OBSERVANT readers will have noticed that everything happening in the Lai See initial public offering is remarkably similar to events in the wicky-wacky world of Hong Kong corporate life. We have trawled some of the finest minds in Hong Kong corporate finance in search of the gems on which to base our tales and we also spoke to Willie Phillips, managing director of Salomon Brothers Hong Kong. There was no way to include one of his stories in the Lai See float tale, but it is simply too good not to use at all. In the heady days of 1972-73 when the Hang Seng Index soared above 1,700 points, you didn't have to have much of a company to hold an initial public offering - in fact about all you needed was a prospectus and a good idea. And a lecturer at Hong Kong Chinese University by the name of Professor Loh Shiu-chang had just that. Broadcast TV had recently come to the territory and roofs all over town were sprouting aerials. But the local toughs and triad-wannabes were skinning people to the tune of $500 a throw for the pleasure of having an aerial on their own roof. The professor realised that an indoor aerial held the solution and patented the ''Backfire Loop Antenna''. A company called Hongkong Antenna and Engineering was quickly formed and 900,000 shares of $1 were offered at par on the Kowloon exchange. To say that the offer went well would massively understate the case. The shares touched $30 on their first day despite the lack of a profit forecast in the prospectus and the fact that no product had actually been made. The chairman of the company, Peter P F Chan, ''hoped, but of course did not expect Hongkong Antenna to become the territory's first IBM''. They went about it the Hong Kong way, of course. Of the $900,000 raised, only $100,000 was to go to manufacturing aerials. The rest went straight back into the market as investments. Not a good plan. As Mr Phillips put it, the issue rang the bell at the top of the bull market and by Christmas 1973 the Hang Seng Index had reached about 150 points. In 1975, the company still had not made any aerials but was hoping to start production in 1976 - if a British patent was gained. It made a loss that year of $1 million and was still making write-offs for ''permanent diminution of value of investments''. The last three stories about the company in the SCMP morgue are no longer than three paragraphs each. An offer was made for the firm by Cheung Hing Yip in October 1976. Then a firm called APEC Development made another offer. On February 4, 1977, the APEC offer went unconditional and the history books are blank thereafter. Sic Transit Gloria Mundi. Still, imagine being a stag on that little issue and remembering to sell. Odd jobs IN the West, unemployment is a real problem. In some places, they have resorted to finding useless jobs to keep the unwillingly idle occupied at the taxpayers' expense. The jobless perform silly and pointless tasks like counting lamp posts, digging and then filling holes, or working for newspapers. But there aren't really any unemployed people in Hong Kong, because they all have jobs at property agencies. So Lai See's man on the Happy Valley tram thought either he or the Urban Services Department had lost their marbles when he saw a workman purposefully watering artificial grass pitches. ''What are you on?'' and ''Can we have some?'' were the first questions to spring to Lai See's mind. But it was no hallucination. Actually, says the Urban Services Department, watering artificial turf is a really important thing to do, even after the wettest July since Hong Kong records began. The heat of Hong Kong warms up an artificial surface really quickly, like the seat of a car parked on a sunny street, the department was able to explain. Without a twice-a-day watering - as much as a standard grass pitch gets in dry weather - the artificial turf can reach dangerous temperatures. While it may not burst into flames, it could certainly injure users and even start to melt, a department spokesman said. That probably explains the football writer's favourite cliche: ''A scorching shot from just outside the penalty area.'' Costly mistake NEW research shows investors and their advisers have failed to realise that advertised management fees are meaningless compared with the total expenses billed to funds. This is how a story in International Money Marketing kicks off in a recent issue. Research by a consultancy called Timberlake and Co (run by a former European director of Fidelity) and by Paul Moulton for Fitzrovia Publishing shows that the expenses ratio charged to offshore investment funds is often twice, and sometimes four times, the fee disclosed in sales literature. Richard Timberlake said some firms were simply exploiting customers: ''There's no doubt there are some naughty boys.'' But more often the fund companies have not really been paying attention. The result was that total expense ratios (TERs) varied from about one per cent to above four per cent, said Mr Timberlake in his recent survey of 1,157 funds with more than US$70 billion in assets. Investors had better start getting to grips with what Mr Timberlake is talking about. ''Investors and their advisers have not yet grasped that TERs are far more relevant - and often more than twice as high - as advertised fees,'' he said. Mr Moulton is about to start work on a survey looking at the Hong Kong industry, which should be published before the end of the year. Why not ask your fund manager about TERs? We certainly will.
