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Aberdeen Stand. Asia (AAS)

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Tuesday 11 January, 2022

Aberdeen Stand. Asia

Publication of Shareholder Circular

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 £250 million of the Company's market capitalisation, 0.6% per annum for the next £500 million, and 0.5% per annum for market capitalisation of £750 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 £1,000 invested in the Company in 1995 is now worth approximately £22,900 (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 £225,000 (as approved at the Company's annual general meeting in December 2013) to £275,000 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 .


Expected timetable


Online Shareholder Presentation

11:00 a.m. on Wednesday 19 January

Latest time and date for receipt of Forms of Proxy for the General Meeting from Shareholders

10:10 a.m. on Tuesday 25 January


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 Shares

Thursday 3 February

Record date for the Share Split and disablement in CREST of the existing ISIN for settlement

6.00 p.m. on Thursday, 3 February

Listing and Admission in the New Ordinary Shares expected to commence

8.00 am on Friday 4 February

Expected date for crediting CREST accounts with New Ordinary Shares (where applicable)

On or soon after 8.00 am on Friday 4 February

Expected date by which certificates in respect of New Ordinary Shares are to be dispatched to certificated shareholders

By Friday 18 February



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   and on the Company's website,   .

For further information


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



Nick Cosgrove  +44 (0)207 404 5959

Robin Wrench  +44 (0)207 404 5959


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