TIDMAAS
RNS Number : 1108Y
Aberdeen Standard Asia Focus PLC
11 January 2022
11 January 2022
Aberdeen Standard Asia Focus plc
LEI: 5493000FBZP1J92OQY70
Proposals for the changes to the Company following a strategic
review and notice of General Meeting
The Board of Aberdeen Standard Asia Focus plc announces that it
has today published a shareholder circular (the "Circular") setting
out the recommended proposals for (i) the adoption of a new
investment policy; (ii) adoption of a new enhanced dividend policy;
(iii) amendments to the Company's articles of association; (iv)
share split of every one 25 pence share in the capital of the
Company into five 5 pence shares; and (v) notice of a General
Meeting.
Introduction and overview
As announced on 30 November 2021, the Board of Aberdeen Standard
Asia Focus PLC (the "Company") has conducted a comprehensive review
of the Company's long-term strategy to ensure that the investment
policy captures the immense opportunities that exist in the Asian
small cap market. This applies to both South Asia but also North
Asia with the emergence of China as the world's second largest
economy and fast expanding stock markets to match.
As part of the Strategic Review, the Board also addressed the
issue of how to make the Company more competitive whilst giving
shareholders, and in particular retail investors, a more meaningful
participation in the Company's ongoing success. The Board believes
that the measures outlined below and proposed in the Circular will
assist in the marketability of the Company's Shares, thus
increasing the potential to narrow the discount to net asset value,
to the benefit of all Company stakeholders.
During the course of the Strategic Review, the Board consulted
with abrdn, outside specialists in the Asian markets and the
Company's major Shareholders.
Outcome of the Strategic Review
As announced on 30 November 2021, as well as the Proposals
outlined above and which are detailed in the Circular, the outcome
of the Strategic Review also includes:
a) changes to the Company's management team, in particular the
addition of Flavia Cheong, abrdn's Head of Equities, Asia Pacific,
as joint lead manager, and Neil Sun as an investment manager
directly responsible for managing the potential increased weighting
in North Asia. They will work alongside Hugh Young and Gabriel
Sacks to bolster the investment management team to reflect the
increasing importance of China;
b) agreement with abrdn to amend the Company's management fee
from 0.96% per annum of the Company's market capitalisation to a
new, tiered management fee of 0.85% per annum for the first GBP250
million of the Company's market capitalisation, 0.6% per annum for
the next GBP500 million, and 0.5% per annum for market
capitalisation of GBP750 million and above; and
c) the Board's commitment to introducing a performance-linked
tender offer, which shall provide that, in the event of
underperformance of the NAV per Share versus the MSCI AC Asia ex
Japan Small Cap Index over a five-year period commencing 1 August
2021, Shareholders will be offered the opportunity to realise a
proportion of their holding for cash at a level close to NAV less
costs of the tender offer. The tender offer would be capped at a
maximum of 25% of the issued share capital of the Company at that
time.
The change in the Company's management fee will be conditional
on Shareholder approval of the Proposals outlined in the Circular
and will be backdated as if it had been effective from 1 August
2021. The introduction of the Future Tender Offer will also be
conditional on Shareholder approval of the Proposals.
The introductions of certain Proposals outlined in the Circular,
including but not limited to the adoption of the New Investment
Policy, are also conditional on the FCA's approval of an AIFMD
Material Change Notification as submitted to the FCA by abrdn on or
around the date of the Circular.
The Board has also taken this opportunity to consider the
Company's objective, its historic return profile, the changes being
proposed and its expectations for the Company's expected long-term
sources of return. As a result, and in accordance with the AIC
SORP, the Company will be allocating a proportion of its finance
costs and management fees to the capital account. Whereas
historically these have been allocated 100% to revenue, going
forward, for the year commencing 1 August 2021, these will be
allocated 75% to revenue and 25% to capital.
Benefits of the Proposals
The Board believes that the Proposals will have the following
key benefits:
(i) By amending the Investment Policy, allow for more
flexibility to invest in small growth companies across Asia. The
changes to the Company's management team will complement this;
(ii) By increasing the target dividend and aiming to maintain
the Company's progressive dividend policy of the last 25 years
(including with the flexibility to pay dividends out of capital
reserves where merited), provide inve stors with an enhanced,
regular level of income alongside capital growth amid the current
low interest rate environment ;
(iii) By introducing the new tiered management fee (which is
conditional on the successful implementation of the Proposals),
reduce the running costs of the Company;
(iv) By introducing the Share Split, increase the marketability
of the Company's Ordinary Shares for small investors; and
(v) By implementing the Future Tender Offer (which is
conditional on the successful implementation of the Proposals),
provide Shareholders with a partial exit opportunity if the
Company's performance does not exceed the MSCI AC Asia ex Japan
Small Cap Index over the five-year period commencing 1 August
2021.
Change of investment objective and policy
As explained in the following paragraphs, the Company is
proposing to make the following changes to its Current Investment
Policy:
a) Removing the market capitalisation upper limit of $1.5 billion in its investment objective;
b) Removing Australasia from the Investment Region, so no new
investments will be made in Australasia; and
c) Various more minor amendments as set out in the blackline
between the Current Investment Policy and the New Investment Policy
in Part 2 of the Circular.
The Company's Current Investment Policy limits new investment
into companies that have a market capitalisation of below
approximately US$1.5 billion. The Board strongly believes this
threshold is overly restrictive, limiting the Company's portfolio
managers from investing in various small-cap high-growth companies,
particularly in larger markets like China and India. As a result,
the Board proposes to remove this market capitalisation limit from
its investment objective while stressing that the Company's
portfolio will remain a small company portfolio. The Company's
portfolio managers will continue to seek out small companies
capable of delivering strong capital growth.
The Company will continue to focus on offering investors
exposure to attractive small, quoted companies in Asia that have
excellent prospects for strong growth in shareholder value, good
balance sheets and skilled, experienced management. The success of
this policy has been demonstrated over the last 26 years, where
GBP1,000 invested in the Company in 1995 is now worth approximately
GBP22,900 (based on share price at close on the Latest Practicable
Date with dividends reinvested). Dividends (including special
dividends) paid to Shareholders have increased from 1.2 pence per
Ordinary Share in 1996 to 16.0 pence in 2021. The Board and abrdn
believe that continued focus on this area of the market will
deliver strong growth over the medium to long term.
Over the same period, the stock markets of the region have
developed from small emerging markets to some of the largest in the
world. Therefore, the Board believes it is necessary to make
changes to the Company's Current Investment Policy to ensure abrdn
can continue to invest in companies that can deliver the best
returns for shareholders and not to be inhibited by the enormous
difference in the relative size of the Asian markets. The
definition of a small cap company varies from market to market with
China and India at one end of the scale and very small markets,
like Sri Lanka, at the opposite end.
Historically, the Company has had limited investments in
Australasia and the Board does not believe the outlook for this
region offers the same growth prospects as other parts of Asia.
Therefore, the Board proposes amending the Current Investment
Policy so no new investments will be made in Australasia. The
Company currently has three holdings in Australasia and the
Company's portfolio managers do not currently intend to dispose of
these should Shareholders approve the change in Current Investment
Policy.
The changes between the Current Investment Policy and the New
Investment Policy, including a blackline between the two, are set
out in full in Part 2 of the Circular.
The Listing Rules require any proposed material changes to the
Company's published Current Investment Policy to be submitted to
the FCA for prior approval. The FCA has approved the New Investment
Policy.
The Listing Rules also require Shareholder approval prior to any
material changes being made to the Company's Current Investment
Policy; this approval is sought at the General Meeting. Any future
material changes to the New Investment Policy will also require the
prior approval of Shareholders.
Enhanced new dividend policy
The Company's aim remains to provide long-term capital growth
but the Board notes that some investors are looking for a regular
level of income alongside capital growth, particularly in the
current low interest rate environment.
The Board is therefore proposing to increase the level of target
dividends paid by the Company. Under this new dividend policy (the
"New Dividend Policy"), the Board aims to set a target dividend of
32.0 pence per Ordinary Share for the financial year ending 31 July
2022 and aims to progressively grow it thereafter. This would
represent a 100% increase in the dividend based on the 16.0 pence
per Ordinary Share recommended in the financial year ending 31 July
2021. This target dividend would be paid in equal quarterly
instalments.(1)
Shareholder approval is sought to the Company's proposed new
dividend policy at the General Meeting.
As outlined under Amendments to articles of association below,
the Board also proposes to amend the Articles, which includes a
proposal to remove the current prohibition on distribution of
capital profits. This is designed to provide the Company with
flexibility to use capital reserves in the future where required to
maintain the new dividend policy.
Any such use of capital reserves and/or capital profits during
the period while the CULS remain in existence would either require
CULS Holder or Trustee consent or an adjustment to the price at
which the CULS convert into Shares. The Company does not currently
intend to pay dividends out of capital reserves and/or capital
profits. For the period to 2025 (when any CULS still in existence
will be repaid), the Company expects to meet its New Dividend
Policy out of current year income and income reserves.
If the Proposals are approved at the General Meeting, the
Company intends to declare in February 2022 an initial target
dividend of 16.0 pence per Ordinary Share (or 3.2 pence per New
Ordinary Share following the Share Split) relating to the 6-month
period from 1 August 2021 to 31 January 2022 and thereafter 8.0
pence per Ordinary Share (or 1.6 pence per New Ordinary Share
following the Share Split) per quarter. In the current year, the
Company anticipates that this targeted level of dividend would be
paid out of current income and existing revenue reserves.
The Company's dividend record is very strong with the ordinary
dividend having been maintained or increased in 24 out of 25 years.
While the proposed enhancement to the dividend would mean that in
future it is unlikely the Company will be paying special dividends,
the Board will aim to maintain its progressive approach albeit off
a higher base (subject, always, to having sufficient income and
reserves). The Board does not intend that there should be any
alteration to how the portfolio managers select stocks for the
portfolio as a result of this change.
(1) Note that, if the Share Split is approved at the General
Meeting, the proposed target dividend of 32.0 pence per Existing
Ordinary Share of 25p each would become 6.4 pence per New Ordinary
Share of 5p each.
Amendments to articles of association
The Board proposes the Company adopt a new set of articles of
association in substitution for the Existing Articles of
Association. A summary of the proposed changes is as follows:
a) To remove the current prohibition on using capital reserves
to pay dividends, to provide flexibility to pay dividends out of
capital profits where merited as explained in Enhanced new dividend
policy above;
b) To provide for the holding of virtual or hybrid Shareholder
meetings, as well as for health and safety measures at in person
meetings, and postponement of meetings, all as flexibility given
the experience during the recent pandemic (although the Board will
not hold virtual meetings in the absence of Government guidance
preventing in person meetings);
c) To increase the limit on ordinary remuneration of the
Directors from GBP225,000 (as approved at the Company's annual
general meeting in December 2013) to GBP275,000 per annum, in order
to allow for orderly board succession planning and any short-term
overlap; and
d) To update the Existing Articles in other minor ways in order
to reflect best practice (the last such update having happened in
2014). Such updates include, but are not limited to:
i. amendments in response to the requirements of the AIFM Rules
(such amendments do not change the Company's current processes,
rather they narrate the minimum requirements of the AIFM
Rules);
ii. permitting execution of documents by electronic means, where the situation allows;
iii. providing the Company with more flexibility in dealing with untraced shareholders;
iv. updating the methods of settling cash dividends; and
v. changes in response to the introduction of international tax
regimes requiring the exchange of information, including sections
1471 to 1474 of the US Tax Code, known as the Foreign Account Tax
Compliance Act, and the Organisation for Economic Co-operation and
Development Common Reporting Standard including, without
limitation, the UK International Tax Compliance Regulations
2015.
Approval of Shareholders to the proposed adoption of the New
Articles is sought at the General Meeting.
Share Split
The closing mid-market price of the Company's Existing Ordinary
Shares of 25p each was 1495.0p as at 5 January 2022 (being the
Latest Practicable Date). The Directors believe that it is
appropriate to propose the sub-division of each Existing Ordinary
Share into 5 New Ordinary Shares of 5p each. The Directors believe
that the Share Split may have the following effects:
a) Improve the liquidity of the Company's Shares and enhance the
ability of investors to make more efficient regular monthly
investments.
b) The reduced price of each Share after the Share Split will
make each Share more affordable to investors, thus encouraging
greater participation by and providing greater flexibility in terms
of the size of the trades to investors with different investment
profiles. Furthermore, the reduced price of each board lot of
Shares would make the Shares more accessible and attractive to both
existing and potential investors and hence enhance the trading
liquidity of the Shares over time.
c) The number of Shareholders after the Share Split may increase
with the increase in the number of Shares available for trading
purposes. As such, the Share Split may broaden the Shareholder base
of the Company given that an investment in the Shares would be made
more accessible to investors.
Shareholders should note, however, that there can be no
assurance that the intended effect of the Share Split above can be
achieved, nor is there any assurance that such effect can be
sustained in the longer term.
Following the Share Split, each Shareholder will hold 5 New
Ordinary Shares for each Existing Ordinary Share they held
immediately prior to the Share Split. Whilst the Share Split will
increase the number of Ordinary Shares the Company has in issue,
upon the Share Split becoming effective the NAV, share price and
dividend per Share can be expected to become one-fifth of their
respective values immediately preceding the Share Split.
A holding of New Ordinary Shares following the Share Split will
represent the same proportion of the issued Ordinary Share capital
of the Company as the corresponding holding of Existing Ordinary
Shares immediately prior to the Share Split. The Share Split will
not affect, therefore, the overall value of a Shareholder's holding
in the Company. By way of example, taking the NAV (including
current year revenue with debt at par) and price as at 5 January
2022 (being the Latest Practicable Date) of 1670.9p and 1495.0p
respectively per Existing Ordinary Share, if the Share Split had
become effective as at that date, each holder of one Existing
Ordinary Share would receive 5 New Ordinary Shares with an
aggregate net asset value and price of 334.2p and 299.0p
respectively immediately following the Share Split.
Under the Trust Deed, the conversion price of the CULS will be
automatically and pro rata adjusted should Shareholders approve the
Share Split. The current conversion price is 1465.0p of CULS for
one Existing Ordinary Share, and this shall change to a conversion
price of 293.0p of CULS for one New Ordinary Share.
The New Ordinary Shares will rank pari passu with each other and
will carry the same rights and be subject to the same restrictions
as the Existing Ordinary Shares, including the same rights to
participate in dividends paid by the Company. Communication
preferences and mandates and other instructions for the payment of
dividends in paper form or via CREST will, unless and until
revised, continue to apply to the New Ordinary Shares.
The Share Split should not itself give rise to any liability to
UK income tax (or corporation tax on income) for Shareholders who
hold their Existing Ordinary Shares as an investment. For the
purposes of UK capital gains tax and corporation tax on chargeable
gains, the receipt of the New Ordinary Shares from the Share Split
will be a reorganisation of the share capital of the Company.
Accordingly, a Shareholder's holding of New Ordinary Shares will be
treated as the same asset as the Shareholder's holding of Existing
Ordinary Shares and as having been acquired at the same time, and
for the same consideration, as that holding of Existing Ordinary
Shares.
Under Article 11 of the Existing Articles, the Share Split
requires the approval of Shareholders. The Share Split is
conditional on the New Ordinary Shares being admitted to the
Official List of the FCA and to trading on the LSE's main market
for listed securities.
Applications for such admissions will be made and, if they are
accepted, it is proposed that the last day of dealings in the
Existing Ordinary Shares will be 3 February 2022 (with the record
date for the Share Split being 6:00 p.m. on that date) and that
dealings in the New Ordinary Shares will commence on 4 February
2022. If the Proposals are approved at the General Meeting, the
Share Split will become effective on admission of the New Ordinary
Shares to the Official List, which is expected to be at 8:00 a.m.
on 4 February 2022.
The New Ordinary Shares may be held in certificated or
uncertificated form. Following the Share Split becoming effective,
share certificates in respect of the Existing Ordinary Shares will
cease to be valid and will be cancelled. New Share Certificates in
respect of the New Ordinary Shares will be issued to those
Shareholders who hold their Existing Ordinary Shares in
certificated form and are expected to be dispatched not later than
18 February 2022. No temporary documents of title will be issued.
Transfers of New Ordinary Shares between 4 February 2022 and the
dispatch of new certificates will be certified against the
Company's register of members held by the Company's Registrars. It
is expected that the ISIN (GB0000100767) of the Existing Ordinary
Shares will be disabled in CREST at the close of business on 3
February 2022 and the New Ordinary Shares will be credited to CREST
accounts on 4 February 2022.
The New Ordinary Shares will retain the ticker of the Existing
Ordinary Shares (being AAS) but will have a new ISIN and SEDOL as
follows:
New ISIN: GB00BMF19B58
New SEDOL: BMF19B5
General Meeting
The Proposals are subject to Shareholder approval at the General
Meeting which is to be held at Bow Bells House, 1 Bread Street,
London EC4M 9HH on 27 January 2022 at 10:10 a.m. (or, if later,
five minutes following the conclusion of the AGM).
In light of the prominence of the Omicron variant of COVID-19 at
the time of publication of the Circular and the UK Government's
work from home advice, and in the interests of the health and
safety of the Company's Shareholders and others in attendance at
the General Meeting, the Company plans to hold the General Meeting
with the minimum attendance required to form a quorum. Shareholders
are strongly discouraged from attending the General Meeting in
person.
If Shareholders do not vote in favour of the Resolutions, the
Board will reassess the Company's strategic options for the future
of the Company and will consult further with the Company's major
Shareholders.
Online Shareholder Presentation
The Company will hold an interactive Online Shareholder
Presentation at 11:00 a.m. on Wednesday 19 January 2022. At the
presentation, the Chairman and AFML will provide further details on
the proposals and there will be the opportunity for an interactive
question and answer session. Shareholders will still have time
following the Online Shareholder Presentation to submit their proxy
votes in respect of the General Meeting if they have not done so by
that stage. Full details on how to register for the Online
Shareholder Presentation can be found at
https://www.workcast.com/register?cpak=5119566346944925 .
Expected timetable
2022
Online Shareholder Presentation 11:00 a.m. on Wednesday
19 January
Latest time and date for receipt of Forms 10:10 a.m. on Tuesday
of Proxy for the General Meeting from 25 January
Shareholders
AGM 10:00 a.m. on Thursday
27 January
General Meeting 10:10 a.m. on Thursday
27 January
(or, if later, five
minutes following the
conclusion of the AGM)
Results of General Meeting announced Thursday 27 January
Last day for dealings in Existing Ordinary Thursday 3 February
Shares
Record date for the Share Split and disablement 6.00 p.m. on Thursday,
in CREST of the existing ISIN for settlement 3 February
Listing and Admission in the New Ordinary 8.00 am on Friday 4 February
Shares expected to commence
Expected date for crediting CREST accounts On or soon after 8.00
with New Ordinary Shares (where applicable) am on Friday 4 February
Expected date by which certificates in By Friday 18 February
respect of New Ordinary Shares are to
be dispatched to certificated shareholders
Notes:
1. References to times in this document are to London time.
2. The dates set out in the expected timetable may be adjusted
by the Company, in which event details of the new dates will be
notified to Shareholders by an announcement made by the Company
through a Regulatory Information Service.
A copy of the Circular will shortly be available for inspection
on the National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the Company's website,
https://www.asia-focus.co.uk .
For further information
abrdn
William Hemmings +44 (0)20 7463 6223
Stephanie Hocking +44 (0)20 7463 6403
Panmure Gordon
Sapna Shah +44 (0)20 7886 2783
Alex Collins +44 (0)20 7886 2767
Brunswick
Nick Cosgrove +44 (0)207 404 5959
Robin Wrench +44 (0)207 404 5959
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END
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