Today (8 November 2024), China Merchants China Direct Investments (CMCDI, 133 HK) finally (and belatedly) published notices of two extraordinary general meetings.
We will call them EGM1 and EGM2.
Both will take place on 29 November 2024, with EGM2 (11am) immediately after EGM1 (10am).
We encourage all shareholders to vote.
You can vote electronically in advance, without going to the EGMs in person. We will show you how later.
We, Argyle Street Management (ASM), will publish soon a long presentation to explain how we will vote. In summary:
- EGM1: vote AGAINST renewing the investment management agreement (IMA)
- EGM2: vote FOR one-year IMA term limit, and vote FOR firing Elizabeth Kan
EGM1: vote AGAINST renewing the IMA
At EGM1, independent shareholders will vote on the renewal of CMCDI’s IMA. ASM will vote AGAINST that.
Under the new IMA (which will last three years), the management fees will be slightly reduced by 25 basis points from the current level.
The 66-page, 24,000-word EGM1 circular says nothing about the large discount to net asset value, the primary issue of CMCDI.
No asset disposal, no share buybacks, and no discount management program.
Even after the 25bps fee reduction, the manager still charges far fatter fees than other reputable China-focused closed-end funds.
Also, the incumbent manager has unacceptable conflicts of interest:
- Victor Chu and Elizabeth Kan collectively own 45% stake in the manager
- Both are Responsible Officers of the manager (out of the four in total)
- Mr. Chu is the founder and principal of another venture capital firm (First Eastern), while Ms. Kan is a senior executive
- First Eastern does exactly what CMCDI does
We do not accept a conflicted investment manager that does nothing to address the issue of large discount.
What will happen to CMCDI, if the manager is fired? Will it decay into chaotic anarchy? The short answer is: we are not worried. We will write a separate blog post on this subject later.
EGM2: vote FOR one-year IMA term limit, and vote FOR firing Elizabeth Kan
We requisitioned the EGM2, and proposed two resolutions:
- #1: the term of new investment management agreements with the incumbent manager shall be one year, not three years
- #2: fire Elizabeth Kan from the board of CMCDI
ASM will vote FOR our own resolutions at EGM2.
We believe that the one-year IMA term limit will allow shareholders to hold the manager accountable, particularly when CMCDI’s discount to net asset value is unacceptably large.
We propose to fire Ms. Kan, because she has unacceptable conflict of interest. We wrote a 16-page presentation on Elizabeth Kan in May 2024. Her inadequate response leaves shareholders with more questions than answers.
Institutional Shareholder Services (ISS), the dominant proxy advisor, agrees with our view. Almost all minority shareholders (including ASM) voted against Elizabeth.
Violation of Companies Ordinance and Listing Rules
By the way, the notice of EGM2 was late.
That is an unacceptable violation of the section 567 of the Companies Ordinance and Listing Rule 3.09B.
Shareholders deserve an explanation on the delay.
If you are new to CMCDI, read our primer.
💬 WeChat ID: ASM_Argyle
💬 WhatsApp ID: +852 6317 6371
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今天（2024 年 11 月 8 日），招商局中国基金（招商局基金，133 HK）终于（迟了）发布了两次特别股东大会（extraordinary general meeting，简称EGM）的通知書。
两个股东大会都将于 2024 年 11 月 29 日举行，其中 EGM2（上午 11 点）紧接着 EGM1（上午 10 点）。
我们鼓励所有股东投票。
您可以提前进行电子投票，无需亲自前往临时股东大会。我们稍后会向您展示如何操作。
我们Argyle Street Management（ASM）将很快发布一份长篇PPT介绍，解释我们投票的理由。总结如下：
- EGM1：反对续签投资管理协议
- EGM2：支持限制新投资管理协议期限为一年，支持罢免董事简家宜女士
EGM1：反对续签投资管理协议
在 EGM1 上，独立股东将就续签招商局基金的投资管理协议进行投票。
ASM 将在EGM1投反对票。
根据新的管理协议（任期三年），管理费将比当前水平略有降低 25 个基点。
长达 66 页、24,000 字的 EGM1 通函完全未提及招商局基金的主要问题，即净资产价值大幅折让。没有出售资产、没有股票回购，也没有折价管理计划。
此外，尽管费用降低了 25 个基点，但投資經理收取的费用仍远高于其他知名的专注于中国的封闭式基金。
此外，投资经理存在严重利益冲突：
- 诸立力先生和简家宜女士合计持有管理人45% 的股份
- 他們佔投资经理四名持牌”負責人員”(Responsible Officer)的其中二席
- 诸先生是另一家风险投资公司（第一東方）的创始人和负责人，而简女士是其高级管理人员
- 第一东方的业务与招商局基金完全重叠
我们不接受有严重利益冲突的投资经理，尤其是投资经理不采取任何措施来解决巨大折扣问题。
如果投资经理被解雇，招商局基金会怎么样？它会陷入无人管理的混乱吗？简而言之：我们并不担心。我们稍后会就此主题撰写帖子。
EGM2：支持限制新投资管理协议期限为一年，支持罢免董事简家宜女士
我们要求召开 EGM2，并提出了两项决议案：
＃1：新投资管理协议，期限应为一年，而不是三年
＃2：罢免董事简家宜女士
ASM 将在 EGM2 上投赞成票。
一年限期的管理协议允许股东有效追责，特别是当招商局基金股价对净资产价值的折扣大到令人无法接受。
罢免简女士，是因为她存在严重利益冲突。我们在 2024 年 5 月撰写了一份关于罢免简女士的 16 页演示文稿PPT。她的回应完全不充分，让股东们留下更多疑问。
全球最大的投票代理顾问Institutional Shareholder Services (ISS) 同意我们的观点。几乎所有少数股东（包括 ASM）都支持罢免简女士。
违反《公司条例》和《上市规则》
另外，招商局基金迟了發出EGM2的通知书。
这严重违反了《公司条例》第 567 条和《上市规则》第 3.09B 条。
招商局基金必须向股东交代延迟的理由。
如果您刚开始了解招商局中国基金，请阅读我们的指南。
欢迎随时与我们联系：
💬 微信: ASM_Argyle
💬 WhatsApp: +852 6317 6371
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