The boards of Fidelity China Special Situations and Abrdn China Investment Company are planning to merge their trusts.
They have already signed ‘heads of terms’, according to a stock exchange announcement.
Abrdn China Investment Company (ACIC) is set to be wound up and its assets folded into Fidelity China Special Situations (FCSS), which will continue under the same name and portfolio manager, Dale Nicholls. The investment objective and policy will also remain unchanged.
ACIC shareholders will be issued new shares in FCSS in exchange for their shares, based on their respective FAV ratios.
Fidelity will make a “material contribution” of £500,000 towards the costs, plus eight months of management fees in respect of the assets to be transferred from ACIC to FCSS.
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The enlarged FCSS is expected to have net assets of £1.2bn, as at valuations on 28 November 2023.
The board said it will be the “largest and most liquid” investment trust focused on China and listed on the FTSE 250.
Benefits cited include diversifying the shareholder register, enhanced profile, marketability, and improved the secondary market liquidity.
It is anticipated that cost efficiencies will allow for a lower OCF and a drop in the second tier of management fees above £1.5bn of net assets to 0.65% from 0.7%.
FCSS chair Mike Balfour said: “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.
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“It also helps 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.
Helen Green, chair of ACIC added: “After a very thorough review process, including consultation with the company’s major shareholders, the board has concluded that the best practicable option to address the company’s over-concentrated register and to provide significantly improved liquidity to our shareholders is to merge with FCSS, which is both sizeable and the clear leader in the China investment company sector.”
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