The voting results but not entirely unexpected, I thought things may be close all along. When I say close, obviously I refer to the numbers adjusting for the prospect the courts would later on decide that the AIMS stake does not count towards the outcome.

Excluding AIMS votes the results may read about 26% to 8% favouring a wind up. That may be the best summary of what shareholders who don’t receive fees from keeping the fund going think of the way the fund is being managed.

The numbers themselves probably surprised me a fraction as on the balance of probabilities I thought all along achieving a vote of around above 30% was a reasonable chance. Perhaps the date of the meeting didn’t help. I also wonder when AIMS removed the RE fee recently as a tactic, whether some may have viewed that as ensuring they could vote their large share and make it count without any interference from the courts later on. Obviously if you believed the AIMS vote counts the wind up is always destined to fail. Hopefully the uncertainty of the voting eligibility of the AIMS stake didn’t actually change the other holders voting intentions, and thus influence the outcome. I don’t particularly like the system in this case where there is a grey area regarding 38% of the voting power during the voting taking place. Probably not much can be done about that but something the regulators may want to examine as I see other companies with similar large holdings that may have conflicted interests. In recent times we have had AGF and now APW where there has been differing opinions and I don’t think these will be the last examples. Unit holders may have read in the media that AIMS will vote their stake and that may have contributed to voter apathy and not bothering to vote because that gave the wind up little chance of succeeding. If this grey area can influence voters bothering to vote for the wind up or not, it hardly seems a thoroughly fair process.

It’s just one of a range of issues that Cromwell Phoenix Property Securities Fund have brought to attention since the vote and preparing a submission to ASIC about. This is pleasing as they have a highly respectable performance history. The financial statements reporting in relation to related party investments and fee disclosures, and the lack of consultation with unit holders regarding changes to the investment mandate are other key items.

The implications of all this is the APW share price is still probably better off now compared to before Samuel Terry Asset Management (STAM) accumulated more shares and pursued a wind up.

Now we can see at least there is a 26% core group of shareholders that prefer a wind up versus 16% in 2013. It may not require a huge leap in those numbers to support a wind up down the track for it to actually occur. STAM was able to accumulate over 5% more shares of the company in the space of a few months recently, it couldn’t entirely be ruled out another fund manager may wish to accumulate in a similar way in the future.

Publicity surrounding this may attract other investors whether it be simply as long term buyers to go along with management’s strategy, or new buyers with similar thoughts as this 26% supporting a wind up. The stock hasn’t seemed to have attracted much publicity of late before this event.

It has at least probably reduced the complacency of management.

AIMS could have avoided this wind-up meeting in the first place by being more aggressive with the on market buy back. They in theory could have bought the approximate extra 5 or 6% or so STAM accumulated since August and then it probably wouldn’t have even gone to vote. This factor may tempt them to be more proactive with the buyback in the future which may assist the share price. That was one implication that occurred post the 2013 wind up attempt when for a year or so they actually did buy back a significant number of shares. Then again, they could once again choose to refuse to take the share buyback more seriously. Yet if STAM could accumulate over 5pc in the few months from August who’s to say another fund manager will not do the same in the future?

Another point to bear in mind is at least this action has so far forced AIMS to waive their RE fees. I would like to think they will disclose the fee arrangements for the other AIMS funds they invest in but I suspect that is wishful thinking. Yet maybe with a few more votes supporting AIMS than I may have expected, some institutions have more comfort with the fee arrangements than they did previously. I don’t have any confidence that the fee arrangements are fair, but maybe AIMS managed to convince a few larger investors regarding this aspect as they campaigned to defeat the wind up. They certainly didn’t convince Cromwell Phoenix, and it will be interesting to see if their ASIC submission forces AIMS to disclose the fees they earn from their related party investments. If they are found to be excessive that may be another item to cast doubt about whether this voting process was fair, questioning whether unit holders had enough information to make a decision.

Another potential consequence surrounding this campaign could be regarding the possibility of an off-market buyback of around 20% of the company at a price well north of where the units typically trade but still at a sizeable discount to NTA. On market buybacks in recent times have seen extremely small amounts being bought back. Might be tricky to come up with a price that satisfies those who voted different ways this time. Yet the concept of the company allowing some holders a degree of an exit plan, and moving forward with a more unified shareholder base I don’t think is too crazy. I touched on this back in August, and whilst I am not that convinced it is the way forward I wouldn’t entirely dismiss such a move. I don’t think unit holders will entertain such a thought though until all avenues have been explored during this expected ASIC submission, and rightly so.

In short when I originally wrote the piece about the potential of a wind up in August I clearly stated there were doubts and I examined the stock even if there were no real prospects of a wind up.

Not the result that those voting for the wind up wanted in the new year, but holders still should probably be grateful for the campaign from STAM and not consider that their efforts have been in vain. Likewise with regards to Cromwell Phoenix and their efforts going forward. I don’t think this campaign has necessarily finished yet.

By the way below is the link to the first time I posted about APW in some detail.


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