Gavin Lumsden, Citywire Investment Trust Insider, 21 July 2023:
The tide of corporate actions sweeping the investment trust world has reached the Asia Pacific sector with Abrdn New Dawn (ABD) agreeing to merge with stablemate Asia Dragon (DGN).
If approved by shareholders, the scheme of reconstruction of New Dawn and transfer of assets to Asia Dragon will create the second-largest listed Asia Pacific fund with net assets of more than £700m that should elevate it into the FTSE 250 index.
It combines the sector’s weakest performers with both their shares trading on wide 16% discounts to net asset value (NAV) after trailing at the bottom of their eight-strong peer group in recent years.
Shares in Abrdn New Dawn, a £336m portfolio launched in 1989, jumped 8% or 20p to 267p, halving its discount, while Asia Dragon eased 0.25p to 362.75p.
The boards of both trusts said the combination would benefit shareholders with greater economies of scale lowering charges and improving liquidity in the enlarged Asia Dragon.
Abrdn has agreed to cut its annual management fee on Asia Dragon to 0.75% from 0.85% of net assets up to £350m, maintaining the fee at 0.5% on assets above that.
New Dawn shareholders will be given the opportunity to withdraw 25% of their cash at 2% below the ‘formula asset value’ (FAV) calculated before the merger completes. This is NAV minus transaction costs…
James Carthew, head of research at QuotedData, said: ‘This has been a long time coming – in fact I have been arguing that the two funds should be merged since 2003 when Aberdeen took over Edinburgh Fund Managers, bringing Edinburgh Dragon, now Asia Dragon, into the Aberdeen stable. The combination is good news therefore but there is still work to do,’ he said in reference to Asia Dragon’s poor performance.
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