Asian Smaller Companies shareholders look for cash exit from investment trust
For the second time in two months, the same group of Govett Asian Smaller Companies shareholders has called an EGM to try to effect a cash exit from the investment trust.
Charlemagne Capital, formerly Regent Europe, which has an 18.6% stake in the trust, has put forward resolutions for the removal of the existing directors and their replacement with a new board.
If this resolution is passed at the EGM the new directors will put forward proposals that allow shareholders to exit their investment in the company for cash at a minimum of 95% of NAV per share.
James de Sausmarez, managing director of investment trusts at Govett Investments, said that the board is currently considering the requisition and will be writing to shareholders. An EGM will be convened within the 42-day requisite time period.
At the first EGM in June, shareholders voted 55% to 45% against the resolutions put forward by Charlemagne to put the company into liquidation.
The overall aim of the £28.6m trust, managed by Christian Dangerfield, is to achieve long-term capital growth via investment in Asia, principally in smaller companies.
In its interim results for the six months to 30 June 2001, Govett Asian Smaller Companies' NAV rose by 5.7% compared to a rise of 16.77% in the SG Asian Smaller Companies Index and a rise of 2.38% in the MSCI Asia Pacific ex-Japan Index. As of 29 August 2001, the trust was trading at a discount of 11.3%, with an NAV per share of 102.6p.
Peter Robertson, chairman of the trust, said that the board is seeking to improve the company's attractiveness by establishing a more active share buy-back programme, supporting the manager's marketing efforts and limiting the total expense ratio of the company to no more than 2.2% of the average net assets.
Over one year to 22 August 2001, the trust is ranked fifth in the Far East ex-Japan sector on a share price basis, returning -5.7% compared to the sector average of -10.4%. Over three years, the trust is ranked sixth, with growth of 96.15% compared to the sector average return of 87.9%. De Sausmarez said: 'We do not know on what basis Charlemagne believe the current directors are not doing their job and can see no reason why they want to replace these independent positions with their nominees. With the costs involved, I am very surprised they are doing this, as the costs will ultimately impact performance.'
Alan Ray, analyst at Credit Lyonnais, said that whatever the rights and wrongs of the two sides, it clearly remains the right of a shareholder to requisition an EGM, whatever the motive behind its holding in the shares.
Ray said: 'Our own view is that Govett Asian Smaller Companies is really too small to make arguments in favour of continuing in closed end form compelling. Rolling into a Govett open-ended fund might actually be a useful option for those who wish to continue with their investment and, indeed, at least one existing Govett open-ended fund's largest holding is the trust itself ' which would provide a useful boost to existing unitholders.'
Ray said the problem, as with other recent emerging market votes, is where the investment trust investor goes with the cash if unable to hold an open-ended fund.
Vitality at Work scheme
Reporting to Steve Hill
Appointed on 19 September
Plans to double size in five years
Unnamed company valuation reduced