Chandler Brothers - Secrets-of-Sovereign 2

Prévia do material em texto

✴
✴
✴
✴
✴ 
MARCH 2006
INTERNATIONAL EDITION—EUROPE
The reclusive Chandler brothers may be the world’s most important—
if least understood—activists. Now, for the first time, the founders 
of Sovereign Global Investment reveal the innovative strategies and 
old-school ethics that built a $5 billion fortune in just two decades. 
INSIDE: HOW SUMMERS LOST HARVARD; BNP’S PROT REDEFINES EUROPEAN BANKING
SECRETS
OF
SOVEREIGN
EXCLUSIVE:
28339_wrmw 8/11/06 9:23 AM Page 1
Sovereign unmasked
The popularity of emerging markets seems to know no bounds today,as this issue amply demonstrates. Our annual ranking “The EmergingEMEA Research Team” and our semiannual survey of country credit
(“Let the Good Times Roll,”), attest to the heightened interest in these
regions and the perception of unprecedentedly low risk in investing in
them. Barely 15 years ago most of these markets were off-limits for global
investors.
That this investment terrain has opened up can be credited in no small
part to the efforts of pioneers like Richard and Christopher Chandler. Over
the past 20 years, the New Zealand–born brothers have turned a modest
family fortune of $10 million into a powerful $5 billion fund — all of it
their own money — by making bold bets in risky markets around the
world. The fund, Sovereign Global Investment, was among the first port-
folio investors in Brazil and the Czech Republic in the early ’90s, and it
waged landmark corporate governance battles in Russia and South Korea.
The Chandlers’ success was matched only by their penchant for secrecy,
which left them virtual unknowns in the financial community.
In recent months senior writer David Lanchner followed the brothers’
trail from Monaco to Dubai and Singapore. His painstaking efforts earned
him an interview with Richard Chandler — the first that either of the
brothers has ever given. Chandler speaks passionately about the art of in-
vesting, the importance of business ethics and his belief that Asia offers
the best prospective returns today. The story of the Chandlers’ unusual
methods and success, recounted in “Secrets of Sovereign”, makes a fascinat-
ing read.
— Tom Buerkle
International Editor
INSIDE i
28339_wrmw 8/11/06 9:24 AM Page 3
Il
lu
st
ra
ti
on
s 
by
 Z
oh
ar
 L
az
ar
INSTITUTIONAL INVESTOR MARCH 2006
COVER STORY
ichard Chandler prides himself on being a contrarian investor. Consider
his plunge into Japanese bank stocks early this decade.
In November 2002, with Japan slipping back into recession after a
decade of stagnation and with stocks at 20-year lows — the Nikkei 225
index was more than 78 percent below its 1989 peak — the country’s
banks were wallowing in bad debt. Chandler, chairman of secretive Sov-
ereign Global Holdings, and his brother Christopher, the firm’s co-founder and presi-
dent, began snatching up shares in the sector, paying $570 million for a 5.1 percent stake
in UFJ Holdings, which had posted a staggering loss of $9.3 billion in its latest year. The
pair went on to buy more than 3 percent of Mizuho Financial Group as well as stakes in
Sumitomo Mitsui Banking Corp. and Mitsubishi Tokyo Financial Group (which merged
with UFJ in January). Altogether they spent about $1 billion on their spree. 
“The banks were priced for a total wipeout of equity holders,” says Sovereign’s broker
at the time at Nikko Citigroup, John Nicholis. “We were advising our clients to stay
away from the sector.” 
The Chandlers are glad they ignored that advice. Japan’s economy recovered in 2003,
the Nikkei has doubled, and the country’s banks have moved firmly back into the black.
The brothers have so far made gains of some $2 billion in Japan and still hold the stake
In two decades Richard and Christopher Chandler’s bold bets transformed a
$10 million family fortune into a cool $5 billion. In an exclusive interview,
Richard Chandler discusses his passion for business ethics, his penchant for
unorthodox metrics and his new focus on Asia. • By David Lancher
R
Richard and Christopher
Chandler: The brothers run
Sovereign as equals, but
only Richard agreed to
publicity. Christopher
declined to be interviewed
Secrets of 
28339_wrmw 8/11/06 9:24 AM Page 2
28339_wrmw 8/11/06 9:24 AM Page 3
in Mizuho, the world’s third-largest bank by assets.
By going into uncharted territory where most investors don’t
dare to tread, the Chandler brothers have, in the space of 20
years, grown a family fortune of $10 million into a cool $5 bil-
lion — and they’re still in their mid-40s. Along the way they
have made waves by being among the first and biggest investors
in such emerging markets as Brazil, the Czech Republic and Rus-
sia and playing an instrumental — and controversial — role in
advocating economic reform and better corporate governance.
They have waged, directly and by proxy, several bruising gover-
nance battles, most notably in Russia, where their militancy
helped get the first independent director appointed at state-
controlled gas giant Gazprom, and in South Korea, where their
two-year campaign at refiner SK Corp. to oust chairman and
CEO Chey Tae Won, who had been convicted of fraud, ended
in failure last year. (The pair still pocketed some $728 million in
profits on their SK investment.)
Sovereign’s secretive ways and history of combativeness arouse
fear and suspicion in many companies. In South Korea, SK por-
trayed the firm, with no small success, as a foreign predator inter-
ested only in short-term profits. The Chandlers’ record has earned
them a reputation as brilliant and daring investors whose extraor-
dinary discretion falls just shy of reclusiveness. Intensely private,
the native New Zealanders cherish their ability to maintain near-
anonymity, assiduously shunning the limelight that success brings
— their names don’t even appear on the Web site of Sovereign’s
main operating arm, Sovereign Global Investment (see box, page
45). They invest only their own money in a handful of long-term
holdings, eschewing the frantic trading strategies favored by many
hedge funds. As a result, they have attracted surprisingly little at-
tention, even from investment professionals. They are unknown
to all but a few in the world of finance.
Until now, that is. This fall and winter, in a series of exclusive
interviews with Institutional Investor — the first that he or his
brother have given since founding Sovereign in 1986 — Richard
Chandler lifted the veil on the fund’s incredible success story.
Even in South Korea, where Sovereign’s former chief executive,
James Fitter, campaigned publicly for support from other share-
holders during the SK battle, the Chandlers themselves never
spoke or appeared in public. Why open up now? By discussing
his motivations and methods with II, Richard says, he aims to
give “management teams that shake when we show up on the
share register a clearer, more balanced view of what we are about.” 
Chandler is passionate about ethics, but he insists that Sover-
eign’s corporate governance crusades are a by-product, not a driver,
of the brothers’ investing strategy. “We do have altruistic motives
that some investors who are looking for the path of least resis-
tance find hard to understand,” says Chandler, 47. “But we don’t
want to be defined by our corporate governance battles. We are
value investors with a sense of responsibility, not activists.”
Sovereign’s foray into Japanese bank stocks is a case in point.
“Japan illuminates the way we invest, the principles we adhere to
and our contrarianism better than any other investment we’ve
made,” Chandler asserts. “There was no research, no price-
earnings ratios, basically no standard road map or Global Posi-
tioning System for investors. The scientists were lost.”
Richard spoke to II in his new Singapore office, which is dec-
orated with fauvist-style oil paintings by his mother, Marija. He
spends three winter months here, far from his Monaco home, to
prospect for new investments. The brothers are searching for tar-
gets in India andChina, believing that those markets stand to
benefit as the world enters an Asian century. Three early finds in
India: Housing Development Finance Corp., the country’s
largest mortgage lender, in which Sovereign has a 4.9 percent
stake as well as a 4.9 percent holding in its fast-growing sub-
sidiary, HDFC Bank; ICICI Bank, the country’s second-biggest
lender, in which Sovereign holds a 4.71 percent stake, and UTI
Bank, operator of the country’s second-largest ATM network, in
which it has a 3.2 percent stake. The holdings together are worth
a little more than $1.27 billion.
“I think Asia is the best place to be for the next 20 years,”
says Richard. 
The Chandlers’ success is the product of an eclectic but rigor-
ous approach to investing (see box, page 50). They consider them-
selves first and foremost value investors — Richard’s idols include
Warren Buffett and Sir John Templeton. Sovereign traditionally
buys stocks at P/E ratios of 3 or less, although in light of current
valuations and the fund’s focus on hot Asian markets, it must
sometimes pay far more. (The HDFC units, in which Sovereign
has built up a $627 million stake, were trading at more than 22
times estimated 2006 earnings last month.)
The brothers also prize scale, believing that the way to achieve
outsize returns is to make a few big bets — Sovereign usually holds
fewer than ten stocks — rather than manage a diverse portfolio.
The Chandlers favor large-cap stocks in big countries. “If you are
invested in big companies in big countries, that means there is a
ready audience of benchmark-following investors who must buy
the asset,” says Richard. “By buying big — going narrow and deep,
as opposed to diversifying — you maximize your success.”
The Chandlers stress the need to be creative in picking stocks
and frequently use unconventional methods to value assets. This
practice is important in what Richard calls the “delta quadrant”
— transition economies or distressed sectors where information
is not easily available and standard metrics don’t apply. 
Earlier this decade, for instance, Japanese banks had no earn-
ings on which to base multiples, and uncertainty about the extent
of bad loans made it difficult to forecast a turnaround. So Richard
and his analysts looked at market capitalization as a percentage of
assets; on this basis they determined that UFJ and other mega-
banks traded at about 3 percent, compared with 15 percent for
Citigroup at the time. The Chandlers concluded that Japan would
INSTITUTIONAL INVESTOR MARCH 2006
Amount Exit
Invested Price
Stock When ($ millions) ($ millions) Return (%)
Mosenergo 1993–’97 $ 62 $ 300 383%
Unified Energy Systems 1993–’97 132 700 430
UFJ Holdings 2002–’04 570 1,460 156
SK Corp. 2003–’05 168 896 433
Mizuho Financial Group 2003–present 600 2,720* 353
*Current value of holding. 
Sources: Sovereign Global, Institutional Investor estimates.
Over the past 15 years, a mere five investments have generated 90
percent of Sovereign’s gains.
A few big bets
28339_wrmw 8/11/06 9:24 AM Page 4
MARCH 2006 INSTITUTIONAL INVESTOR
have to nationalize the banks or reflate
the economy with low interest rates,
and bet — correctly, as it turns out —
on the latter scenario. 
“Most fund managers are focused
on what can go wrong rather than on
what can go right and were too afraid
to make that call,” says Richard. “We
were not.”
Additionally, the Chandlers prefer
to operate at a distance from the crowd,
steering clear of consensus views. One
of Richard’s favorite sayings comes
from legendary value investor and
Pioneer Investments founder Philip
Carret, who said it is essential to “seek
facts diligently, advice never.” Explains
Richard: “Money managers have to ac-
count for their actions to their share-
holders, which means they have an
undue fear of underperformance. We
invest only our own money. Our in-
vestment decisions are driven by opti-
mism, not fear.”
The brothers maintain their pri-
mary office and residences in Monaco,
not just for tax reasons but to avoid the
herd of global investors based in Lon-
don. (Sovereign is headquartered in
Dubai, allowing it to take advantage
of the emirate’s low tax regime and
midway position between the Asian
and European time zones.) When the
brothers were considering investing
in Japanese banks, Richard says, “we
specifically avoided visiting Japan while
we made up our minds, since the despair and despondency of the
place could have distorted our long-term view, even though that
kind of distance is conventionally considered foolhardy.”
THE CHANDLERS BRING TO INVESTING A 
background that is anything but conventional. The brothers grew
up in Matangi, a rural town outside the provincial city of Hamil-
ton in the dairy farming country of New Zealand’s north island.
Their Chicago-born grandfather had emigrated to New Zealand
in the early 1900s, gone into advertising and married his secre-
tary. He died of an allergic reaction when his third son, Robert,
was just one year old. Although he never knew his father, Robert
was profoundly marked by the American success literature he had
left behind, notably the books of Orison Swett Marden, an early-
20th-century American journalist and author who inspired such
proponents of “positive thinking” as Dale Carnegie and Norman
Vincent Peale. Robert’s sons were deeply influenced by this world-
view as well. “We are great believers in the idea of having auda-
cious goals, breaking out and doing something out of the
ordinary,” says Richard. “It’s helped us turn what most people con-
sider a mere profession into a vocation and, beyond that, an art,
where we frequently put ourselves in harm’s way.”
Robert served as a lieutenant on a Royal Navy minesweeper
during World War II. The conflict claimed his two older broth-
ers, both Spitfire pilots who were shot down. After the war Robert
went to work in a beekeeping business run by some friends: Ed-
mund Hillary, who with Tenzing Norgay would later be the first
to climb Mount Everest; Hillary’s brother, Rex, and their father,
Percy. Robert went on to establish his own beekeeping operation
and launch a business building homes and apartments. In 1955,
during a round-the-world trip with an old military buddy, he met
his wife, Marija, the vivacious, independent-minded daughter of
an anticommunist mayor and farmer in what is now Croatia.
Robert and Marija returned to New Zealand and spent the
next 17 years leading a quiet life and raising three boys: George
(now a retired accountant in Canada), Richard and Christopher.
In 1972, with George at university and Richard and Christopher
in boarding school, Robert and Marija launched the venture that
would generate the family fortune and bankroll Sovereign.
Against the advice of most of their friends but spurred on by Mar-
ija, Robert bought a beat-up two-story building in a depressed
area of central Hamilton, putting 5,000 New Zealand dollars
(then worth $5,975) down and taking out a mortgage of
NZ$195,000. The couple renovated the building, erecting an el-
The Chandlers’ father, Robert, first went to work in a New Zealand beekeeping
business with the famed mountain climber Sir Edmund Hillary
28339_wrmw 8/11/06 9:24 AM Page 5
egant colonnade on the outside and a sweeping staircase inside.
Then, to the surprise of stuffy, provincial Hamilton, they chris-
tened it Chandler House and launched what quickly became New
Zealand’s most upscale department store. 
With Marija scouring Europe and Asia as chief buyer, the store
sold everything from French Lalique crystal to Chinese rugs and
helped transform the neighborhood into an exclusive shopping
district. “People from all over New Zealand came to buy at the
store, which became a tourist attraction and was New Zealand’s
equivalent of Neiman Marcus,” says Margaret Evans, a longtime
city council member and former mayor of Hamilton. 
For the quiet, family-oriented Chandlers, the success brought
visible wealth. It also opened up the world of business to Richard
and Christopher,who is one year younger than his brother.
When not at boarding school in Auckland, the siblings got in-
volved in the business by selling in the store, discussing strategy
at the dinner table and helping to reconcile the books on week-
ends. Most important, they traveled with their mother on buy-
ing trips. “My father is very values-driven and helped instill in
us our ethics, but my mother is the most brilliant businessper-
son I’ve ever met and taught us many of the key principles we
follow as investors,” says Richard.
The first of Marija’s principles was, Never buy something un-
less you know to whom you can sell it. The second was, Buy as
much as possible in a narrow range of hot
items. That way, when competitors ran out of
stock, Chandler House could clean up. Marija
“was able to identify the best opportunities
and be the master of narrow and deep,” says
Richard. “With stocks, we do the same thing.
We back our beliefs to the hilt.” 
Inspired by the success of the family enter-
prise, Richard went to the University of Auck-
land, where he obtained an accounting degree
in 1979 and a master’s degree in commercial
studies two years later. There his keen intellect
and passion for corporate governance blos-
somed. His master’s thesis was a groundbreak-
ing study on corporate board structure and
accountability in New Zealand. Richard sent
questionnaires to all listed New Zealand com-
panies and 200 individual directors, and con-
cluded that there was a dangerous, widening
rift between ownership and control at most
quoted companies. The growing clout of in-
stitutional shareholders could provide a way
to close that rift, the paper added.
“As the son of entrepreneurs, Richard was
fascinated by succession issues, the change
from direct ownership to indirect ownership
and how the boards and managements of for-
merly private companies that had listed could
remain accountable to owners,” says Brian
Henshall, founder of the university’s business
program and thesis adviser to Richard, the first
graduate on whom he had ever bestowed first-
class honors.
The thesis had a lasting impact on Chan-
dler’s approach to investing. In a letter to his former professor in
2004, Chandler wrote, “While I did not know it then, our proj-
ect was the first sign of what would become my vocation, a pas-
sion to see capital managed by the most competent, so that
companies and countries could enjoy sustainable prosperity.”
Christopher Chandler also attended the University of Auck-
land, earning a law degree in 1982. A technology buff, he built
computers and wrote software programs in his spare time. Re-
cently married and the father of an infant son, Christopher is
balding, compact and less intense than Richard, a lanky bachelor
with a head of wavy gray hair. Christopher, who declined to be
interviewed, enjoys windsurfing, water-skiing and riding motor-
cycles, while Richard unwinds on the golf course (he has a 12
handicap). 
Richard began investing the family’s money in New Zealand
stocks while in college, but he honed his skills by taking a job at
accounting firm Peat, Marwick, now part of KPMG Interna-
tional, in London in 1982. He was assigned to a 50-person team
under Douglas Flint that worked on corporate restructurings,
takeovers, stock offerings and bank audits. “You can’t imagine
what the City of London was like for someone from the boon-
docks of New Zealand,” Chandler recalls. “It was like walking
around a Monopoly board.” 
Flint, now chief financial officer for HSBC Holdings in Lon-
INSTITUTIONAL INVESTOR MARCH 2006
The Chandler boys got their first taste of business working in their parents’
upscale department store, Chandler House
28339_wrmw 8/11/06 9:24 AM Page 6
MARCH 2006 INSTITUTIONAL INVESTOR
don, says he was struck by Chandler’s “incredible intellectual ca-
pacity and enormous, almost unbelievable thirst for knowledge.
He used every project we worked on as an experience to learn a
new business model.” 
Chandler’s London days came to an abrupt halt after less than
a year when his father became ill and urged him to come home
and run the family business. “It was a tough, tough choice, but
the business was a going concern and a chance to do something
on my own, so I said yes,” he says. 
With the New Zealand economy booming thanks to the tax
and regulatory reforms of the country’s then–Finance minister,
Roger Douglas, Richard and Christopher aggressively expanded
the business. They opened another Chandler House in Auckland,
bought three clothing factories and launched a chain of eight up-
scale fashion stores across the country.
The business thrived, but the Chandler brothers weren’t cut
out for the rag trade. “It had three-month cycles, and we were liv-
ing with our hearts in our mouths,” says Richard. The pair decid-
ed that rather than expand overseas, they should sell the business
and turn to investing. 
“Basically, we said, ‘Let’s do something that we love to
do, not just something that we are good at,’” recalls Richard.
After persuading their parents to go along with the idea, they
sold off the business store by store and in late 1986 launched
Sovereign Global with a modest net worth of $10 million
and enormous reserves of conviction and energy. They also
decided to relocate to Monaco, bringing Marija and Robert,
who was by then back in good health, with them. 
The Chandlers made their first investment in Hong Kong,
which both men had visited frequently on buying trips for the re-
tail business. Spirits in the British colony were depressed because
of the negotiations to hand the territory back to China, which
would conclude in 1987. Real estate prices were roughly 70 per-
cent below their 1981 peaks. “The feeling was China was going
to take over Hong Kong, so most investors said, ‘Who cares?’” re-
members Richard. “We had read the treaty, and it promised the
status quo for 50 years, and we believed it.” Even more impor-
tant, rents were rising, and rental yields exceeded interest rates by
5 percentage points, which guaranteed that any investment would
more than pay for its financing costs.
Leveraging up, the brothers put almost all of the family for-
tune into four office buildings, beginning in February 1987,
when they paid $27.6 million for D’Aguilar Place, a 22-story
building in the central business district. They put down $5.8 mil-
lion of their own money and borrowed the balance from the
Hong Kong and Shanghai Bank. Then they took a page from
their parents’ playbook and renovated the building, allowing them
to triple rents over three years and generate the cash to acquire
other properties.
“The Chandlers were the most dynamic, creative clients
we had,” says Gerry Kipling, a Hong Kong real estate con-
sultant who handled the brothers’ account at property man-
ager Jones Lang LaSalle at the time. Eventually, sentiment
and property prices recovered: The Chandlers sold their
Sovereign Global Investment has built astaff of about 20 professionals as itsportfolio has blossomed to some $5 bil-
lion, but the firm is at heart a two-man part-
nership. Richard and Christopher Chandler
generate most of their investment ideas in pri-
vate discussions that cover everything from
technical analysis and market psychology to
macro trends like the transition to capitalism
in Eastern Europe and the rise of Asian
economies. Richard likens their working rela-
tionship to that of another celebrated pair of
investors, Warren Buffett and Charlie Munger.
“I do the analysis and develop the concept,”
he says. “Then I take the concept to Christo-
pher and ask him, ‘Hey, is this crazy or not?’ A
sense of value ultimately comes down to being
able to project a future and see where a busi-
ness case really goes in five or ten years. No
one I know is better at that than Christopher.”
Since 1991, when they turned to equity in-
vesting, the brothers have retained at least two
full-time analysts to research potential targets.
Frequently, given the distressed state of some
of the markets and companies in whichSov-
ereign invests, the analysts have to resort to
what Richard calls “creative metrics.” Brazil’s
hyperinflation in the early 1990s made price-
earnings ratios virtually impossible to calcu-
late, so Sovereign looked at market capitaliza-
tion per access line to evaluate the national
telephone monopoly, Telebrás, and found it
was dirt cheap at $200 per line, compared with
$2,000 for Mexico’s Telmex.
The fund’s staff of researchers, traders,
lawyers and accountants are a group of
mostly 30-something professionals hired
from leading financial services firms. Presi-
dent David Mapplebeck joined Sovereign in
2004 after working in the enforcement divi-
sion of Britain’s Financial Services Authority
and as European general counsel at Charles
Schwab Corp. Chief trader Pekka Johnson,
whom Richard Chandler calls his “eyes and
ears’’ in the markets, worked in Asian equity
sales in Hong Kong for nine years, most
recently as an executive director at UBS,
before joining Sovereign in May 2005. In-
vestment manager Derek Sheeler, who also
came to the firm last year, had worked
variously as an analyst and portfolio manag-
er at Saudi investment firm Olayan Group in
New York, Gabelli Asset Management and
Wellington Management. The staff like to
kick around ideas over espresso at the well-
appointed canteen of Sovereign’s headquar-
ters on the ninth floor of the Dubai Conven-
tion Center. 
Sovereign usually holds fewer than ten
equity positions at any one time. Though it
typically holds its larger positions for two to
five years, the firm regularly trades in and
out of some stocks to test the waters and
take advantage of price movements. In a re-
cent nine-month period, Richard Chandler
says, Johnson has traded some $6 billion
worth of stocks. That includes the sale of
Sovereign’s 14.82 percent stake in South
Korean refiner SK Corp. and the purchase of
stakes in ICICI Bank and Housing Devel-
opment Finance Corp. in India, as well as
trading smaller positions in a few Hong
Kong–listed oil companies.
Once they’ve done their homework and de-
cided to make an investment, the Chandler
brothers like to move fast. “The market gives
you the opportunity to arbitrage what the emo-
tional investor will pay or sell at versus the
fundamental value of a company, but you’ve
got to pull the trigger promptly without hesi-
tating,” says Richard. “We’ve disciplined our-
selves mentally and prepared ourselves in
terms of information, as well as relationships
with brokers, to do that.” —D.L.
The Sovereign method
28339_wrmw 8/11/06 9:24 AM Page 7
buildings in 1991 for more than $110 million, boosting their
wealth to just over $40 million.
The Chandlers also invested in stock index futures in Hong
Kong and learned a valuable lesson. “The Hang Seng index was
60 percent property, so it seemed very closely related to our main
investments,” says Richard. Because of the volatility of the mar-
ket, however, they set stop-losses to protect themselves from a
downturn. On Friday, October 16, 1987, their broker informed
them that their stops had been hit. After deliberating briefly the
brothers ordered their positions closed. They were glad they did.
The following Monday stock markets around the world collapsed,
and the Hong Kong exchange shut down for three days. The
Chandlers managed to get out with a $5 million profit and have
not bought futures or other derivatives since. “We learned that if
you get lucky once, don’t press your luck,” says Richard.
The experience also left the brothers with an aversion to lever-
age. Since 1990, Sovereign’s debt has averaged less than 1 per-
cent of assets; the fund has not borrowed since 1998. That
enables the Chandlers to take a long-term view of risky markets,
their key competitive advantage at a time when many investors,
particularly highly leveraged hedge funds, invest with a short-
term horizon. “We’re just very much a plain-vanilla,
long-only investment fund,” says Richard. “We like
investments where the risk is time, not price.”
Seeking “to do well by doing good,” another of
Richard’s favorite aphorisms, the Chandlers in the
early 1990s began looking at emerging markets.
“The fax machine was becoming very popular,”
Richard recalls. “We felt that value was moving from
real estate to communications. So we researched it
and found that Telebrás was the cheapest telecom
company in the world.” 
Determining that value wasn’t easy. Brazil’s hy-
perinflation at the time had rendered P/E ratios
meaningless, so the brothers turned for the first time
to creative metrics — in this case, market capitaliza-
tion per access line. Telebrás, the national telephone
monopoly, was trading at about $200 per line, com-
pared with $2,000 for Mexico’s Teléfono de México
and an average cost of $1,600 for installing a line in
Brazil. The brothers bet that the government of
then–president Fernando Collor de Mello would lib-
eralize the economy and open the country up to for-
eign investment. 
Working with Mark Donegan, then head of the
Latin American emerging-markets desk at James
Capel & Co. and now a partner in the London
hedge fund firm Altima Capital, Sovereign obtained
government permission to invest in Brazilian equi-
ties. The firm put $30 million into Telebrás shares in
late 1991 and a smaller amount into Eletrobrás, the
electric utility. The Chandlers contend that the pur-
chases made them the first foreign portfolio investors
in Brazil. With Collor de Mello cutting the budget
deficit and granting foreigners broader access to the
stock market, Brazilian equities tripled in value be-
tween January and April 1992. But Collor de Mello
was soon caught in a massive kickback scheme and
was impeached that April. Stocks swooned, falling 60 percent
over the next eight months. Most foreign investors fled the mar-
ket, but the Chandlers sat tight. “As far as we were concerned, the
shock was external to the fundamentals of the company,” says
Richard. “Telebrás had simply gone from extremely undervalued
to outrageously undervalued.” 
Itamar Franco, Collor de Mello’s former deputy, succeeded
him as president and continued the government’s liberal econom-
ic policies. By 1993 the market had recovered about two thirds of
its lost ground. When the Chandlers sold out late that year, they
had made a fivefold return on their initial investment and boast-
ed wealth of more than $150 million, according to Richard. “We
learned to build our emotional muscles, helping us make it
through major market falls and grind through the trying times
without losing our equilibrium,” he says. Donegan testifies to the
brothers’ fortitude. “Once they’ve taken a view, volatility does not
bother the Chandlers,” he says. 
Telebrás and Eletrobrás weren’t the pair’s only investment. Be-
tween 1991 and 1994 the Chandlers made $10 million trading
Venezuelan power bonds, Argentinean Brady bonds, Cuban gov-
ernment bonds and promissory notes from the Central Bank of
INSTITUTIONAL INVESTOR MARCH 2006
After selling the retail business, the Chandler brothers made their first
killing by buying and renovating Hong Kong real estate
28339_wrmw 8/11/06 9:24 AM Page 8
INSTITUTIONAL INVESTOR MARCH 2006
Nigeria. This trading would never amount to more than a minor
sideshow to their big equity bets, however.
After exiting Brazil the Chandlers gravitated to Eastern Eu-
rope, attracted by the region’s transition to capitalism. They
bought an undisclosed stake in the Czech Republic’s electricity
monopoly, CEZ, within months of the company’s official listing
on the Prague Stock Exchange in January 1994. At the time,
many Western institutions could not buy Czech shares directly,
and many individuals were unable to access the market through
their Western brokers. Working with Donegan, who was then at
Morgan Grenfell, and his colleague Mark Foster-Brown, also now
a partner at Altima Capital, the brothers designed the Czech Re-
public’s first global depositary receipt program, with CEZ as the
star offering. The GDR created new liquidity, allowing theChan-
dlers to sell their CEZ stake at the end of 1994 for a modest gain.
The early ’90s also saw the brothers venturing into Russia. Be-
ginning in late 1993 they bought Russian privatization vouchers,
which had recently been introduced as a vehicle to buy stakes in
privatized companies through special state auctions. (Russia didn’t
have a stock market until the June 1995 launch of the RTS ex-
change.) “For Richard and Christopher the Czech Republic was
really just a stepping-stone toward understanding the kind of
country risk and volatility that would be inherent in investing in
Russian equities,” explains Foster-Brown. 
By the end of 1994, the Chandlers had snapped up enough
vouchers to buy a 4 percent stake in Unified Energy Systems,
Russia’s largest electric utility; 11 percent of Mosenergo, the
Moscow electricity distributor; 5 percent stakes in each of the
three main production arms of Yukos Oil Co.; a 15
percent stake in Novolipetsk Metallurgical Kombinat,
the country’s biggest steelmaker; and a small, undis-
closed stake in Gazprom, the world’s No. 1 gas pro-
ducer. The metric they used in each case was simple:
The book value of assets vastly exceeded the compa-
nies’ market capitalizations. With more than $194 mil-
lion invested at the time, the brothers say they were the
largest foreign portfolio investors in Russia.
When Mikhail Khodorkovsky’s Menatep Bank took
control of Yukos in early 1996 through a state auction,
the Chandlers sold their stakes in its production com-
panies and invested the proceeds in a further 10 percent
of steelmaker NLMK, giving them a blocking minority
stake of 25 percent plus one share. They used this to
launch a governance crusade — the first of its kind by a
foreign investor in Russia. After armed guards prevent-
ed their representatives from attending the company’s
annual meeting in 1996, the brothers teamed with
Sputnik Fund, which also held a 25 percent stake, and
sued in the Russian courts for the right to appoint board
members. “Russia is really the place where Richard and
Christopher’s ability to stomach volatility, their value-
spotting talents and their rigorous adherence to prin-
cipled investment first clearly came together,” says
Charles Ryan, chief executive of United Financial
Group, the Moscow firm that advised the brothers. 
Sovereign and Sputnik sought to end alleged trans-
fer pricing practices, which they suspected NLMK was
using to sell steel at below-market prices to export
agents they believed were owned by the company’s
managers. Lending credence to their allegations,
NLMK’s profits fell from $480 million in 1995 to just
$40 million in 1996, despite strengthening world steel
prices. Although the investors won a series of court cases
in 1997, Sputnik — an outfit controlled by Russian
financier Boris Jordan and backed by, among others,
Soros Fund Management and Harvard Management Co. — sold
its NLMK stake at a profit before the appeals process was finished.
A decade later Sputnik’s actions still rankle Richard Chandler.
“We would have hoped that Soros Fund Management and Har-
vard would have recognized the opportunity to set up Novoli-
petsk as a model of good corporate governance in Russia,” he says.
Jack Meyer, former chief of Harvard Management, declined to
comment about NLMK or the Chandlers when contacted by e-
mail. An aide said George Soros would not comment.
“By taking principled and well-publicized positions regarding
corporate governance at NLMK, the Chandlers advanced the lev-
el of dialogue and understanding regarding shareholder rights in
Russia,” says Jim Dannis, a retired former head of Eastern Euro-
pean investment banking at Salomon Brothers who advised Sov-
The contrarian investors, who are oft villified, found themselves barred
by armed guards from a Russian shareholder meeting
28339_wrmw 8/11/06 9:24 AM Page 9
ereign and other dissidents at NLMK. “They were left to fight
this battle alone after every other investor sold out.” 
Ironically, the Chandlers did better than their erstwhile allies,
selling their NLMK stake in 1999 for more than the $50 million
that Sputnik received and making an undisclosed profit. They left
a lot of money on the table, though. Novolipetsk Steel, as the
company is now known, made a secondary offering of 7.5 per-
cent of its shares on the London Stock Exchange in December,
raising $649 million and valuing the company at $8.7 billion.
The Chandlers’ timing on the sale of their two largest invest-
ments in Russia proved a much greater coup. Concerned that the
country’s burgeoning market for Treasury bills, which were
known as GKOs and carried interest rates of as much as 100 per-
cent, was little more than a pyramid scheme, they sold their 4
percent stake in UES and their 11 percent stake in Mosenergo
over the summer of 1997, at the height of the first Russian stock
market boom. The amounts they received — $700 million and
$300 million, respectively — produced a profit of 416 percent. 
As jitters over the GKO market increased, Russian shares lost
50 percent of their value between August 1997 and February
1998. Believing that the country had had a sufficient fright to
pull back from the brink of default, the Chandlers plunged again
into the Russian market that February, investing nearly $1 billion
for slightly less than 5 percent of Gazprom. Among private in-
vestors, only Germany’s Ruhrgas, which had a little more than 5
percent, held a larger stake.
Sovereign’s optimism proved premature. Gazprom’s market
capitalization, which had plummeted to about $20 billion
from $47 billion at the end of August 1997, collapsed to a low
of $4 billion after Russia defaulted on its debt and devalued
the ruble in August 1998. That meltdown left the brothers sit-
ting on an estimated loss of close to $800 million.
“I could have said to myself, ‘I’m a bad investor, I got it
wrong,’” says Richard. “Instead, I said, ‘We got in a bit early, but
the value is still there.’ Just because the market deserted Russia, it
did not mean that Gazprom was a bad company. It was a great
company supplying 25 percent of Europe’s gas.” Indeed,
Gazprom held natural-gas reserves worth a stunning $2.9 trillion.
It was not a profitable company, however. Gazprom posted
losses of $7 billion in 1998 and $2.8 billion in 1999, while amass-
ing debts of $9 billion. The reason, the Chandlers suspected once
again, was transfer pricing. The utility was selling vast quantities
of gas at below-market prices to a little-known company called It-
era Group that Sovereign and others believed had close ties to
Gazprom chief executive Rem Vyakhirev and other company di-
rectors, who held five seats on the 11-person board. (The govern-
ment, which then held a 38 percent stake, had five seats and
Ruhrgas, which voted with management, one.) Gazprom also
transferred control of many of its most profitable production sub-
sidiaries to Itera and gave management allies interest-free loans
that an independent audit committee of the Duma, Russia’s legis-
lature, estimated in 2000 totaled $850 million. “It was a com-
pany that was rife with investor abuse,” says UFG’s Ryan.
To combat the abuses and release the company’s value, the
Chandlers backed a campaign by Ryan’s partner, UFG chairman
Boris Fyodorov, to gain a seat on Gazprom’s board and oust
Vyakhirev. A former Finance minister and one of Russia’s most
prominent reformers, Fyodorov asserted that the company was
plundering corporate assets for the benefit of third parties.
Their stance wasn’t without risk. Fyodorov’s Siberian husky
was killed by a rare form of cyanide, and Ryan was repeatedly
questioned by tax authorities, according to people close to the
MARCH 2006 INSTITUTIONAL INVESTOR
Although Richard and Christopher Chan-dler say that social obligations lie at theheart of their investing activities, the
two brothers have remained remarkably pri-
vate individuals.
On its Web site (www.sov.com), the
brothers’ Sovereign Global Investment pro-
claims its goal to be nothing lessthan seek-
ing “prosperity for all by promoting effective
capital allocation and good corporate gover-
nance.” The firm lists its core values as hon-
esty, integrity, justice and mutual respect and
vows to live by the golden rule: “to treat oth-
ers as we would like others to treat us.” But
the site avoids any mention of the Chandlers
themselves, saying only that Sovereign was
founded by two New Zealanders.
Richard Chandler acknowledges that the
brothers’ secrecy might seem at odds with
their self-proclaimed social mission and de-
votion to transparency in corporate gover-
nance, but as custodians of only their own
wealth, they have until now felt no obligation
to speak publicly.
That stance may have cost them in South
Korea, where their effort to force manage-
ment changes at oil refiner SK Corp. were
successfully blocked. SK’s spin portrayed
Sovereign as being interested solely in short-
term profits. Michael Breen, a journalist and
the author of The Koreans, says that Christo-
pher Chandler had him flown from Seoul to
Sovereign’s Dubai offices to discuss ways to
boost the fund’s image in South Korea.
Breen’s advice: “Meet with and court the Ko-
rean press.” The brothers, protective of their
privacy, never followed it.
It was partly as a result of that experience,
and partly in response to the efforts of Institu-
tional Investor Staff Writer David Lanchner to
dig up the Sovereign story, that Richard Chan-
dler agreed to give his first-ever interview. His
aim, he says, is to explain Sovereign’s history
and the importance of its investing principles.
But he declined our request for a photo shoot
and instead forwarded a few polished shots
by Singapore photographer Russell Wong
(see Inside II, page 5). “We are not perfect,”
say the Sovereign duo in their Web site mani-
festo. “We seek progress, not perfection.”
Still, it seems they’d rather not risk any blem-
ishes or flyaways.
Although they can seem uncompromis-
ing and painfully earnest to some who have
dealt with them, friends say the Chandlers
have a lighter side. “They are extremely seri-
ous when it comes to moral convictions, but
they don’t hit you over the head with them,”
says Mark Foster-Brown, a partner in London
hedge fund Altima Capital, who has known
the Chandlers since trading for them at Mor-
gan Grenfell in the ’90s. He and his partner,
Mark Donegan, who also has handled trades
for the Chandlers in the past, bring the
brothers and their father, Robert, to Lon-
don’s Twickenham Stadium whenever New
Zealand’s rugby team, the All Blacks, play
against England. “It’s a moment of pure re-
laxation,” says Foster-Brown.
Stepping gingerly into the light
28339_wrmw 8/11/06 9:24 AM Page 10
INSTITUTIONAL INVESTOR MARCH 2006
two financiers. These sources say both men believed they were the
targets of a Gazprom-inspired campaign of terror. Neither Fyo-
dorov nor Ryan would comment on the alleged intimidation. To
calm his nerves, Richard took up golf in 1998 and began to make
annual two-month trips to Florence to learn Italian.
By December 2000, Gazprom had recovered from its lows,
but its market cap still stood at just $6.2 billion, leaving Sov-
ereign with a sizable paper loss. Chandler and others familiar
with the situation contend that management allies repeatedly
offered to buy Sovereign’s stake at a price that would have
given them a profit. 
“If we were in it simply for the money at Gazprom, we would
have just taken the money,” says Chandler. “But it was not about
the money. In Russia we believed we could change a culture of
fraud by going after the big fish, and that was Gazprom.” 
At the company’s annual general meeting in July 2000, Sover-
eign and other minority investors succeeded in getting Fyodorov
elected to the board over a management candidate. By teaming
up with the five government appointees, who were sympathetic
to complaints about management abuses following the election
of President Vladimir Putin in March 2000, Fyodorov changed
the balance of power at Gazprom. In May 2001 the board re-
moved Vyakhirev as chief executive, kicking him upstairs to the
largely ceremonial position of chairman, and installed Alexey
Miller, then deputy Energy minister, as his replacement.
Vyakhirev stepped down a year later, replaced by current chair-
man Dmitry Medvedev. 
With Miller, a confidant of Putin who remains CEO, stop-
ping much of the transfer pricing, Gazprom’s share price re-
bounded. Sovereign sold off its stake between late 2002 and
mid-2003, posting a 12.5 percent total return on its investment
over nearly four and a half years. It was not the kind of result that
the brothers were used to, but in unseating Vyakhirev they had
made a point — and saved the fund from a significant loss. “We
finally left after nearly ten years in Russia because we felt we had
done as much as we could in corporate governance and in share-
holder rights,” Richard explains. 
With assets totaling nearly $1.4 billion, the brothers in late
2002 made their move into Japan’s tottering banking sector. But
even as they were putting the bulk of their funds into UFJ,
Mizuho and other banks, the Chandlers decided in March 2003
to invest $168 million in SK Corp., the flagship company of SK
Group, South Korea’s third-largest chaebol, or conglomerate. The
investment gave them a 14.82 percent stake in the oil refining
company, just below the threshold that would have obliged them
to make a takeover offer. The Chandlers paid little more than 1
times expected 2004 earnings. The reason? They bought just days
after government auditors announced that SK had fraudulently
boosted profits at its trading and gas station affiliate, SK Net-
works, by $1.2 billion. It later turned out that the unit had cov-
ered up a staggering $5.6 billion in losses. 
“SK Corp.’s main business was solidly in the black, so we
thought there was very little chance the problem at SK Networks
would be big enough to bring the whole group down,” says
Richard, explaining the decision to invest.
The Chandlers also believed that SK Networks’ creditors
would help force the resignation of chairman and CEO Chey,
who had been arrested on charges of illegal
stock trading in February 2003 and was
later charged with accounting fraud. Chey
was convicted and imprisoned that June.
Notwithstanding that conviction, Chey
and his team of executives won creditors to
their side by agreeing to swap $878 million
in debt owed by SK Networks to SK Corp.
into equity. Chey was released on bail in September pending an
appeal, and a court subsequently suspended his sentence, en-
abling him to return to management. The company contended
that Chey deserved to retain his posts because he had inherited
the fraud when he took over the group in 1998 from his uncle. 
Angered by the company’s stance, the Chandlers embarked on
a long and bitter campaign to oust Chey. They proposed a series
of resolutions that Sovereign’s then–chief executive, James Fitter,
who left the firm last year to manage his own wealth, presented at
SK’s annual meeting in March 2004. The resolutions would have
banned convicted criminals from holding any position at SK, re-
quired a majority of the board to be independent and created a
committee to oversee all third-party transactions, to prevent SK
from using refining profits to subsidize money-losing affiliates
like SK Networks. 
The Chandlers rejected a compromise negotiated by Jang Ha-
sung, an economics professor at Korea University in Seoul and a
leading shareholder rights activist, under which Chey would have
resigned as chairman, given up his board seat and accepted most
of Sovereign’s resolutions if he were allowed to stay as CEO. Jang,
who went to Monaco to pitch the plan directly to Richard, ar-
gued that a concession was necessary for Chey to save face, but
Chandler dismissed the proposal, saying it smacked of “situa-
tional ethics” and would not ensure real change at SK.
“When I saw that a compromise was not possible, I washed
my hands of the whole affair,” Jang tells II. “Themeeting illus-
trated the principles but also the arrogance of the Chandlers.”
Chey defeated Sovereign at the 2004 meeting and remained as
chairman and CEO. The Chandlers continued to campaign for
Chey’s removal but failed to block his reappointment to the board
in March 2005. Facing a legal ban on reintroducing defeated reso-
lutions for three years, the brothers sold their stake for $896 mil-
lion in July 2005, a more than fivefold return on their investment.
Sovereign’s efforts weren’t entirely in vain. After the 2004
meeting, Chey adopted some of the fund’s key demands to pla-
cate shareholders. Seven out of ten SK board members are now
independent, and over the past two years, SK has done more
than its peers in terms of raising its dividend, reducing debt, is-
suing transparent monthly financial reports and establishing a
committee to oversee third-party transactions, according to ana-
lysts. “Those are all very positive changes, and I don’t think they
would have happened without the pressure from Sovereign,” say
Marc Goldstein, head of Asian research at Institutional Share-
“We do have altruistic motives that many
investors who are looking for the path of
least resistance find hard to understand.”
28339_wrmw 8/11/06 9:24 AM Page 11
holder Services in Tokyo.
Nevertheless, the SK experi-
ence was a bitter one for the
Chandlers. Sovereign had spent
$4 million on a campaign with
the slogan “Stand Up! Korea,”
arguing that its proposals would
have improved corporate gov-
ernance for the benefit of the
country. 
The brothers themselves stayed
out of the public eye during the
campaign. “We felt that if the
whole issue had been about who
we are and our performance
rather than the principles we ad-
vocate, then the world, being lazy,
would just latch on to how much
money we make,” says Richard.
“What we wanted people to focus
on was the development of econ-
omies, property rights, capital al-
location and the good corporate
governance principles that are
meant to be creating prosperity
for everyone.” 
In the end, however, Sovereign
was vilified by the local media,
politicians and many domestic
shareholders as a rapacious for-
eign raider. It is largely to combat
that caricature, Richard says, that
he decided to speak with II.
Today the brothers’ main ex-
posure is in Japan, where Sover-
eign has some $3 billion invested.
Its biggest holding, believed by
people familiar with the fund to
be worth at least $2.7 billion, is
its stake in Mizuho, the world’s
third-largest bank, which has
more than $1.3 trillion in assets
and a market cap that has soared from $10 billion to nearly
$91 billion since the Chandlers first began investing in it. Presi-
dent and CEO Terunobu Maeda has spent the past three years
integrating the three institutions that merged to form Mizuho
— Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of
Japan — laying off one fifth of the combined staff and building
up the retail business to complement existing strengths in corpo-
rate lending. Analysts expect Mizuho to post record earnings of
nearly $6 billion in the year ending March 31, a dramatic turn-
around from the $19.4 billion loss three years earlier. 
In addition to their Indian holdings, the Chandlers also have
dabbled in Chinese oil stocks over the past year. Richard is cau-
tious about China, however, contending that growth won’t neces-
sarily translate into investment returns because of legal uncertainty
and poor corporate governance. “China still has a long way to go
to create trust in the Chinese capital markets,” he asserts.
THE ULTIMATE IRONY IS THAT AFTER TWO DECADES
of blazing trails in emerging markets and out-of-favor sectors,
and becoming fabulously wealthy in the process, the Chandlers
now find themselves heavily invested in some of the most fash-
ionable markets on earth. So have they lost their appetite for risk
and gone mainstream? Richard insists not.
The adoption of orthodox economic policies has trans-
formed many emerging markets and reduced risk over the past
ten to 15 years, he acknowledges. Asian markets no longer of-
fer many great value plays, but he believes there is still great
potential for investors who can identify the companies that are
likely to profit from the region’s extraordinary growth and be-
come global leaders. 
“Our talent is to understand the long-term potential of a busi-
ness,” Richard says. And when they do, the Chandlers will back
their hunches 100 percent. i
In South Korea the Chandlers’ efforts
to force out the chairman and CEO of
SK Corp. led to widespread protests
Reprinted from the March 2006 issue of Institutional Investor Magazine. Copyright 2006 by Institutional Investor Magazine. All rights reserved.
For more information call (212) 224-3205
28339_wrmw 8/11/06 9:24 AM Page 12
<<
 /ASCII85EncodePages false
 /AllowTransparency false
 /AutoPositionEPSFiles true
 /AutoRotatePages /None
 /Binding /Left
 /CalGrayProfile (Dot Gain 20%)
 /CalRGBProfile (sRGB IEC61966-2.1)
 /CalCMYKProfile (U.S. Web Coated \050SWOP\051 v2)
 /sRGBProfile (sRGB IEC61966-2.1)
 /CannotEmbedFontPolicy /Error
 /CompatibilityLevel 1.5
 /CompressObjects /Tags
 /CompressPages true
 /ConvertImagesToIndexed true
 /PassThroughJPEGImages true
 /CreateJDFFile false
 /CreateJobTicket true
 /DefaultRenderingIntent /RelativeColorimetric
 /DetectBlends true
 /DetectCurves 0.1000
 /ColorConversionStrategy /LeaveColorUnchanged
 /DoThumbnails false
 /EmbedAllFonts true
 /EmbedOpenType false
 /ParseICCProfilesInComments true
 /EmbedJobOptions true
 /DSCReportingLevel 0
 /EmitDSCWarnings true
 /EndPage -1
 /ImageMemory 1048576
 /LockDistillerParams true
 /MaxSubsetPct 100
 /Optimize true
 /OPM 1
 /ParseDSCComments true
 /ParseDSCCommentsForDocInfo true
 /PreserveCopyPage true
 /PreserveDICMYKValues true
 /PreserveEPSInfo true
 /PreserveFlatness true
 /PreserveHalftoneInfo false
 /PreserveOPIComments false
 /PreserveOverprintSettings true
 /StartPage 1
 /SubsetFonts true
 /TransferFunctionInfo /Apply
 /UCRandBGInfo /Remove
 /UsePrologue false
 /ColorSettingsFile (None)
 /AlwaysEmbed [ true
 ]
 /NeverEmbed [ true
 ]
 /AntiAliasColorImages false
 /CropColorImages true
 /ColorImageMinResolution 300
 /ColorImageMinResolutionPolicy /OK
 /DownsampleColorImages true
 /ColorImageDownsampleType /Bicubic
 /ColorImageResolution 300
 /ColorImageDepth 8
 /ColorImageMinDownsampleDepth 1
 /ColorImageDownsampleThreshold 1.50000
 /EncodeColorImages true
 /ColorImageFilter /FlateEncode
 /AutoFilterColorImages false
 /ColorImageAutoFilterStrategy /JPEG
 /ColorACSImageDict <<
 /QFactor 0.15
 /HSamples [1 1 1 1] /VSamples [1 1 1 1]
 >>
 /ColorImageDict <<
 /QFactor 0.15
 /HSamples [1 1 1 1] /VSamples [1 1 1 1]
 >>
 /JPEG2000ColorACSImageDict <<
 /TileWidth 256
 /TileHeight 256
 /Quality 30
 >>
 /JPEG2000ColorImageDict <<
 /TileWidth 256
 /TileHeight 256
 /Quality 30
 >>
 /AntiAliasGrayImages false
 /CropGrayImages true
 /GrayImageMinResolution 300
 /GrayImageMinResolutionPolicy /OK
 /DownsampleGrayImages true
 /GrayImageDownsampleType /Bicubic
 /GrayImageResolution 300
 /GrayImageDepth 8
 /GrayImageMinDownsampleDepth 2
 /GrayImageDownsampleThreshold 1.50000
 /EncodeGrayImages true
 /GrayImageFilter /FlateEncode
 /AutoFilterGrayImages false
 /GrayImageAutoFilterStrategy /JPEG
 /GrayACSImageDict <<
 /QFactor 0.15
 /HSamples [1 1 1 1] /VSamples [1 1 1 1]
 >>
 /GrayImageDict <<
 /QFactor 0.15
 /HSamples [1 1 1 1] /VSamples [1 1 1 1]
 >>
 /JPEG2000GrayACSImageDict <<
 /TileWidth 256
 /TileHeight 256
 /Quality 30
 >>
 /JPEG2000GrayImageDict <<
 /TileWidth 256
 /TileHeight 256
 /Quality 30
 >>
 /AntiAliasMonoImages false
 /CropMonoImages true
 /MonoImageMinResolution 1200
 /MonoImageMinResolutionPolicy /OK
 /DownsampleMonoImages true
 /MonoImageDownsampleType /Bicubic
 /MonoImageResolution 2400
 /MonoImageDepth -1
 /MonoImageDownsampleThreshold 1.50000
 /EncodeMonoImagestrue
 /MonoImageFilter /CCITTFaxEncode
 /MonoImageDict <<
 /K -1
 >>
 /AllowPSXObjects false
 /CheckCompliance [
 /None
 ]
 /PDFX1aCheck false
 /PDFX3Check false
 /PDFXCompliantPDFOnly false
 /PDFXNoTrimBoxError true
 /PDFXTrimBoxToMediaBoxOffset [
 0.00000
 0.00000
 0.00000
 0.00000
 ]
 /PDFXSetBleedBoxToMediaBox true
 /PDFXBleedBoxToTrimBoxOffset [
 0.00000
 0.00000
 0.00000
 0.00000
 ]
 /PDFXOutputIntentProfile (None)
 /PDFXOutputConditionIdentifier ()
 /PDFXOutputCondition ()
 /PDFXRegistryName ()
 /PDFXTrapped /False
 /Description <<
 /CHS <FEFF4f7f75288fd94e9b8bbe5b9a521b5efa7684002000410064006f006200650020005000440046002065876863900275284e8e9ad88d2891cf76845370524d53705237300260a853ef4ee54f7f75280020004100630072006f0062006100740020548c002000410064006f00620065002000520065006100640065007200200035002e003000204ee553ca66f49ad87248672c676562535f00521b5efa768400200050004400460020658768633002>
 /CHT <FEFF4f7f752890194e9b8a2d7f6e5efa7acb7684002000410064006f006200650020005000440046002065874ef69069752865bc9ad854c18cea76845370524d5370523786557406300260a853ef4ee54f7f75280020004100630072006f0062006100740020548c002000410064006f00620065002000520065006100640065007200200035002e003000204ee553ca66f49ad87248672c4f86958b555f5df25efa7acb76840020005000440046002065874ef63002>
 /DAN <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>
 /DEU <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>
 /ESP <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>
 /FRA <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>
 /ITA <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>
 /JPN <FEFF9ad854c18cea306a30d730ea30d730ec30b951fa529b7528002000410064006f0062006500200050004400460020658766f8306e4f5c6210306b4f7f75283057307e305930023053306e8a2d5b9a30674f5c62103055308c305f0020005000440046002030d530a130a430eb306f3001004100630072006f0062006100740020304a30883073002000410064006f00620065002000520065006100640065007200200035002e003000204ee5964d3067958b304f30533068304c3067304d307e305930023053306e8a2d5b9a306b306f30d530a930f330c8306e57cb30818fbc307f304c5fc59808306730593002>
 /KOR <FEFFc7740020c124c815c7440020c0acc6a9d558c5ec0020ace0d488c9c80020c2dcd5d80020c778c1c4c5d00020ac00c7a50020c801d569d55c002000410064006f0062006500200050004400460020bb38c11cb97c0020c791c131d569b2c8b2e4002e0020c774b807ac8c0020c791c131b41c00200050004400460020bb38c11cb2940020004100630072006f0062006100740020bc0f002000410064006f00620065002000520065006100640065007200200035002e00300020c774c0c1c5d0c11c0020c5f40020c2180020c788c2b5b2c8b2e4002e>
 /NLD (Gebruik deze instellingen om Adobe PDF-documenten te maken die zijn geoptimaliseerd voor prepress-afdrukken van hoge kwaliteit. De gemaakte PDF-documenten kunnen worden geopend met Acrobat en Adobe Reader 5.0 en hoger.)
 /NOR <FEFF004200720075006b00200064006900730073006500200069006e006e007300740069006c006c0069006e00670065006e0065002000740069006c002000e50020006f0070007000720065007400740065002000410064006f006200650020005000440046002d0064006f006b0075006d0065006e00740065007200200073006f006d00200065007200200062006500730074002000650067006e0065007400200066006f00720020006600f80072007400720079006b006b0073007500740073006b00720069006600740020006100760020006800f800790020006b00760061006c0069007400650074002e0020005000440046002d0064006f006b0075006d0065006e00740065006e00650020006b0061006e002000e50070006e00650073002000690020004100630072006f00620061007400200065006c006c00650072002000410064006f00620065002000520065006100640065007200200035002e003000200065006c006c00650072002000730065006e006500720065002e>
 /PTB <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>/SUO <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>
 /SVE <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>
 /ENU (Use these settings to create Adobe PDF documents best suited for high-quality prepress printing. Created PDF documents can be opened with Acrobat and Adobe Reader 5.0 and later.)
 >>
 /Namespace [
 (Adobe)
 (Common)
 (1.0)
 ]
 /OtherNamespaces [
 <<
 /AsReaderSpreads false
 /CropImagesToFrames true
 /ErrorControl /WarnAndContinue
 /FlattenerIgnoreSpreadOverrides false
 /IncludeGuidesGrids false
 /IncludeNonPrinting false
 /IncludeSlug false
 /Namespace [
 (Adobe)
 (InDesign)
 (4.0)
 ]
 /OmitPlacedBitmaps false
 /OmitPlacedEPS false
 /OmitPlacedPDF false
 /SimulateOverprint /Legacy
 >>
 <<
 /AddBleedMarks false
 /AddColorBars false
 /AddCropMarks false
 /AddPageInfo false
 /AddRegMarks false
 /ConvertColors /ConvertToCMYK
 /DestinationProfileName ()
 /DestinationProfileSelector /DocumentCMYK
 /Downsample16BitImages true
 /FlattenerPreset <<
 /PresetSelector /MediumResolution
 >>
 /FormElements false
 /GenerateStructure false
 /IncludeBookmarks false
 /IncludeHyperlinks false
 /IncludeInteractive false
 /IncludeLayers false
 /IncludeProfiles false
 /MultimediaHandling /UseObjectSettings
 /Namespace [
 (Adobe)
 (CreativeSuite)
 (2.0)
 ]
 /PDFXOutputIntentProfileSelector /DocumentCMYK
 /PreserveEditing true
 /UntaggedCMYKHandling /LeaveUntagged
 /UntaggedRGBHandling /UseDocumentProfile
 /UseDocumentBleed false
 >>
 ]
>> setdistillerparams
<<
 /HWResolution [2400 2400]
 /PageSize [612.000 792.000]
>> setpagedevice