Aberdeen Fund Managers Limited (“Aberdeen”) has concluded that in the interests of treating all customers fairly the Aberdeen UK Property Fund and the Aberdeen UK Property Feeder Unit Trust (together “the Funds”) will make a dilution adjustment with the result that today’s dealing price is reduced by 17%. Aberdeen has been in regular contact with the Funds’ independent valuation advisor and has been gathering evidence on current market pricing and on the impact of short term trading in property where required in order to provide liquidity.
This action has been taken due to rapidly changing commercial property market conditions and to continue to provide liquidity in the Fund at a price reflecting those conditions.
Aberdeen is mindful of the fact that a 17% impact on fund pricing may lead shareholders who have placed redemption orders to re-consider their decision. Accordingly, it has been decided to temporarily suspend trading in the Funds from 12 noon on 6 July 2016 and to lift the suspension tomorrow 7 July 2016 at 12 noon in order that shareholders who have placed trades have the option to withdraw that instruction if they wish.
Orders for subscriptions and redemptions in the Fund placed after 12 noon on 5 July 2016 will be processed at 12 noon on 7 July at the diluted price. Orders placed between 12 noon on 6 July 2016 and the next valuation point will not be accepted.
Shareholders wishing to redeem will do so at a price which is subject to the above dilution adjustment in order to reflect the current market environment and the fact that short term trading in the property market has relatively penal consequences. Those investors who submitted redemption requests before 12 noon today will have the opportunity to cancel or proceed with the trade. For the avoidance of doubt, if investors do not specifically instruct the cancellation of their redemption request, such redemptions will be processed at the diluted dealing price on 7 July 2016.
It is important to note that the dilution adjustment has been imposed solely to reflect the need to dispose of properties quickly in order to provide liquidity. Doing so allows us to protect value for longer term investors and, although today’s price incorporates a further fair value adjustment of 2% to longer term values, the diluted price is quite distinct from that and not a reflection of what we believe is achievable in a stable market where there is not undue pressure to sell assets. Accordingly, if future trading in the Fund reverts to lower levels, we would likely not apply the dilution adjustment, and the price would revert to a level reflective of longer term property values.
The suspension decision was taken by Aberdeen in agreement with the Depositary.
In line with our investment approach, the portfolio was positioned defensively prior to the referendum with one of the highest levels of liquidity of all similar funds and having sold all its quoted property companies investments in the week prior to the referendum and holding this as cash. The direct property portfolio invests in 79 UK properties across retail, industrial, office and other sectors. It has been positioned defensively for some time, with a view to reducing risk and with a focus on durable income streams and the potential for long-term income growth.
We recognise that the temporary suspension and dilution adjustment will be inconvenient for some shareholders, but Aberdeen remains absolutely focused on attempting to provide liquidity to shareholders who wish to access it at an appropriate price, while protecting value for remaining shareholders: our aim is to ensure all shareholders are treated fairly. We will keep all shareholders updated on any developments including the lifting of the suspension and you can find any additional information on our website at www.aberdeen-asset.co.uk