This
announcement and the information contained in it are not for
release, publication or distribution, directly or indirectly, in
whole or in part, in or into any member state of the European
Economic Area, the United States,
Australia, Canada, Japan
or the Republic of South Africa or
any jurisdiction for which the same could be unlawful.
This
announcement contains inside information for the purposes of
Article 7 of Market Abuse Regulation (EU) 596/2014 as it forms part
of UK domestic law by virtue of the European Union (Withdrawal) Act
2018 and as amended ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
ATLANTIS
JAPAN GROWTH FUND
LIMITED
("AJGF"
or the "Company")
(A
closed-ended investment company incorporated in Guernsey with
registration number 30709)
LEI:
54930041W0LDG00PGL69
Proposal for the Reconstruction and Voluntary Winding-up of
the Company
11 August 2023
The Board
of Atlantis Japan Growth Fund Limited is pleased to announce that
heads of terms have been agreed for a proposed combination of the
assets of the Company with the assets of Nippon Active Value Fund
plc ("NAVF")
(the "Proposal").
The Board
has been actively reviewing options to address the relative small
size of the Company, which has been driven in part by the market
rotation away from the growth investment style and recent
disappointing relative performance. These issues have made it
difficult to attract significant demand for the Company's shares
and, absent any action, the discount at which the shares trade to
net asset value is likely to persist.
NAVF is a
UK investment trust which targets attractive capital growth for its
shareholders through the active management of a focused portfolio
of quoted companies which have the majority of their operations in,
or revenue derived from, Japan,
and that have been identified by NAVF's investment adviser, Rising
Sun Management Limited ("Rising
Sun"), as
being undervalued.
The
Proposal provides the Company's shareholders ("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 approved by each company's
shareholders, will be implemented through a scheme of
reconstruction pursuant to section 391(1)(b) of the Companies
(Guernsey) Law, 2008 ("Section
391(1)(b) Scheme"),
resulting in the reconstruction and members' voluntary liquidation
of the Company.
Key
benefits of the Proposal:
-
NAVF's active management
approach, which differentiates it from many of its peers, focuses
on unlocking value in cash-rich smaller Japanese companies, an
approach which is aligned with recent developments in Japanese
corporate governance and with NAVF's structure as a listed UK
investment trust. The highly selective
portfolio of NAVF offers investors a high-conviction, uncorrelated
opportunity.
-
Since the date of its IPO
(21 February 2020), NAVF has been the
top performing Japanese investment trust over the period to
9 August 2023, having delivered a NAV
Total Return of 45.6 per cent. in sterling
terms.
-
Although NAVF has only
been in existence for a little over three years, members of its
investment adviser's team have a track record of over 30 years of
investing in Japan, pursuing an
activist strategy in recent years.
-
NAVF has access to the
Tokyo based research team of its
investment adviser's affiliate, Dalton Investments LLC, and
corporate legal expertise based in Japan. NAVF also benefits from the potential
to have other clients of Dalton Investments LLC invest alongside
it, which provides the opportunity to take more meaningful stakes
in companies and have more effective conversations with investee
company management.
-
As announced on
18 May 2023 in connection with the
proposed combination of abrdn Japan Investment Trust plc and NAVF
(the "AJIT
Combination"), NAVF has undertaken to
move to a premium listing on the Main Market of the London Stock
Exchange, which is expected to complete prior to completion of the
Proposal and the AJIT Combination and improve the access of retail
investors to the enlarged NAVF and therefore its share rating and
liquidity. The Proposal is not conditional upon the AJIT
Combination.
-
NAVF also intends to
implement the Proposal under the same prospectus to be issued by
NAVF in connection with the AJIT Combination, which is expected to
reduce the costs of the proposed combination.
-
Rising Sun has offered to
underwrite the Company's costs of the proposed merger up to
£800,000 including advisory and termination fees and associated
VAT.
-
The Proposal will result
in an inflow of capital into the NAVF portfolio which can be
deployed at an advantageous time in the cycle, when recent
government reforms support, more than ever in NAVF's view, the
strategy of finding undervalued Japanese listed companies and
actively engaging with them to deliver returns for
shareholders.
-
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. The ongoing costs
ratio of NAVF, as enlarged by implementation of the Proposal and
the AJIT Combination, are anticipated to be significantly less than
that of AJGF as currently constituted.
-
The Proposal includes 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 formula asset value ("FAV") per ordinary
share.
Background
to the Proposal
While the
Board believes that the Company's strategy remains attractive in
the longer term, it is aware that the Company's small size and
recent poor performance, both relative and absolute, make it
difficult to attract significant demand for its shares, and that
the discount at which the shares trade to net asset value is likely
to persist. The Board is also conscious that the continuation vote
at the forthcoming annual general meeting is a significant hurdle
to the Company continuing unchanged.
Accordingly,
the Board has been reviewing alternative options for the Company's
future, including combinations with other closed-ended funds, a
change of manager and a solvent liquidation with no rollover
option. In conducting its review, the Board took account of the
attractive opportunities in Japanese equities and the fact that
many of the Company's investors are long term supporters of the
listed investment fund structure and concluded that a rollover into
an investment trust or similar vehicle was appropriate.
Furthermore, the Board wished to see an appropriate cash exit
opportunity being available to shareholders as well as ongoing
liquidity in, and demand for, the rollover vehicle's shares. The
Board has maintained dialogue with major shareholders on the future
of the Company over the last twelve months.
The Board
considers that taking advantage of the ongoing reforms and
improvements in corporate governance to invest in undervalued
Japanese listed companies and actively engage with them to deliver
returns for shareholders is an attractive strategy. The strategy
has delivered strong returns in recent years, and in the Board's
view can be expected to continue to do so.
The
combination with NAVF, as contemplated in the Proposal, therefore
provides an opportunity for shareholders to continue with an
attractive ongoing exposure to Japanese equities in an investment
trust structure alongside an option to elect for a cash exit at a
modest discount to NAV in respect of at least 25 per cent. of their
holdings.
The Board
wishes to place on record its appreciation of the long-standing
dedication and service to the Company of the investment adviser,
Atlantis Investment Research Corporation. For many years this was
led Mr Ed Merner, regarded as one of
the leading Japanese fund managers by his peers until his death in
2022. Taeko Setaishi and her team at AIRC have advised the fund
since 2016 and deserve our thanks.
Combination
with NAVF
The Board
has in principle agreed the terms for a combination of the Company
with NAVF. NAVF is a UK investment trust, with Rising Sun as its
investment adviser. Total net assets were £165.8 million at
30 June 2023. It aims to provide its
shareholders with attractive capital growth through active
management of a focused portfolio of quoted companies which have
the majority of their operations in, or revenue derived from,
Japan and that are considered by
Rising Sun to be undervalued.
The
combination, if approved by each company's shareholders at the
requisite general meetings, will be implemented through a Section
391(1)(b) Scheme, resulting in the voluntary liquidation of the
Company and the rollover of its assets into NAVF in exchange for
the issue of new NAVF shares to Shareholders who roll their
investment into the enlarged fund.
New NAVF
shares issued to the Company's Shareholders will be issued on a
FAV-to-FAV basis. FAVs will be calculated using the respective net
asset values of each company, adjusted for (i) the costs payable by
the relevant company in relation to the Proposal, (ii) any
dividends and distributions declared by each company which have a
record date prior to the effective date of the combination, and
(iii) in the case of AJGF, less the amount reserved by the
liquidator to provide for known and unknown liabilities. The AJGF
FAV per share in respect of the rollover pool shall be increased by
the amount equivalent to the 2 per cent. discount applied to the
AJGF FAV per share in respect of the cash option.
The Board
believes it is appropriate to offer Shareholders the opportunity to
realise part, or potentially all, of their investment in the
Company via a cash exit for up to 25 per cent. of the Company's
shares in issue, at a 2 per cent. discount to FAV per share of the
Company. The discount applied to the cash exit FAV will benefit the
FAV of AJGF shares electing, or deemed to have elected, to
rollover.
Shareholders
may elect for more or less than their pro rata entitlement to the
cash option however, excess applications for the cash option over
25 per cent. of the Company's issued share capital will be scaled
back pro rata to such excess applications.
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.
Following
completion of the Proposal, it is expected that a director from the
Board of the Company will join the Board of NAVF.
Management
cost contribution
Rising
Sun, the investment adviser to NAVF, has demonstrated its
conviction in the combined fund by offering to pay for the
Company's costs of implementing the Proposal up to £800,000. The
Board welcomes this contribution and notes the strong indication it
gives of Rising Sun's commitment to the Proposal and the enlarged
NAVF.
Annual
report and accounts and AGM
The Board
expects that the Company will publish its annual report and
accounts for the year to 30 April
2023 and the notice of the AGM to be held in December as
usual in the coming weeks. The Company intends that the
extraordinary general meeting required to implement the Proposal
will be held before planned the AGM, such that (assuming the
Proposal is approved) the Company will be in liquidation by the
date of the AGM, and the AGM may therefore be adjourned
sine
die. If the
Proposal is not approved, the AGM will be held as planned and the
scheduled continuation vote will be put to shareholders.
City
Code
In
accordance with customary practice for schemes of reconstruction
schemes, The Panel on Takeover and Mergers has confirmed that the
City Code on Takeovers and Mergers is not expected to apply to the
combination of the Company and NAVF.
Approvals
Implementation
of the Proposal is subject to the approval, inter alia, of the
Company's Shareholders as well as regulatory and tax approvals and
approval by the shareholders of NAVF. It is anticipated that the
Company will publish a circular setting out details of the Proposal
in early September 2023. The Proposal
is not conditional on implementation of the AJIT
Combination.
The
Company has consulted with a number of its major Shareholders who
have indicated support for the Proposal. These comprise
approximately 51 per cent. of the Company's share
register.
Noel Lamb, Chairman of the Company,
commented:
"Style
rotation, recent poor performance and reduced liquidity have led
the Board to review alternative options and take market soundings.
The investment adviser, Atlantis Investment Research Corporation
has given the fund great service over many years. Looking ahead,
this proposal to rollover into Nippon Active Value Fund with an
option for a 25 per cent. cash exit, will provide investors with
increased liquidity and access to a manager with a proven record. I
commend it to our shareholders."
For
further information please contact:
Enquiries:
Company Secretary
Hannah Hayward
Northern
Trust International Fund Administration Services (Guernsey)
Limited
Email: HH61@ntrs.com
Tel:
+44 (0)
1481 745 417
Corporate Broker
Singer
Capital Markets
Robert Peel,
Robert.Peel@singercm.com (Investment
Banking)
James Waterlow,
James.Waterlow@singercm.com (Sales)
Tel:
+44 (0) 20 7496 3000
Important
Information
This
announcement contains statements about the Company that are or may
be deemed to be forward looking statements. Without limitation, any
statements preceded or followed by or that includes the words
"targets", "plans", "believes", "expects", "aims", "intends",
"will", "may", "anticipates", "estimates", "projects" or words or
terms of similar substance of the negative thereof, may be forward
looking statements.
These
forward looking statements are not guarantees of future
performance. Such forward looking statements involve known and
unknown risks and uncertainties that could significantly affect
expected results and are based on certain key assumptions. Many
factors could cause actual results to differ materially from those
projected or implied in any forward looking statement. Due to such
uncertainties and risks, readers should not rely on such forward
looking statements, which speak only as of the date of this
announcement, except as required by applicable law.
The
distribution of this announcement in jurisdictions outside the
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by law and therefore persons into whose possession this
announcement comes should inform themselves about, and observe,
such restrictions. Any failure to comply with the restrictions may
constitute a violation of the securities laws of such
jurisdictions.