TIDMAJIT
RNS Number : 1490L
abrdn Japan Investment Trust plc
01 September 2023
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announcement, this information is considered to be in the public
domain.
1 September 2023
ABRDN JAPAN INVESTMENT TRUST PLC
LEI: 5493007LN438OBLNLM64
Publication of a circular in relation to the recommended
proposals for the members' voluntary winding up of the Company and
combination with Nippon Active Value Fund plc
The Board of abrdn Japan Investment Trust PLC announces that it
has today published a shareholder circular (the "Circular") setting
out proposals for the reconstruction and voluntary winding-up of
the Company.
Introduction
On 18 May 2023, the Board announced that it had agreed heads of
terms with Nippon Active Value Fund plc ("NAVF") in respect of a
proposed merger of the Company with NAVF to be effected by way of a
scheme of reconstruction and members' voluntary winding up of the
Company under Section 110 of the Insolvency Act 1986 (the "Scheme"
or "AJIT Scheme") and the issue of New NAVF Shares to Shareholders
who elect, or are deemed to have elected, to roll over their
investments into NAVF (the "Proposals"). The background and
rationale to the Proposals is set out below.
In addition to the AJIT Scheme, the NAVF Board announced on 11
August 2023 details of a proposed combination of NAVF and Atlantis
Japan Growth Fund Limited ("AJG" and "the AJG Scheme"), which is in
addition to the Proposals of the Company and NAVF. The principal
terms of the NAVF and AJG combination are identical to those agreed
between the Company and NAVF. Neither combination is conditional
upon the other completing.
The Board welcomes news of the AJG Scheme as a second
endorsement of the investment strategy of Rising Sun Management Ltd
("Rising Sun"), investment adviser to NAVF. Furthermore, the Board
believes it represents the potential for a further scaling up of
the combined company with the consequent benefits of greater
liquidity for Shareholders as well as the spreading of the fixed
costs of NAVF over an even larger base.
The Proposals, which are conditional upon, amongst other things,
the approval of Shareholders at the General Meetings , comprise a
members' voluntary liquidation and a scheme of reconstruction of
the Company under which Shareholders will be entitled to elect to
receive in respect of some or all of their Shares:
(a) New NAVF Shares (the "Rollover Option"); and/or
(b) cash (subject to an overall limit of 25 per cent. of the
Ordinary Shares in issue) (the "Cash Option").
The default option under the Scheme is for eligible Shareholders
to receive New NAVF Shares meaning that Shareholders who, in
respect of all or part of their holding of Shares, do not make a
valid Election or who do not make an Election at all under the
Scheme will be deemed to have elected for New NAVF Shares in
respect of such holding.
In order to effect the Scheme and the change in respect of the
Company's continuation vote as explained below, Shareholder
approval is required at the First General Meeting. If the Scheme is
approved at the First General Meeting, Shareholder approval is
required at the Second General Meeting to wind up the Company
voluntarily and to appoint the Liquidators and grant authority to
them to implement the Scheme. Further details of the Scheme
Resolutions to be proposed at the General Meetings, the Resolutions
to be proposed at the Annual General Meeting and the expected
timetable associated with the Proposals are provided below.
The Board considers the Proposals to be in the best interests of
Shareholders as a whole and recommends that Shareholders vote in
favour of the Resolutions required to implement the Proposals at
the General Meetings.
Background to and rationale for the Proposals
The Proposals follow an extensive review by the Board of various
investment strategies in the Japan fund sector. The Board believes
this review demonstrated that the case for taking advantage of
recent corporate governance changes in Japan remains compelling,
particularly at the small cap end of the market, where NAVF has
performed strongly. The Proposals provide Shareholders with access
to a focused and differentiated investment opportunity with a
strong track record, a partial cash exit option and a larger
continuing investment trust with the prospect of improved
liquidity. The combination, if completed, will be implemented
through a scheme of reconstruction under section 110 of the
Insolvency Act 1986 resulting in the reconstruction and voluntary
liquidation of the Company.
Subject to the adoption of the New NAVF Investment Policy,
NAVF's investment objective will be to provide its shareholders
with attractive long-term capital growth primarily through the
active management of a focused portfolio of quoted companies that
have the majority of their operations in, or revenue derived from,
Japan, or a majority of whose consolidated net assets are held in
Japan, or that are included in the TOPIX, and that have been
identified by NAVF's investment adviser, Rising Sun as being
undervalued.
The Board and its advisers concluded that the Scheme will offer
Shareholders the best way to continue their investment in a
closed-ended investment vehicle with exposure to the attractive
fundamental drivers operating in the Japanese market, but in a
vehicle which has delivered top ranking performance and which has a
much better rating than the Company whose Ordinary Shares have
traded at a persistently wide discount to net asset value
historically. The Proposals also allow Shareholders the opportunity
for a partial cash exit at a 2 per cent. discount to FAV per AJIT
Share.
Under the Articles of the Company there is a requirement to put
a continuation vote to Shareholders at or before the next upcoming
AGM. This is due to a technical provision of the Articles which
means that if the Company's Ordinary Shares trade at an average
discount wider than 10 per cent. over the discount monitoring
period to 31 March 2023, a continuation vote is triggered (the
"Continuation Vote"). As noted in the announcement of 18 May, it is
proposed to subsume the continuation vote into the business of the
General Meetings that are being held for the purpose of the
Proposals. It is proposed that the Continuation Vote provisions are
removed in the amended articles of association to be tabled as part
of the Proposals. If the Scheme does not go ahead, these amendments
will not be effective and the requirement for the Continuation Vote
will remain in the Company's Articles and be voted upon at the AGM
which is due to take place immediately after the First General
Meeting. The next potential trigger point after this AGM will be in
respect of FY23-24. As noted below, if the Scheme does not go
ahead, the Board will in any case reassess the options available to
the Company.
Benefits of the Proposals
The Directors believe that the Proposals will have the following
benefits for Shareholders:
(a) NAVF active management - NAVF's active management approach,
which differentiates it from many of its peers, focuses on
unlocking value in cash-rich small and mid-cap Japanese companies,
an approach which is well aligned with recent developments in
Japanese corporate governance and with its structure as a listed UK
investment trust. The current NAVF portfolio offers investors a
high-conviction uncorrelated opportunity.
(b) Premium listing - In connection with (but prior to
completion of) the Scheme, NAVF is proposing to migrate from the
Specialist Fund Segment of the Main Market of the London Stock
Exchange to a premium listing on the Main Market of the London
Stock Exchange, which is expected to improve the access of retail
investors to the enlarged fund and therefore its share rating and
liquidity. The Scheme is conditional on the Migration, but as noted
above not on the completion of the AJG Scheme.
(c) Cost contribution - Rising Sun, the investment manager of
NAVF, has demonstrated its conviction in the combined fund by
offering to underwrite the Company's current estimated costs of the
proposed merger up to GBP800,000 including advisory and termination
fees and associated VAT . The current estimate of costs associated
with the Proposals is approximately GBP725,000 inclusive of VAT and
therefore it is likely that Shareholders will not bear any of the
costs of the Proposals.
(d) Injection of capital - The Proposals will result in an
inflow of capital into NAVF which can be deployed at an
advantageous time in the cycle, when recent government reforms
support, more than ever in the Board's view, NAVF's strategy of
finding undervalued Japanese listed companies and actively engaging
with them to deliver improved returns for shareholders.
(e) Increase in scale, spread of costs - The combination with
NAVF is expected to improve the enlarged fund's liquidity for all
shareholders as well as spreading the fixed costs of NAVF, as the
continuing entity, over a larger pool of assets. As at the Latest
Practicable Date, the net asset value of the Company was GBP83.4m
and the net asset value of NAVF was GBP168.0m.
(f) Opportunity for substantial cash exit - The Proposals
include a cash exit opportunity of up to 25 per cent. of the
Company's shares in issue, providing Shareholders with the ability
to realise part (or potentially all) of their investment at a 2 per
cent. discount to FAV per AJIT Share.
(g) Uplift in market value - The Proposals also have the
potential to deliver an uplift in the market value of a
Shareholder's investment due to the narrower discount to net asset
value at which the NAVF Shares might reasonably be expected to
trade over the longer term.
NAVF
Shareholders who elect (or are deemed to elect) for the Rollover
Option will be electing to receive New NAVF Shares.
NAVF is a closed-ended investment company incorporated in
England and Wales on 22 October 2019 as a public limited company,
registered number 12275668. It is an investment company as defined
by section 833 of the Companies Act and operates as an investment
trust within the meaning of Chapter 4 of Part 24 of the Corporation
Tax Act 2010.
The NAVF Shares were first admitted to trading on the Specialist
Fund Segment on 21 February 2020. It is expected that the NAVF
Shares will be admitted to the Official List and to trading on the
premium segment of the Main Market on 21 September 2023. The Scheme
is conditional upon the Migration.
NAVF has appointed FundRock Management Company (Guernsey)
Limited as its alternative investment fund manager ("AIFM") to
provide overall portfolio and risk management services to NAVF. The
AIFM and NAVF have appointed Rising Sun as investment adviser to
provide investment advisory services to the AIFM and NAVF in
respect of NAVF's portfolio of investments.
NAVF seeks to achieve its investment objective by taking
advantage of the corporate governance reforms in Japan and
utilising the increased focus on good corporate governance to
engage with management teams, unlock value and encourage investee
companies to improve returns to their shareholders.
It is expected that Claire Boyle, the Chair of the Company's
audit committee, will join the NAVF Board on completion of the
Scheme.
Conditions of the Proposals
Implementation of the Proposals is subject to a number of
conditions, including:
(h) Completion of the Migration (which is subject to NAVF Shareholder approval);
(i) the recommendation of the boards of the Company and NAVF to
proceed with the Proposals which may be withdrawn at any time
(including, without limit, for material adverse change
reasons);
(j) the passing of the Resolutions to be proposed at the First
General Meeting and the Resolution to be proposed at the Second
General Meeting, or any adjournment of those meetings and upon any
conditions of such Resolutions being fulfilled;
(k) the NAVF Share Allotment Authorities relating, inter alia,
to the Scheme being approved by NAVF Shareholders and not having
been revoked or superseded; and
(l) approval by the FCA of the publication of the NAVF Prospectus.
Any condition may, subject to compliance with legal
requirements, be waived with the mutual agreement of each of the
Company, NAVF and Rising Sun at any time up to completion of the
Scheme.
If any condition is not satisfied (or waived), the Proposals
will not become effective, the Company will not proceed with the
winding-up and instead will continue in existence. Shareholders of
the Company will bear any abort costs incurred if the Proposals do
not become effective. In these circumstances, the Directors will
reassess the options available to the Company at that time.
Costs of implementing the Scheme
The costs of the Scheme payable by the Company are expected to
be approximately GBP725,000 inclusive of VAT which, for the
purposes of this calculation, is assumed to be irrecoverable where
applicable. Rising Sun has agreed to pay the Company's costs of the
Scheme up to GBP800,000, and therefore it is likely that
Shareholders will not bear any of the costs of the Scheme. To the
extent that the Company's costs of the Scheme are above GBP800,000,
the Company will bear these costs.
The estimate of the Company's costs excludes the Liquidators'
retention to cover unknown liabilities (estimated at GBP100,000),
and does not take account of any dealing costs which will be
incurred by the Company in disposing of assets in order to repay
the existing debt facilities, fund the Cash Option, and fund the
Liquidation Pool.
Except for these purposes, it is expected that AJIT will not
liquidate its portfolio but will remain invested in accordance with
its published investment policy, and will largely transfer its
portfolio to NAVF in specie rather than as cash or cash
equivalents. This structure has been agreed to avoid unnecessary
dealing costs in connection with the disposal of the AJIT portfolio
and to avoid unnecessary periods when Shareholders' funds are not
invested in the Japanese market.
Although there are not expected to be any costs incurred in
connection with the realignment of the portfolio in respect of the
Rollover Pool, there may be dealing costs incurred by NAVF
following the completion of the Scheme to the extent that NAVF
disposes of the existing AJIT portfolio and redeploys into activist
opportunities.
In the event that the Scheme does not proceed then each party
will bear their own costs in connection with the Proposals.
The Liquidators' retention is estimated at GBP100,000 and will
be retained by the Liquidators to meet any unknown or unascertained
liabilities of the Company. To the extent that some or all of the
Liquidators' retention remains when the Liquidators decide to close
the liquidation, this will be returned to Shareholders that were on
the Register as at the Record Date.
Entitlements under the Scheme
Under the Scheme, each Shareholder on the Register on the Record
Date may elect to receive:
(m) such number of New NAVF Shares as have a value equal to the
proportion of the Rollover Pool attributable to the number of
Ordinary Shares so Elected, for the Rollover Option; or
(n) subject to an overall 25 per cent. cap on such Elections (in
aggregate), an amount of cash equal to the Cash NAV per Share
multiplied by the number of Ordinary Shares so Elected, being the
Cash Option.
Shareholders can make different Elections in respect of
different parts of their holdings.
The default option under the Scheme is to receive New NAVF
Shares, meaning that eligible Shareholders who, in respect of all
or part of their holding of Ordinary Shares, do not make a valid
Election, or who do not make an Election, will be deemed to have
elected for New NAVF Shares in respect of such holding.
After allocating cash and other assets to the Liquidation Pool
to meet all known and unknown liabilities of the Company and other
contingencies, including the retention and the entitlements of any
Dissenting Shareholders, there shall be appropriated to the Cash
Pool and the Rollover Pool the remaining assets of the Company in
the manner described in the Circular. Such appropriation includes
the application of a discount of 2 per cent. to FAV per AJIT Share
in relation to those Shares in respect of which Shareholders have
elected to receive cash. The value arising from the application of
the Cash Option Discount shall be allocated to the Rollover Pool
for the benefit of Shareholders electing, or deemed to have elected
for, the Rollover Option. In the week commencing 16 October 2023,
it is expected that the Liquidators shall distribute to
Shareholders who have elected for the Cash Option their Cash
Entitlements, being rounded down to the nearest penny.
For illustrative purposes only , had the Calculation Date been
5.00 p.m. on the Latest Practicable Date and assuming that no
Shareholders exercise their right to dissent from participation in
the Scheme, after deduction of the Dividend and assuming that the
maximum amount is elected for the Cash Option, the AJIT FAV per
Share would have been 673.083880 pence and the NAVF FAV per Share
would have been 148.153178 pence which, for the Rollover Option,
would have produced a conversion ratio of 4.543162 and, in
aggregate, 42,360,524 New NAVF Shares would have been issued to
Shareholders who elected for the Rollover Option under the
Scheme.
The above figures are for illustrative purposes only and do not
represent forecasts. The AJIT FAV per Share and NAVF FAV per Share
and Shareholders' entitlements under the Proposals may materially
change up to the Effective Date as a result of, inter alia, changes
in the value of investments.
Scaling back of Elections for the Cash Option
The maximum number of Ordinary Shares (in aggregate) that can be
elected for the Cash Option is 25 per cent. of the total number of
Ordinary Shares in issue (excluding Ordinary Shares held in
treasury). Shareholders are entitled to elect for the Cash Option
in respect of more than 25 per cent. of their individual holdings
of Ordinary Shares (the " Basic Entitlement ", such excess amount
being an " Excess Application "). However, if aggregate Elections
are made for the Cash Option which exceed 25 per cent. of the
issued Ordinary Shares (excluding Ordinary Shares held in
treasury), Shareholders who have made an Election for the Cash
Option in excess of their Basic Entitlement shall have their Excess
Applications scaled back in a manner which is, as near as
practicable, pro rata to the number of Shares elected under such
Excess Applications, resulting in such Shareholders (other than
Excluded Shareholders) receiving New NAVF Shares instead of cash in
respect of part of their holding of Ordinary Shares.
dividend
As an investment trust, the Company is not permitted to retain
more than 15 per cent. of its income in any accounting period. If
the Scheme is successful, that condition requires to be met in the
shortened accounting period commencing on 1 April 2023 and ending
on the Effective Date. In order to meet this requirement, the
Company is separately announcing today an interim dividend of 3
pence per Ordinary Share, to be paid to Shareholders on the
Register as at 15 September 2023. The expected payment date for the
Dividend is 29 September 2023.
Apart from the Dividend, it is not anticipated that there will
be any dividends paid by the Company in relation to the current
financial period or for the period up to the liquidation of the
Company.
GENERAL meetings
The implementation of the Proposals will require two general
meetings of the Company. The notices convening the First General
Meeting (to be held at 4.00 p.m. on 28 September 2023) and the
Second General Meeting (to be held at 3.00 p.m. on 10 October 2023)
are set out in the Circular.
annual general meeting
Under the Companies Act, the Company is required to hold its
annual general meeting within six months of its financial year end.
It is proposed that this technically required AGM will follow the
First General Meeting. This will include standard AGM resolutions
to (amongst other things) reappoint the Directors, approve the
Directors' Remuneration Policy, re-elect the Directors and renew
its share allotment and share buyback authorities.
The Company's AGM will be held at 4.30 p.m. on 28 September 2023
at Dentons UK & Middle East LLP, 1 Fleet Place, London EC4M
7WS, which is immediately following the First General Meeting.
If the Scheme Resolutions at the First General Meeting are not
passed, as noted above the Continuation Vote will be held at the
AGM.
The Board recommend voting in favour of all the resolutions to
be put forward at the AGM and believe they are in the best
interests of the Company. If the Scheme Resolutions do not pass,
the Board support the continuation of the Company but as noted in
this document the Board will consider carefully the future options
for the Company.
Recommendation and voting intentions
The Board considers the Proposals and the Resolutions to be
proposed at the General Meetings to be in the best interests of
Shareholders as a whole.
Accordingly, the Board unanimously recommends Shareholders to
vote in favour of the Resolutions, as the Directors intend to do in
respect of their own beneficial holdings, which total 5,313
Ordinary Shares (representing 0.043 per cent. of the Company's
total voting rights) as at the Latest Practicable Date. The
Directors who hold Ordinary Shares (being Karen Brade and David
Warren) intend to roll over their entire beneficial holdings of
Shares into New NAVF Shares.
EXPECTED TIMETABLE
2023
Ex dividend date for the Dividend 14 September
Record date for the Dividend 15 September
Latest time and date for receipt of Forms 4.00 p.m. on 21 September
of Direction in respect of the First General
Meeting
Lates time and date for receipt of Forms 4.30 p.m. on 21 September
of Direction in respect of the Annual
General Meeting
Latest time and date for receipt of Forms 4.00 p.m. on 26 September
of Proxy and CREST voting instructions
in respect of the First General Meeting
Latest time and date for receipt of Forms 4.30 p.m. on 26 September
of Proxy and CREST voting instructions
in respect of the Annual General Meeting
First General Meeting 4.00 p.m. on 28 September
Annual General Meeting 4.30 p.m. on 28 September
Dividend paid to Shareholders 29 September
Latest time and date for receipt of Forms 1.00 p.m. on 2 October
of Election for Shareholders who hold
Ordinary Shares in a Share Plan
Latest time and date for receipt of Forms 3.00 p.m. on 3 October
of Direction in respect of the Second
General Meeting
Latest time and date for receipt of Forms 1.00 p.m. on 5 October
of Election and TTE Instructions
Calculation Date 5.00 p.m. on 5 October
Record date for entitlements under the 6.00 p.m. on 5 October
Scheme
Ordinary Shares disabled in CREST (for close of business on
settlement) 5 October
Latest time and date for receipt of Forms 3.00 p.m. on 6 October
of Proxy in respect of the Second General
Meeting
Reclassification of the Ordinary Shares 8.00 a.m. on 9 October
Suspension of listing of Reclassified 7.30 a.m. on 10 October
Shares
Second General Meeting 3.00 p.m. on 10 October
Appointment of the Liquidators 10 October
Effective Date for implementation of the 10 October
Scheme
Announcement of the results of Elections, 10 October
the AJIT FAV per Share, the Cash NAV per
Share and the NAVF FAV per Share
CREST accounts credited with, and dealings 8.00 a.m. on 11 October
commence in, New NAVF Shares
Certificates despatched in respect of week commencing 16 October
New NAVF Shares during or as soon as practicable
after
Cheques despatched to Shareholders who week commencing 16 October
elect for the Cash Option in accordance
with their entitlements and CREST accounts
credited with cash
Cancellation of listing of Reclassified as soon as practicable
Shares after the Effective Date
Note: All references to time in the Circular are to UK time.
Each of the times and dates in the above expected timetable (other
than in relation to the General Meetings) may be extended or
brought forward. If any of the above times and/or dates change, the
revised time(s) and/ordate(s) will be notiï--ed to Shareholders by
an announcement through a Regulatory Information Service.
A copy of the Circular has been submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The
Circular will also shortly be available on the Company's website at
www.abrdnjapan.co.uk.co.uk where further information on the Company
can also be found.
Capitalised terms used but not defined in this announcement will
have the same meaning as set out in the Circular dated 1 September
2023.
Enquiries
abrdn Japan Karen Brade E: abrdnjapan@shorecap.co.uk
Shore Capital Robert Finlay/Rose Ramsden/Angus T: 020 7408 4090
Murphy (Corporate Advisory)
Fiona Conroy (Corporate
Broking)
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END
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(END) Dow Jones Newswires
September 01, 2023 07:30 ET (11:30 GMT)
Abrdn Japan Investment (LSE:AJIT)
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