TIDMANW
RNS Number : 9904G
Aberdeen New Thai Inv Trust PLC
30 July 2021
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30 July 2021
ABERDEEN NEW THAI INVESTMENT TRUST PLC
LEI: 213800LUTHTZ8LS5UK85
Proposals for the Reconstruction and Voluntary Winding-up of the
Company
The Board of Aberdeen New Thai Investment Trust PLC (the
"Company") is pleased to announce proposals, as set out below, (the
"Proposals") which it believes will benefit shareholders in the
Company ("Shareholders") going forward. The Proposals include the
reconstruction and voluntary winding-up of the Company, a partial
cash exit opportunity and a rollover into Aberdeen Emerging Markets
Investment Company Limited ("AEMC") which, following its own
extensive review process, is adopting an investment policy of
investing directly in the equities of Chinese companies.
Key benefits of the Proposals
-- Exposure to investing directly in Chinese equities, which the
Board sees as underserved despite China being the world's second
largest economy;
-- Access to the highly successful Aberdeen Standard Investments
equities team specialising in China, locally based in Shanghai and
Hong Kong, supported by the team in Singapore;
-- Combination with AEMC to help improve liquidity and reduce fixed costs per share and;
-- Partial cash exit opportunity to provide shareholders the
ability to realise part (or potentially all) of their
investment.
Background to the Proposals
In the latest Annual Report for the year ended 28 February 2021,
your Board repeated its commitment to providing Shareholders with a
strong investment proposition with the objective of delivering
relative outperformance of the Company's benchmark over the long
term.
Your Board has kept the investment performance of the Company
under constant review, and in the period from 1 March 2020 to 30
June 2021 the Stock Exchange of Thailand Index (the "Benchmark")
delivered total returns of 12.8% on a Sterling adjusted basis. By
comparison, the Company's net asset value ("NAV") total return was
-0.5%. Given the continued relative underperformance and mindful of
the commitment to undertake a full review of the Company's
investment management arrangements if performance over the three
years to 28 February 2023 has not shown outperformance of the
Benchmark, the Board has decided to bring forward alternative
proposals to Shareholders now. The Proposals seek to provide
Shareholders with the ability to gain exposure to investment in
Chinese equities, managed by a highly successful Aberdeen Standard
Investments ("ASI") equities team with a proven track record of
outperformance, all through a larger more liquid vehicle.
Proposals
Combination with AEMC
The Board has in principle agreed the terms for a combination of
the Company with AEMC. AEMC is a Guernsey-incorporated,
London-listed, investment company managed by Aberdeen Standard
Investments with gross assets of GBP388 million at 30 June 2021
that is proposing to change its investment policy to one of
investing directly in Chinese equities.
AEMC's board, like that of the Company, has been considering a
move to an All China All Cap investment mandate and consequently
the boards, following discussions with shareholders representing
73% of the combined shares in issue, consider that it would be
beneficial for the companies to combine. The combination, if
approved by each company's shareholders at the requisite general
meetings, will be implemented through a scheme of reconstruction
pursuant to section 110 of the Insolvency Act 1986 ("section 110
scheme"), resulting in the voluntary liquidation of the Company and
the rollover of its assets into AEMC in exchange for the issue of
new AEMC shares to the Company's Shareholders.
New AEMC shares that are issued to the Company's shareholders
will be issued on a formula asset value ("FAV")-to-FAV basis. FAVs
will be calculated using the respective net asset values of each
company, adjusted for the costs of implementing the Proposals, any
dividends and distributions declared by each party which have a
record date prior to the effective date of the combination, an
allowance for the costs of liquidation (for the Company), the cash
exit option (for the Company) and the tender price pursuant to the
tender offer referred to below (for AEMC).
The Board believes that many Shareholders will wish to continue
being invested notwithstanding the proposed change of investment
exposure that the Proposals will bring and would encourage them to
roll over their interest into AEMC as they will be doing with their
own holdings. Nevertheless, given the proposed change of investment
exposure that the Proposals represent, the Board believes it is
appropriate to offer those Shareholders wishing to realise part, or
potentially all, of their investment in the Company a chance to do
so through a cash exit for up to 15% of the Company's shares in
issue, at a two per cent. discount to FAV per share of the
Company.
Given the proposed change of investment policy, AEMC's board
believes that it is appropriate to offer those shareholders in AEMC
wishing to realise part, or potentially all, of their investment in
AEMC a chance to do so through a tender offer for up to 15 per
cent. of its shares in issue (excluding shares held in treasury) at
a two per cent. discount to FAV per share of AEMC.
The combination with AEMC is expected to improve the Company's
liquidity for all shareholders as well as spreading the fixed costs
of AEMC, as the continuing entity, over a larger pool of
assets.
Two current directors of the Company, Anne Gilding and Sarah
MacAulay, have been invited to join the board of AEMC from the date
of completion of the transaction.
Exposure to an All China All Cap equity investment policy
AEMC's proposed portfolio will be high conviction with an
estimated 30 to 60 holdings, with exposure to small companies. The
model portfolio has approximately 60% invested in the China A
Shares market and will evolve over time. The same portfolio
reflects ASI's ESG strengths, with a higher rating and lower carbon
profile than the MSCI China All Shares index (in Sterling terms),
being the combined entity's proposed benchmark (both as measured by
MSCI).
With over GBP4 billion invested in Chinese equities as at 31
March 2021, ASI has a strong record of performance (both absolute
and relative) witnessed in its Aberdeen Standard Luxembourg
registered SICAV I China A and All China equity funds. ASI has been
investing in China for almost 30 years, and has a large team based
in Shanghai and Hong Kong, supported by team members in Singapore.
ASI also brings a strong record of ESG integration into its
investment processes and engagement with investment managers
supported by on-desk ESG specialists, together with a very strong
track record of investment in China. ASI's Chinese equities team of
thirteen is complemented by three on-desk ESG specialists and
underpinned by ASI's global footprint with its central ESG team of
20+ based in Edinburgh. ASI is acknowledged as industry leading
with an A+ ESG rating from UN PRI.
ASI believes that several key themes are providing interesting
opportunities in China:
-- rising affluence is leading to fast growth in premium
consumption in areas including education, travel, and food and
beverage;
-- growing integration amid the widespread adoption of
technology means a bright future for plays on e-commerce, gaming,
cybersecurity and data centres supporting cloud services;
-- growing prosperity means structural growth for consumer
finance, increasing investor participation on stock exchanges, and
a need for financial protection - especially given the
under-penetration of life insurance;
-- rising disposable incomes are driving demand for healthcare products and services;
-- policy makers globally are committing to a greener and lower
carbon world and China, presently the world's largest emitter of
greenhouse gases, is expected to have a transformational role to
play. Investments in renewable energy, batteries, electric
vehicles, related infrastructure, and environmental management all
have a bright future. 'Grid parity' will be game-changing.
ASI will manage the investment portfolio so that it does not
include any company currently sanctioned under the Chinese
Military-Industrial Complex Companies, or CMIC, list as per the
United States Executive Order 14032. ASI will monitor the position
for any future developments associated with this list of companies
and any change to compliance with this approach would be
communicated to the market.
Management arrangements
Aberdeen Standard Fund Managers Limited ("ASFML") has agreed to
make a contribution to the costs of implementing the Proposals by
means of a waiver of the management fee otherwise payable by AEMC
to ASFML for the first six months following the completion of the
section 110 scheme, which will be for the benefit of all remaining
shareholders of the enlarged company. In addition, in future the
fee for the management of the enlarged AEMC will be calculated with
regards to the market capitalisation of the enlarged company,
rather than net assets. This aligns ASFML with shareholder aims
such that it is better incentivised to ensure that the share price
discount to net asset value is kept close to zero. The annual
management fee will be structured on a tiered basis, with the first
GBP150 million of market capitalisation being charged at 0.80%,
0.75% on the next GBP150 million and 0.65% thereafter.
AEMC's Continuation vote and future performance linked
tender
AEMC is currently required to hold a continuation vote every
five years with the last vote held at the AGM in April 2018. If the
Proposals put to AEMC's shareholders are approved, it is the
intention that the requirement for this vote will be reset with the
next continuation vote put to shareholders at AEMC's AGM to be held
in 2027.
In addition, the AEMC board intends that, if the company's NAV
total return over five years ending December 2026 does not exceed
the total return of the MSCI China All Shares Index (in Sterling
terms) the company will undertake a tender offer for up to 25 per
cent. of the company's issued share capital (excluding any shares
held in treasury) at a 2 per cent. discount to the then prevailing
FAV.
City Code
In accordance with customary practice for section 110 schemes,
the City Code on Takeovers and Mergers is not expected to apply to
the combination of the Company and AEMC.
Approvals
Implementation of the Proposals is subject to the approval,
inter alia, of the Company's Shareholders as well as regulatory and
tax approvals and approval by the shareholders of AEMC. A circular
providing further details of the Proposals and convening general
meetings to seek the necessary shareholder approvals will be
published by the Company as soon as practicable. It is anticipated
that the Proposals will be implemented in Q4 2021.
The Company has consulted with a number of its major
shareholders who have indicated support for the Proposals. These
comprise over 58% of the Company's share register.
Nicholas Smith, Chairman of the Company, commented:
"Despite providing shareholders with a strong absolute total
return since launch in December 1989, relative performance against
the benchmark index has disappointed. The Board has engaged with
the Manager over the past three years to seek to improve this but
relative results have not improved.
I mentioned in my two most recent Chairman's Statements the
Board's continuing commitment to providing shareholders with an
investment proposition of producing relative outperformance over
the long term. I also noted that should the performance over the
three years to 28 February 2023 not show outperformance of the SET
Index ('three year test') the Board would undertake a full review
of the Company's investment management arrangements.
Recently, the Board received a proposal to join with AEMC to
support its new investment objective of investing in Chinese
equities. With the continuing lacklustre performance in the
portfolio since 1 March 2021, the likelihood of the three year test
not being met, and the lack of investor interest in small country
funds, the Board believes this proposal will offer our shareholders
the opportunity to be invested in one of the fastest growing
countries in the world with rising affluence and disposable
incomes. The Chinese economy continues to innovate and prosper with
policy objectives such as digital innovation, green technology and
access to better healthcare and we believe shareholders will
benefit over the longer term from a larger, more liquid vehicle
investing in China.
I, and the Board, would like to extend our thanks to Orsen
Karnburisudthi and Adrian Lim at ASI for their time and dedication
as investment managers of the Company and we should like to take
this opportunity to wish them both all the best for the
future."
Enquiries
Aberdeen New Thai Investment Nicholas Smith Via ASI
Trust PLC
Numis Securities Nathan Brown/Matt Goss T: 020 7260 1000
Aberdeen Standard Investments Gary Jones/William Hemmings T: 020 7463 6000
Notes:
The Company is the only UK-listed investment trust specialising
in Thai equities with a long-term track record of investing in
quoted Thai stocks. Its investment objective is to provide
shareholders with a high level of long-term, above-average capital
growth through investing in companies listed in Thailand.
The portfolio is managed by the ASI Asian team, which includes
experienced investment professionals based in Bangkok. Orsen
Karnburisudthi heads up the Bangkok investment team.
During 2018-19 the strategy moved increasingly towards smaller
companies and allowed for investment in companies approaching IPO.
In 2020 the Board committed to a full review of the Company's
investment management arrangements if performance over the three
years to 28 February 2023 did not show outperformance of the Stock
Exchange of Thailand Index, which might include, but was not
limited to, an option for shareholders to redeem shares for cash.
At the latest practicable date of 28 July 2021 the net assets of
the Company amounted to GBP72.5 million and the number of Ordinary
shares in issue was 15,986,569. Each Ordinary share entitles the
holder to one vote.
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