AMP Capital opts for upfront sell-down of AGF

AMP Capital, the responsible entity (RE) of the AMP Capital Growth China Fund (AGF), has announced it has selected a strategy to wind-up the fund, with plans to return the proceeds to investors "as soon as practicable" and a first tranche of around $40 million expected to be transferred no later than 30 September.

The announcement followed an extraordinary shareholders meeting, held in late July, during which the unitholders voted in favour of the resolution, submitted by LIM Advisors, requesting to wind-up the fund.

In a letter to its unitholders, AMP Capital said that under Chinese law the company was permitted to repatriate around $305 million of the fund's principal over a three-month period while the repatriation of the remaining profits required Chinese tax and regulatory approvals which would take longer and was uncertain.

The company said that profits required regulatory clearances before they could be repatriated, which might differ depending on when the profits were made. Additionally, the relevant Chinese authorities did not currently have an established procedure for the remittance of profits realised before 17 November 2009 and after 17 November 2014.

AMP Capital has selected one of two options: an "upfront sell-down option", as its strategy to wind-up the fund. This meant the company would sell all of the underlying portfolio of China A-shares, other than shares suspended or in trading halt, which equalled to around 95 per cent of the net portfolio's current value.

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Following this, the net cash proceeds of sale would be held in a bank account in China in US dollars and the fund would continue to be exposed to USD/AUD exchange rate fluctuation, while AMP Capital did not intend to hedge the exposure and recommended investors to manage their risk via obtaining their own financial advice.

AMP Capital Funds Management chairman, Adam Tindall, reiterated that it would still take nine to 18 months to return "the last dollar" to unitholders, a timeframe that had been previously verified by KPMG.

Additionally, AMP Capital would also reduce base management fees from 1.35 per cent to 0.4 per cent from 1 September.

The company has appointed UBS as a third party financial adviser to review the wind-up strategy for the fund.

"AMP Capital is committed to returning funds to unitholders as quickly as possible. We have decided that the best approach is an ‘upfront sell-down option' where all of the underlying portfolio of China A-shares is sold (other than shares that are suspended or in trading halt), and then the net proceeds are distributed in tranches as soon as tax and regulatory approvals are received by the Chinese authorities," Tindall said.

"We believe that this strategy is fair and reasonable to all unitholders and provides for an efficient and economic pathway to completion of the wind-up in the shortest possible time frame and provides more certainty to unitholders."

Earlier in July, LIM Advisors, which owned more than five per cent of outstanding units of AGF, submitted a proposal to wind up the fund to enable all unitholders to exit at net asset value (NAV) per unit less costs, as, according to LIM, the AGF's RE had "failed to take action to reduce the fund's problems, in particular, an excessive discount to net asset value".