Unlocking Value

We, Argyle Street Management, requisitioned China Merchants China Direct Investments (CMCDI, 133 HK) to convene an extraordinary general meeting (EGM).

That EGM will take place on 29 November 2024.

Ｗe propose that: going forward, all future investment management agreements (IMA) between CMCDI and its incumbent manager shall have a term limit of at most one year (not three years, which is the term of the current IMA).

(We also propose to remove director Elizabeth Kan. More on that later.)

Other reputable international closed-end funds do the same

The purpose of limiting the IMAs to one year is for shareholders to hold the manager accountable, especially when the discount to net asset value is unacceptably large.

In fact, other reputable China-focused closed-end funds renew/review their IMAs once a year, too.

For example, recently, Morgan Stanley China A Share Fund announced that:

the Board concluded that it would be in the best interest of the [Morgan Stanley] Fund and its shareholders to approve renewal of the Management Agreement for another year.

The board of JPMorgan China Growth & Income Fund is required to:

review at least annually the contractual relationships with, and scrutinise and hold to account the performance of, the Manager…

The same applies to Fidelity China Special Situations plc (which invests in both listed and non-listed equities, like CMCDI):

The Board reviews the Management Agreement at least annually…

In fact, the board can fire the Fidelity manager anytime at short notice:

The Management Agreement will continue unless and until terminated by either party giving to the other not less than six months’ notice in writing.

We believe that CMCDI shall follow international best practices.

Shareholders have the final say on the IMA

Article 155 of CMCD’s articles of association says that:

No management agreement… may be entered into… unless approved by the [CMCDI shareholders] in general meeting by way of ordinary resolution…

CMCDI shareholders therefore have the final say on the IMA, including the length of the term.

We wrote this PowerPoint presentation (PDF, 38 pages) to explain how we plan to vote at the EGM.

If you are new to CMCDI, read our primer (which was updated on 25 October 2024).

Chat with us on WeChat or WhatsApp:

💬 WeChat ID: ASM_Argyle

💬 WhatsApp ID: +852 6317 6371

🖥️ UnlockValueChinaMerchants.com

📧 ChinaMerchants@asmhk.com

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我们 Argyle Street Management 要求招商局中国基金 (招商局基金, 133 HK) 召开特别股东大会 (EGM)。

EGM將在2024年11月29日进行。

我们提议：今后，招商局基金与其现任管理人之间的所有投资管理协议的期限不得超过一年（而不是当前管理协议的三年期限）。

（我们还提议罢免董事簡家宜女士。我们稍后会写一篇关于此的文章。）

其他知名国际封闭式基金也是一年一续

将投资管理协议期限限制为一年，目的是为了让股东有效追责，特别是考虑到招商局基金股价比资产净值的折让幅度过大。

其他知名国际封闭式基金的投资管理协议也是一年一续。

例如，最近摩根士丹利中国 A 股基金表示：

董事会认为，批准将管理协议续签一年符合基金及其股东的最佳利益。

摩根大通中国增长及收益基金的董事会必须：

至少每年审查一次与管理人的合同关系，并审查和监督管理人的表现，以确保投资管理协议具有竞争力和合理性，并符合公司整体的最佳利益。

富达中国特殊情况基金（投资上市和非上市股票）的情况同样如此：

董事会至少每年审查一次管理协议…

事实上，董事会可以在任何时候在短时间内解雇富达基金经理：

管理协议将持续有效，除非任何一方提前至少六个月向另一方发出书面通知终止协议。

我们认为招商局基金应遵循国际标準。

股东对管理协议条款拥有最终决定权

招商局基金章程第 155 条规定：

除非经 [招商局基金股东] 以普通决议的方式在股东大会上批准，否则不得签订任何管理协议……

因此，股东对投资管理协议拥有最终决定权，包括任期长度。

我们写了这个 PPT文件（PDF, 38 页）解释我们的投票。

如果您刚开始了解中国基金，请阅读我们的指南（已于 2024 年 10 月 25 日更新）。

欢迎随时与我们联系：

💬 微信: ASM_Argyle

💬 WhatsApp: +852 6317 6371

🖥️ UnlockValueChinaMerchants.com

📧 ChinaMerchants@asmhk.com