LIM Advisors has proposed to wind up AMP Capital China Growth Fund (AGF) and enable all unitholders to exit at net asset value (NAV) per unit less costs.
In an open letter to AGF’s unitholders and ASX market participants, the investment management firm, which owns more than five per cent of the outstanding units of AGF, expressed its concerns over AGF’s responsible entity (RE) which, according to LIM, failed to take action to reduce the fund’s problems, in particular an excessive discount relative to NAV.
The firm is seeking to wind up AGF at a unitholder meeting scheduled for 28 July in Sydney.
“We have been long-term investors in AGF, but it has significant problems, including underperformance against its benchmark index, persistent and excessive discount relative to NAV, inadequate measures implemented by the RE, weak corporate governance, and potential conflicts of interests,” the letter said.
Also, LIM Advisors stressed that it did not find the recent changes introduced by the RE sufficient to reduce the unacceptable discount.
“The largely unchanged discount indicates that the RE’s changes have not worked, and we no longer believe that the RE will resolve the discount for the benefit of all unitholders,”
According to LIM, there were only two alternative ways of addressing the AGF discount without winding it up, but only the RE had the power to propose these solutions and it declined to introduce either.
They included converting AGF into an open-ended fund or implementing an immediate unrestricted offer to all unitholders to redeem or buyback some of their units at NAV assets.
LIM also said that it was not satisfied with the recent RE’s proposed 15 per cent redemption offer as it was restricted to “such a small number of units”.
“We are proposing to wind up AGF because the discount has persisted for too long and the RE has failed to take effective action to reduce it. We recommend that all unitholders support the winding up of AGF so that they can realise close to the NAV of their units,”
“If our proposal to wind up AGF is not passed, the recent narrowing of the discount way may well be temporary and the discount could significantly widen again,” the letter said.
AMP Capital held a round of consultations with their unitholders where around 40 options were being discussed, and winding up the fund was one of them.
“We considered more than 40 options – including a wind-up – and concluded with the benefit of broad investor input that the enhancements recommended are in the unitholders’ best interests, and we stand by that decision,” chairman of the RE of the AMP Capital Growth China Fund, Adam Tindall, said.
AMP Capital also said that AGF has always acted and continue to act in the best interest of all unitholders in the fund, not just those of a single investor regardless of its size.
