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.
ATLANTIS
JAPAN GROWTH FUND
LIMITED
(“AJGF”
or the “Company”)
(A
closed-ended investment company incorporated in Guernsey with
registration number 30709)
LEI:
54930041W0LDG00PGL69
Publication of a circular in relation to the recommended
proposals for the voluntary winding up of the Company and
combination with Nippon Active Value Fund plc
12 September 2023
The Board
of Atlantis Japan Growth Fund Limited 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
11 August 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 pursuant to article
134.3 of the Articles and voluntary winding up of the Company under
Section 391(1)(b) of the Companies (Guernsey) Law, 2008, (the
"Scheme")
and the issue of New NAVF Shares to Shareholders who elect, or are
deemed to have elected, to roll over their investments in the
Company into NAVF (the "Proposals").
The background and rationale to the Proposals is set out
below.
The
Proposals, which are conditional upon, amongst other things, the
approval of Shareholders at the Extraordinary General Meeting,
comprise a voluntary winding up 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, Shareholder approval is required. Shareholder
approval is sought at the Extraordinary General Meeting to approve
and authorise the implementation of the Scheme by the Liquidators,
once appointed, and place the Company into voluntary winding up.
Further details of the Scheme Resolutions to be proposed at the
Extraordinary General Meeting 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 Extraordinary General Meeting.
Background
to and Rationale for the Proposal
The
Proposals follow an active review by the Board of the options to
address the relative small size of the Company, recent poor
performance and the discount at which the Ordinary Shares trade to
their net asset value. The Board considers that NAVF's strategy of
taking advantage of the ongoing reforms and improvements in
corporate governance to invest in undervalued Japanese listed
companies, particularly cash-rich smaller Japanese companies, where
NAVF has performed strongly, and actively engage with them to
deliver returns for shareholders, is an attractive strategy. The
Proposals provide Shareholders with the opportunity to continue
with attractive ongoing exposure to Japanese equities in a larger
continuing investment trust structure with improved liquidity,
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
combination, if completed, will be implemented through a scheme of
reconstruction under article 134.3 of the Articles and section
391(1)(b) of the Companies (Guernsey) Law, 2008, resulting in the
reconstruction and voluntary winding up of the Company.
Subject to
the adoption of the New NAVF Investment Policy, NAVF's investment
objective is 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 Management Limited
("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 formula asset value ("FAV")
(less a 2 per cent. discount to the AJG FAV per
Share).
Conditional
upon the Scheme becoming effective, the Proposals would result in
those assets in the Company which are to be transferred to NAVF
pursuant to the Scheme forming part of NAVF's portfolio.
As
Shareholders will be aware from the 2022 annual report, the Board
announced at the 2019 Annual General Meeting ("AGM")
that a continuation vote will be called every fourth year.
Accordingly, the next continuation vote is due to be held at the
2023 AGM. As noted in our announcement of 11
August 2023, the Extraordinary General Meeting required to
implement the Proposals will be held before the planned AGM, such
that (assuming the Proposals are approved at the EGM) the Company
will be in liquidation by the date of the planned AGM, and the AGM
may therefore be adjourned sine die. If the Proposals are not
approved, the AGM will be held as planned and the continuation vote
will be voted upon at the AGM. As noted below, if the winding up
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 -
Shareholders may roll their investment in the Company into NAVF,
therefore allowing exposure to NAVF’s active management approach.
The Board believes that NAVF's approach is differentiated from many
of its peers, focuses on unlocking value in cash-rich small and
mid-cap Japanese companies and is well aligned with recent
developments in Japanese corporate governance and with its
structure as a listed UK investment trust.
b)
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
£800,000 including advisory and termination fees and associated VAT
(the "Rising Sun Contribution"). The current estimate of costs
associated with the Proposals is approximately £700,000 and
therefore it is likely that the Company will not bear any of the
costs of the Proposals.
c)
Injection
of capital - The
Proposals, together with the AJIT Combination, 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.
d)
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 (being prior to the enlargement of
NAVF through the Proposals and the AJIT Combination), the net asset
value of the Company was £76.8 million and the net asset value of
NAVF was £168.0 million.
e)
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.
f)
Opportunity
for substantial cash exit - The
Proposals include a cash exit opportunity of up to 25 per cent. of
the Company's Ordinary Shares in issue, providing Shareholders with
the ability to realise part (or potentially all) of their
investment at a 2 per cent. discount to the AJG FAV per Share,
which is at a tighter level than the current discount to net asset
value.
g)
Premium
segment, main market listing – In
connection with (but prior to completion of) the Scheme and the
proposed combination of abrdn Japan Investment Trust plc and NAVF
("AJIT Combination"), 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 potentially improve
its share rating and liquidity. The Scheme is conditional on the
Migration but not the AJIT Combination.
NAVF
Shareholders
who elect (or are deemed to elect) for the Rollover Option will be
electing to receive New NAVF Shares.
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.
Further
details on NAVF and its investment strategy are set out in Part 5
of the Circular and in the NAVF Prospectus published on
1 September 2023.
It is
expected that Noel Lamb, currently
the Chairman of the Company, will join the NAVF Board on completion
of the Scheme.
Conditions
of the Proposal
At a
general meeting of NAVF to be held on 20
September 2023, the required allotment and disapplication
authorities will be sought, as well as NAVF Shareholder approval
for a revised investment policy in connection with the
Migration.
Implementation
of the Proposals is subject to a number of conditions,
including:
a)
admission
of the existing NAVF Shares to the FCA's Official List and to
trading on the Premium Segment of the Main Market pursuant to the
Migration;
b)
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);
c)
the NAVF
Share Allotment Authorities relating, inter alia, to the Scheme
being approved by NAVF Shareholders and not having been revoked or
superseded;
d)
passing of
the Resolutions to be proposed at the Extraordinary General Meeting
or any adjournment thereof and upon any conditions of such
Resolutions being fulfilled; and
e)
admission
of the New NAVF Shares to the FCA's Official List and to trading on
the Premium Segment of the Main Market of the LSE.
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.
Cost
of Implementing the Scheme
The costs
of the Scheme payable by the Company are expected to be
approximately £700,000 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 £800,000, and
therefore it is likely that the Company will not bear any of the
costs of the Scheme. To the extent that the Company's costs of the
Scheme are above £800,000, the Company will bear these
costs.
The
estimate of the Company’s costs excludes the Liquidators' retention
to cover unknown liabilities (estimated at £100,000) and does not
take account of any dealing costs which will be incurred by the
Company in disposing of assets in order to fund the Cash Option and
fund the Liquidation Pool.
Except for
these purposes, it is expected that the Company 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 protect the investment trust status of
the Company, to avoid unnecessary dealing costs in connection with
the disposal of the Company's portfolio and to avoid unnecessary
periods when Shareholders funds are not invested in the Japanese
market in accordance with the Company's investment
policy.
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
Company's existing 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 £100,000 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:
a)
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
b)
subject to
an overall 25 per cent. cap on such Elections (in aggregate), an
amount of cash equal to the Cash Pool 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, there shall be appropriated to the Cash Pool and the
Rollover Pool the remaining assets of the Company in the manner
described in paragraph 3.3 in Part 3 of this document. Such
appropriation includes the application of a discount of 2 per cent.
to the AJG FAV per Share in relation to those Ordinary 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, after deduction of the Dividend and
assuming that the maximum amount is elected for the Cash Option,
the AJG FAV per Share would have been 189.22
pence and the NAVF FAV per Share would have been
148.24 pence which, for the Rollover
Option, would have produced a conversion ratio of 1.28, meaning for
every Share held in AJG, 1.28 New NAVF Shares would be issued to
Shareholders who elected for the Rollover Option under the Scheme
and, in aggregate, 38,987,891 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
AJG FAV per Share and NAVF FAV per Share and Shareholders’
entitlements under the Proposals may materially change up to the
Calculation 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) as at the Calculation Date. Each Shareholder who validly
elects to receive the Cash Option in respect of up to 25 per cent.
of their individual holding of Ordinary Shares as at the
Calculation Date, rounded down to the nearest whole share, will
receive the full amount of cash for which they have elected (the
"Basic
Entitlement").
Shareholders are also entitled to elect to receive cash in respect
of more than 25 per cent. of their individual holdings of Ordinary
Shares (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) as at the Calculation Date,
Shareholders who have made an Election for the Cash Option in
excess of their Basic Entitlement will have their Excess
Applications scaled back in a manner which is, as near as
practicable, pro
rata to the
number of Ordinary Shares elected under such Excess Applications.
Ordinary Shares which are subject to such scaling back will be
deemed to have elected for the Rollover Option.
Dividends
The
Company has declared a Dividend, in respect of the financial
quarter ended 31 July 2023, of 1.96p
per Ordinary Share with a record date of 25
August 2023 which will be paid on 29
September 2023.
It is not
anticipated that any further dividends will be paid by the Company
in relation to the current financial period or for the period up to
the liquidation of the Company.
Shareholder
Meeting
The
implementation of the Proposals will require a general meeting of
the Company. The notice convening the Extraordinary General Meeting
(to be held at 3.00 p.m. on
10 October 2023) is set out in the
Circular.
The
Resolutions to be considered at the Extraordinary General Meeting
will, if passed, approve the terms of the Scheme and associated
amendments to the Company's Articles set out in Part 3 of the
Circular, place the Company into liquidation, appoint the
Liquidators, agree the basis of their remuneration, authorise the
Liquidators to enter into and give effect to the Transfer Agreement
with NAVF to renounce New NAVF Shares in favour of Shareholders in
accordance with the Scheme and authorise the Liquidators to apply
to cancel the listing of the Ordinary Shares with effect from such
date as the Liquidators may determine.
Each
Resolution to be proposed either as a special resolution or an
extraordinary resolution will require at least 75 per cent. of the
votes cast in respect of it to be voted in favour, whether in
person or by proxy, in order for it to be passed.
If
relevant, the Company will notify Shareholders of any changes to
the proposed format for the Extraordinary General Meeting as soon
as possible via a Regulatory Information Service and its
website.
Recommendation
and Voting Intentions
The Board
considers the Proposals and the Resolutions to be proposed at the
Extraordinary General Meeting 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 170,000 Ordinary Shares
(representing 0.42 per cent. of the Company's total voting rights)
as at 11 September 2023. The
Directors who hold Ordinary Shares (being Noel Lamb, Philip
Ehrmann, Richard Pavry and Michael
Moule) intend to roll over their entire beneficial holdings
of Ordinary Shares into New NAVF Shares.
Expected
Timetable
|
2023
|
Ex
dividend date for the Dividend
|
24
August
|
Record
date for the Dividend
|
25
August
|
Dividend
paid to Shareholders
|
29
September
|
Latest
time and date for receipt of Forms of Election and TTE instructions
from Shareholders wishing to elect for the Cash Option
|
1.00 p.m.
on 5 October
|
Calculation
Date
|
5.00 p.m.
on 5 October
|
Record
Date for entitlements under the Scheme
|
6.00 p.m.
on 5 October
|
Latest
time and date for receipt of Forms of Proxy and CREST voting
instructions from Shareholders for the Extraordinary General
Meeting
|
3.00 p.m.
on 6 October
|
Ordinary
Shares disabled in CREST
|
close of
business on 6 October
|
Trading in
Ordinary Shares suspended
|
7.30 a.m.
on 10 October
|
Extraordinary
General Meeting
|
3.00
p.m. on 10 October
|
Reclassification
of Ordinary Shares
|
10
October
|
Appointment
of Liquidators
|
10
October
|
Effective
Date for implementation of the Scheme
|
10
October
|
Announcement
of the results of Elections, the AJG FAV per Share, the Cash Pool
NAV per Share and the NAVF FAV per Share
|
10
October
|
CREST
accounts credited with, and dealings commence in, New NAVF
Shares
|
8.00 a.m.
on 11 October
|
Certificates
despatched in respect of New NAVF Shares during or as soon as
practicable after
|
week
commencing 16 October
|
Cheques
despatched to Shareholders who elect for the Cash Option in
accordance with their entitlements and CREST accounts credited with
cash
|
week
commencing 16 October
|
Cancellation
of listing of Reclassified Shares
|
as soon as
practicable after the Effective Date
|
Note:
All references to time in this document are to UK time. Each of the
times and dates in the above expected timetable (other than in
relation to the Extraordinary General Meeting) may be extended or
brought forward. If any of the above times and/or dates change, the
revised time(s) and/or date(s) will be notified 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.atlantisjapangrowthfund.com 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 12
September 2023.
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, Alaina
Wong (Investment
Banking)
James Waterlow (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
United Kingdom may be restricted
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.