use on a daily basis has caught up on the vision of an always on, always connected world. If you look into the details of what comprises the IoT, you’ll see that it includes everything from cloud computing, Big Data analytics, “Things,” Web communication, applications, network, storage, etc. It is essentially including everything connected online from hardware to software, or as we like to say, it’s an Internet of many different things. The difference ...
Cloud Expo 2014 TV commercials will feature @ThingsExpo, which was launched in June, 2014 at New York City's Javits Center as the largest 'Internet of Things' event in the world.