In a stock exchange filing today (26 October), the investment trust revealed that the outcome of its strategic review, which started in June 2023, ultimately resulted in the decision to return value via distributions to shareholders.
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These will take place in the form of special dividends and a tender offer and are expected to give back between £30m and £35m to shareholders.
The special interim dividend has been set at 1.65 pence per ordinary share in respect of the financial year to 30 September 2023, which will amount to a total of about £5m and will be paid on 1 December for shareholders on the register on 3 November 2023, ADIG said.
The tender offer will be given to shareholders during 2024, subject to the passing of the continuation vote at the trust's annual general meeting in February 2024, and is expected to be at a 15% discount to ADIG's prevailing NAV.
The trust explained the special dividends and tender offer will be paid using its surplus available cash, "after taking into account the company's undrawn commitments to private funds, together with realised gains over the short to medium term". The offer is expected to return between £25m and £30m to shareholders.
As part of the strategic review, ADIG revealed it took into account the possibility of merging with another trust, as it entered in discussions about potential combinations with other investment companies.
However, the board said that, while those discussions were encouraging, it concluded "none of the third parties' proposals put forward would optimise shareholder value at this time" and decided that realising value from the trust's existing investment strategy and portfolio would be in shareholders' best interests over the short and medium term.
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In terms of investment strategy, the board explained abrdn Investments, the investment manager for the trust, will seek exposure to alternative asset classes "primarily through private investments rather than funds".
As a result of the distribution programme and existing private investments maturing, ADIG expected private market investments to make up a higher proportion of its portfolio.
Currently, around 58.5% of the trust's existing portfolio is invested in private markets, with the remainder in listed investments and bonds.
ADIG added: "The investment manager believes that ADIG's listed and private portfolio has a much greater intrinsic value than that currently reflected in the share price. This value can be assessed on an asset's financial performance, growth prospects and risk characteristics."
The investment manager also vowed to provide additional disclosures on the investments within the trust's portfolio to "provide the market with a greater ability to understand this intrinsic value and reduce the impact of short-term price fluctuations influenced by near-term market forces", the trust explained.
According to data from the Association of Investment Companies, ADIG is currently trading at a 30.4% discount.
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Davina Walter, chair of ADIG, said: "Throughout the strategic review process, the board's primary objective has always been the enhancement of shareholder value. Having carefully considered a number of options, including potential combinations with other investment trusts, we have ultimately concluded that the best way to achieve this objective will be to return value to shareholders through an enhanced distribution programme of special dividends and a tender offer.
"Whilst this process is ongoing, our investment managers, ably led by Nalaka De Silva, will continue to manage the portfolio proactively. The board will assess the effectiveness of the enhanced distribution programme on an ongoing basis and explore other potential opportunities to realise income and capital value for return for shareholders as the portfolio matures.
"We will, as always, continue to engage in active dialogue and take feedback from our shareholders throughout this process."