FCSS Fidelity China Special Situations Plc

 
TIDMFCSS 
 
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE 
OR IN PART, IN, INTO OR FROM THE UNITED STATES OF AMERICA (INCLUDING ITS 
TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF 
COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA, 
ANY MEMBER STATE OF THE EEA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE 
UNLAWFUL. 
 
This announcement is not an offer to sell, or a solicitation of an offer to 
acquire, securities inthe United Statesor in any other jurisdiction in which the 
same would be unlawful. Neither this announcement nor any part of it shall form 
the basis of or be relied on in connection with or act as an inducement to enter 
into any contract or commitment whatsoever. 
 
28 November 2023 
 
Fidelity China Special Situations PLC 
 
Legal Entity Identifier: 54930076MSJ0ZW67JB75 
 
Proposed Combination with abrdn China Investment Company Limited 
 
Introduction 
 
The Board of Fidelity China Special Situations PLC (the "Company" or "FCSS") is 
pleased to announce that it has agreed heads of terms with the Board of abrdn 
China Investment Company Limited ("ACIC") in respect of a proposed combination 
of ACIC with the Company. The combination, if approved by the companies' 
respective shareholders, will be effected by way of a Guernsey scheme of 
reconstruction and winding up of ACIC (the "Scheme") and the associated transfer 
of part of the cash, assets and undertaking of ACIC to the Company in exchange 
for the issue of new ordinary shares in the Company ("New FCSS Shares") 
(together the "Proposals"). 
 
Following implementation of the Proposals, the enlarged FCSS will continue to be 
managed, in accordance with its existing investment objective and policy, by FIL 
Investment Management (Hong Kong) Limited with Dale Nicholls continuing as the 
named portfolio manager. 
 
The Board of the Company believes that, if the Proposals are implemented, FCSS 
shareholders will benefit from, amongst other things, the economies of scale 
that are expected to result from the enlarged asset base, including improved 
market liquidity in FCSS shares (including in relation to its existing share 
buyback policy) and cost efficiencies. 
 
The Proposals will be subject to approval by the shareholders of both FCSS and 
ACIC in addition to regulatory and tax approvals. 
 
Summary of the Scheme 
 
The Proposals will be effected by way of a Guernsey scheme of reconstruction of 
ACIC, resulting in the voluntary winding up of ACIC and the transfer of part of 
ACIC's cash, assets and undertaking to FCSS on a formula asset value ("FAV") for 
FAV basis. 
 
Under the Scheme, ACIC shareholders will be deemed to have elected to receive 
New FCSS Shares in respect of their ACIC shares unless they elect to receive 
cash in respect of some or all of their ACIC shares (the "Cash Option"). 
 
The Cash Option is limited to 33 per cent. of ACIC's shares in issue (excluding 
treasury shares). Should total elections for the Cash Option exceed this 33 per 
cent. threshold, excess elections for the Cash Option will be scaled back into 
New FCSS Shares on a pro rata basis. 
 
The Cash Option will be offered at a discount of 2 per cent. to the ACIC FAV per 
share (less the further costs of any realisations required to fund the cash 
pool) (the "Cash Discount"). The benefit of the Cash Discount will be credited 
towards the interests of the ACIC shareholders rolling over their shareholdings 
in ACIC into the enlarged FCSS. 
 
The Scheme will be subject to approval by the shareholders of both companies in 
addition to regulatory and tax approvals. In accordance with customary practice 
for such transactions involving investment trusts, the City Code on Takeovers 
and Mergers is not expected to apply to the Scheme. A timetable and further 
details of the Scheme will be announced in due course. 
 
Benefits of the Proposals 
 
The Board believes that, if implemented, the Proposals will have a number of 
benefits for FCSS shareholders, including: 
 
  · Scale and enhanced profile: the enlarged FCSS is expected to have net assets 
of approximately £1.2 billion (as at 28 November 2023). As the flagship UK 
closed ended vehicle for investment in China and a constituent of the FTSE 250 
Index, it is expected that the enlarged FCSS would benefit from enhanced profile 
and marketability. 
  · Enhanced liquidity: the scale of the enlarged FCSS, as the largest and most 
liquid company in the sector, is expected to further improve secondary market 
liquidity for the Company's shareholders (including in relation to its share 
buyback policy). 
  · Shareholder register: the implementation of the Proposals would allow a 
number of shareholders to consolidate their holdings across FCSS and ACIC whilst 
also creating a more diversified shareholder base through a combination of the 
two share registers. 
  · Lower ongoing charges: the enlarged FCSS would be expected to benefit from a 
lower ongoing expense ratio with the Company's fixed costs being spread over a 
larger asset base. 
  · Contribution to costs: the Company's alternative investment fund manager, 
FIL Investment Services (UK) Limited ("Fidelity"), is willing to make a material 
cost contribution in respect of the Proposals, which is expected to offset the 
direct transaction costs for FCSS shareholders. 
  · Lower tiered management fee: Fidelity has agreed that, with effect from the 
admission to listing and trading of the New FCSS Shares, the base management fee 
payable by the Company under the investment management agreement will be reduced 
to 0.65 per cent. (currently 0.70 per cent.) in respect of the Company's net 
assets in excess of £1.5 billion. 
 
Costs of the Proposals and Fidelity Contribution 
 
Each company intends to bear its own costs incurred in relation to the 
Proposals. 
 
As noted above, Fidelity has undertaken to make a material contribution towards 
the costs of the Proposals of £500,000 plus an amount equal to eight months of 
management fees in respect of the assets to be transferred from ACIC to FCSS 
(the "Fidelity Contribution"). The Fidelity Contribution will first be applied 
to meet the Company's costs (up to a maximum of £1 million). Any surplus will 
then be applied to meet ACIC's costs. The Fidelity Contribution is expected to 
fully offset the Company's direct costs in respect of the Proposals. 
 
Continuation vote 
 
Subject to implementation of the Scheme, FCSS will also commit to holding a 
continuation vote in 2029 and every five years thereafter. 
 
Expected timetable 
 
A circular to shareholders of the Company, providing further details of the 
Proposals and convening a general meeting to approve the Proposals, and a 
prospectus in respect of the issue of New FCSS Shares in connection with the 
Scheme, will be published by the Company as soon as practicable. The Proposals 
are anticipated to become effective by the end of the first quarter of 2024. 
 
The Chairman of FCSS, Mike Balfour, commented: 
 
"I am pleased we are able to offer existing shareholders, as well as 
shareholders of ACIC who roll over, the benefits of an enlarged vehicle with 
additional liquidity, cementing the Company's status as the leading constituent 
of the China investment company sector. The proposals will also help spread 
costs over a larger base of assets, thereby reducing the ongoing charges for 
both new and existing shareholders. 
 
As a Board, we are positive about the long-term prospects of investing in China. 
FCSS is seen by many as the one-stop shop solution for exposure to this asset 
class and this proposal enhances the prospect of the Company building on its 
long-term success story." 
 
For further information please contact: 
FIL Investment Services (UK) Limited        +44 (0) 20 3986 5367 
Claire Dwyer 
 
Daniel Summerland 
Dickson Minto Advisers (Financial Adviser)  +44 (0) 20 7649 6823 
Douglas Armstrong 
Jefferies International (Corporate Broker)  +44 (0) 20 7029 8000 
Gaudi Le Roux 
 
Harry Randall 
 
Important Information 
 
This announcement contains information that is inside information for the 
purposes of Article 7 of the UK version of Regulation (EU) No. 596/2014 which is 
part of UK law by virtue of the European Union (Withdrawal) Act 2018, as 
amended. Following publication of this announcement, this inside information is 
now considered to be in the public domain. The person responsible for arranging 
for the release of this announcement on behalf of the Company is FIL Investments 
International acting as company secretary. 
 
This announcement is not for publication or distribution, directly or 
indirectly, in, into or from the United States of America. This announcement is 
not an offer of securities for sale into the United States. The securities 
referred to herein have not been and will not be registered under the U.S. 
Securities Act of 1933, as amended, and may not be offered or sold in the United 
States, except pursuant to an applicable exemption from registration. No public 
offering of securities is being made in the United States. 
 
 
This information was brought to you by Cision http://news.cision.com 
https://news.cision.com/fidelity-china-special-situations-plc/r/proposed-combination-with-abrdn-china-investment-company,c3883837 
 
 
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November 28, 2023 02:00 ET (07:00 GMT)

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