Disclaimer

The website is directed only at Professional Clients in the UK. The website is issued by Asset Value Investors Limited (“AVI”), in respect of British Empire Trust plc (“British Empire”). AVI is authorised and regulated by the UK Financial Conduct Authority (“FCA”). British Empire is a public company listed and traded on the London Stock Exchange.

You agree that we may contact you about our products and services that we believe you might be interested in.

The price of the Shares will be determined by supply and demand in the market as well as NAV per Share. The market price of the Shares is therefore likely to fluctuate and may represent either a premium or discount to NAV per Share.

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Vietnam Phoenix Fund

Nature of business:
Investment Company
Valuation:
Phoenix Realisation £33.2m
Phoenix Private Equity £14.6m
Total £47.8m
% of total assets less current liabilities:
Phoenix Realisation 3.7%
Phoenix Private Equity 1.6%
Total 5.3%
Discount:
Phoenix Realisation 0%
Phoenix Private Equity 30%
Total Weighted Average 9%
In GBP:
+94%
Total return
+30%
IRR
*All figures as at 3 January 2017

Our position in Vietnam Phoenix Fund is now in the final innings of what has been a very successful investment (in GBP +94% total return, +30% IRR), yet we still see scope for further upside. However, this successful return was not achieved by sitting on the sidelines….

We first invested in Vietnam Phoenix Fund in June 2013. Despite a successful track record, the company’s shares languished on a near-40% discount due to an egregious fee structure, poor corporate governance, a conflicted board and the absence of any discount control measures.


AVI accumulated an 18% stake in the company and became the catalyst for several changes.

  • We removed the three management representatives from the board
  • Had two of our nominees appointed as directors.
  • The company cancelled the 10% of its shares held in treasury and began a new buyback programme.
  • We extracted a public commitment from the board that the manager’s contract would not be extended on the same terms and to hold restructuring proposals to open-end the fund.

On the 30 th September 2016, these restructuring proposals were passed at the company’s AGM with 92% of votes in favour. On the first day of 2017, all shareholders received a closed-end ‘private equity run-off’ share class (c.1/3rd of NAV), while the liquid assets (c.2/3rds of NAV) were split between an open-ended realisation class and an open-ended continuation class depending on shareholder preferences.The assets in the open-ended realisation class will be liquidated over a 2-3 month period and cash returned at NAV. AVI opted for the realisation class and has thus benefitted from the complete elimination of the discount on c.2/3rds of our holding.

The fee structure on the private equity vehicle ensures a strong alignment of interests between the manager and shareholders, and is well-designed to incentivise the manager not only to achieve exits in a speedy fashion, but also to increase NAV. The manager’s acceptance of these terms is, in our view, a substantial vote of confidence in the unlisted assets and their carrying values, which are also supported by a record of achieving significant uplifts upon exits.The private equity shares are trading on a 30% discount, yet this will also be eliminated over time as assets are sold and the proceeds returned to shareholders.

 

NAV growth has been strong over the investment holding period as the cheap Vietnamese market performed well in the wake of continued economic growth and the introduction of measures to further open up the country’s capital markets.

 

British Empire Trust focuses on a diverse universe of investment opportunities often ignored by mainstream investors: family controlled holding companies, closed end funds and other asset backed companies. This ‘investing in undervalued assets’ is what makes British Empire Trust an interesting addition to your portfolio.

 

This ‘investing in undervalued assets’ is what makes British Empire Trust an interesting addition to your portfolio.

Vietnam Phoenix Fund Limited


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British Empire Trust

Key facts

  • Total assets:
    £982 million*
  • Launch date:
    1 July 1889
  • Average annual return:
    11.8%**
  • Annual charge:
    0.87%***

* As at 31 October 2018
** Source: Morningstar, performance period 30 June 1985 to 31 October 2018, TR net of fees, GBP
*** As at 30 September 2017, includes: management fee 0.70%, marketing and administration costs

British Empire Securities and General Trust p.l.c is referred to as ‘British Empire’ throughout the website. British Empire’s investment managers, Asset Value Investors are referred to as ‘AVI’

British Empire currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers (“IFAs”) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (“FCA”) rules in relation to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they are shares in an authorised investment trust. © British Empire Trust plc. 2014 Registered in England No: 00028203. An investment company under Section 833 of the Companies Act 2006. Registered Office: Beaufort House, 51 New North Road, Exeter, EX4 4EP. Managed by Asset Value Investors Ltd. which is authorised and regulated by the Financial Conduct Authority. Past performance should not be seen as an indication of future performance. The price of investments and the income may fall as well as rise and investors may not get back the full amount invested. British Empire uses gearing techniques (leverage) which will exaggerate market movements both down and up which could mean sudden and large falls in market value. Please refer to the Key Features Document for further details of the risks affecting your investment. Performance figures are cumulative and based on Price total return and do not include Plan charges. For more information, please call 03458 500181. Tax treatment depends on the individual circumstances and may be subject to change in the future. Asset Value Investors Ltd do not offer Innovative Finance ISAs.