REG-Fidelity Japan Trust Plc: Result of Review - Proposed Combination

Fidelity Japan TrustAnnouncement

12/08/2025 07:00

12 August 2025

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, THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND
POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA),
AUSTRALIA, NEW ZEALAND CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, IN ANY
MEMBER STATE OF THE EUROPEAN ECONOMIC AREA OR IN ANY OTHER JURISDICTION IN
WHICH THE SAME WOULD BE UNLAWFUL.

This announcement is not an offer to sell, or a solicitation of an offer to
acquire, securities in the United States or in any other jurisdiction in which
the same would be unlawful. Neither this announcement nor any part of it shall
form the basis of or be relied on in connection with or act as an inducement
to enter into any contract or commitment whatsoever.

This announcement contains information that is inside information for the
purposes of Article 7 of the UK version of Regulation (EU) No. 596/2014 which
is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as
amended (the "Market Abuse Regulation").

 

Fidelity Japan Trust Plc ("FJV" or the "Company")

Result of Board Review

Proposed combination with AVI Japan Opportunity Trust plc ("AJOT") with an
alternative election for cash

 

Result of Board Review
* The FJV board of directors (the "Board") has completed a comprehensive
review of potential options for the Company.  This followed the Company's
announcement on 17 April 2025 in relation to the formal review process to
consider the future of the Company, and the failed continuation vote on 21 May
2025.
* Taking into account the preferences of those large shareholders that hold
over 50 per cent. of the voting rights of the Company, the Board has entered
into a set of non-binding heads of terms ("Heads of Terms") for the proposed
combination of the Company with AJOT, pursuant to a scheme of reconstruction
of FJV under section 110 of the Insolvency Act 1986, with a cash exit
alternative for FJV shareholders (the "Scheme").
 

Summary of the Scheme

The boards of FJV and AJOT are pleased to announce that they have entered into
the Heads of Terms in respect of the Scheme, pursuant to which FJV
shareholders will be offered the choice of rolling their investment into new
ordinary shares to be issued by AJOT ("New AJOT Shares") (the "AJOT Option")
as the default option, and/or to elect to receive cash in respect of part, or
all, of their  ordinary shares of £0.25 each in the capital of FJV ("FJV
Shares"), subject to an aggregate limit of 50 per cent. of FJV's issued share
capital (excluding any treasury shares) (the "Cash Option").  Under the Cash
Option, a discount of 1% will be applied (the "Cash Option Charge"). 

The AJOT Option will, depending on the shareholder elections, see part of
FJV's cash, assets and undertakings roll into AJOT in exchange for the issue
of New AJOT Shares.  The number of the New AJOT Shares issued to FJV
shareholders will be determined on a formula asset value ("FAV") for FAV
basis, with adjustments as set out in the paragraph entitled "Further details
on the Scheme" below. 

In addition, under the Heads of Terms:

-           Based on the Scheme becoming unconditional by no later
than the end of November 2025, AJOT's 2025 100% realisation opportunity will
be made available to those FJV shareholders who receive New AJOT Shares; and

-           On the Scheme becoming effective, and subject to any
consents required, FJV's unquoted investments will be transferred to AJOT at
their current carrying value in FJV's net asset value ("NAV").  Further
details are set out in the paragraph entitled "Unquoted Investments" below. 

AJOT

Following completion of the Scheme, AJOT's investment manager Asset Value
Investors Ltd ("AVI"), will continue to manage AJOT in accordance with AJOT's
current investment objective and policy.  AJOT's strategy is to generate
returns in excess of the MSCI Japan Small Cap Index by investing in a
concentrated, high-conviction portfolio of small to mid-cap companies in Japan
which are considered under-valued and where cash, listed securities and/or
realisable assets make up a significant proportion of the market
capitalisation.  The AVI team, led by Joe Bauernfreund, seeks to unlock value
through constructive and proactive engagement with management teams, and by
taking advantage of the increased focus on corporate governance and
shareholder returns developing in Japan. 

Since AJOT's inception in 2018, its NAV total return to 7 August 2025 (in GBP)
has been 102 per cent. which compares to the 41 per cent. recorded for the
MSCI Japan Small Cap Index and 53 per cent. recorded for the TOPIX index
(source: Refinitiv Workspace).  Under AJOT's discount control mechanism, if,
under normal market conditions, the four month-average share price discount to
NAV is greater than 5 per cent., AJOT will buy back shares with the intention
of reducing the discount to a level no greater than 5 per cent. 

 

Expected benefits of the Scheme

The proposed Scheme is expected to enable FJV shareholders to benefit from:
* Choice between remaining invested in a Japanese strategy and realising
cash.  AJOT has a successful track record of investing in Japanese equities,
through a data focussed stock selection process and active and constructive
engagement with portfolio companies.  
* A potential immediate uplift in market value of their shareholding. 
Since AJOT's IPO on 23 October 2018 to 7 August 2025, the latest practicable
date ahead of this announcement, AJOT's shares have traded at an average
discount of 0.2 per cent. to NAV versus 9.2 per cent. average discount to NAV
for FJV.  As at close on 7 August 2025, AJOT's shares traded on a discount of
4.2 per cent. to NAV, and FJV's shares traded on a discount of 5.4 per cent.
to NAV (source: Refinitiv Workspace).  
* Access to liquidity: AJOT has an annual realisation opportunity for up to
100 per cent. of its share capital with the next opportunity to take place in
Q4 2025.  In 2024, this was undertaken through an uncapped tender offer at a
2 per cent. discount to the prevailing net asset value per share at the
calculation date less any transaction costs directly associated with the
realising assets to satisfy elections under the tender offer.
 

Background to the Board Review

On 21 May 2025, the FJV shareholders voted against the continuation of the
Company at the 2025 AGM. The Board announced that they had recently received
formal written non-binding proposals from a small number of London listed
investment companies focused on investing in Japan. Each of the proposals
required the Company to enter a scheme of reconstruction pursuant to section
110 of the Insolvency Act 1986. 

After a comprehensive review process, the Board has concluded that a
combination with AJOT, pursuant to a scheme of reconstruction, together with
an alternative shareholder election for cash, should be put forward to FJV
shareholders. 

 

Further details on the Scheme

The proposed combination will be effected by way of a scheme of reconstruction
of FJV under section 110 of the Insolvency Act 1986 (being the Scheme),
resulting in the voluntary liquidation of FJV.  Under the Scheme, FJV will be
put into liquidation, and its assets and undertaking split notionally into
three pools on the basis described below in respect of:
* the interests of FJV shareholders rolling over their shareholdings in FJV
into AJOT;
* FJV shareholders electing to receive their entitlement upon the winding-up
of FJV in cash; and
* a provision sufficient to meet any contingent or unknown liabilities of FJV
following its entry into liquidation, and any outstanding known liabilities of
FJV.
FJV shareholders will be offered the AJOT Option, as the default option, and
/or the Cash Option for up to 50 per cent. of FJV shares in issue (excluding
treasury shares).  The AJOT Option will, depending on the shareholder
elections, see part of FJV's cash, assets and undertakings roll into AJOT in
exchange for the issue of New AJOT Shares.  The number of the New AJOT Shares
issued to FJV shareholders will be determined on an FAV for FAV basis. 

The New AJOT Shares will be issued on the basis of the ratio between the AJOT
FAV per share and the FJV FAV per share.  Both FAVs will be calculated based
on the NAV of each company (cum income and debt at fair value) on the
calculation date to be agreed by both parties, subject to adjustments for any
declared but unpaid dividends, the allocation of transaction costs, the
allocation of the benefit of the Cash Option Charge and, in the case of FJV,
also taking account of the liquidator's retention, and the financial benefit
of the AVI Cost Contribution (see below). More information will be provided in
a circular to be sent to shareholders in due course.

Each company will bear its own costs incurred in relation to the Scheme,
subject to the cost contribution described below.

AVI has agreed to make a cash contribution to FJV's AJOT Option FAV to the
extent its share of the benefit of the Cash Option Charge does not offset its
pro rata allocation of (i) FJV's scheme costs and (ii) FJV's liability to pay
to Fidelity any part of the unexpired management agreement and investment
management agreement termination fee by reason of the early termination of
such agreements upon the Scheme effective date (the "Termination Costs"). 
The above contribution is subject to the AJOT Option pool's share of the costs
mentioned in (i) and (ii) above not exceeding £1 million in total. 

In accordance with customary practice for such schemes of reconstruction
pursuant to section 110 of the Insolvency Act 1986 involving investment
companies, the City Code on Takeovers and Mergers is not expected to apply to
the proposed combination via the Scheme. The Scheme will be subject to, inter
alia, the approval of both FJV and AJOT shareholders, in addition to
regulatory approval and tax clearance.

 

Unquoted Investments

As set out in FJV's annual report and accounts to 31 December 2024, the
Company held seven unquoted investments which had a valuation of 6.6 per cent
of FJV's NAV at the same date.  In July 2025, one of those seven investments,
Moneytree Co., Ltd ("Moneytree") was sold to a consortium of third party
investors at a price which represented a premium to FJV's carrying value at
the time.  Completion of the sale of Moneytree is expected in the coming
months and the price of the sale is reflected in FJV's current NAV. 

 

The remaining six unquoted investments have a carrying value of approximately
5.9 per cent. of FJV's NAV published on 8 August 2025, the latest practical
date prior to this announcement.  FJV's unquoted assets held at the time
immediately prior to the effective date of the Scheme will be transferred to
AJOT at the Scheme effective date at their current valuations.  Each transfer
under the Scheme is subject to any Japanese regulatory approval or consents
required under the constitution documents of each unquoted investment. 

 

The majority of the remaining other FJV quoted assets will be realised (and
held in cash or cash-equivalent investments) ahead of the Scheme effective
date.

 

Costs

The Board of FJV currently estimates the fixed advisory costs and expenses in
respect of the recent review process completed and the Scheme will be no
greater than approximately £0.8 million including VAT.  This estimate
excludes the liquidator's retention, any portfolio realisation costs and the
Termination Costs. 

 

Expected timetable

Documentation in connection with the Scheme will be posted to FJV shareholders
as soon as practicable, with a view to convening general meetings of FJV and
AJOT later in 2025 with the Scheme becoming effective by no later than the end
of November 2025. Completion of the Scheme will be conditional upon, inter
alia, approval from the shareholders of both companies, tax clearance and
Financial Conduct Authority approval in relation to the publication of the
AJOT prospectus.

The person responsible for arranging for the release of this announcement on
behalf of the Fidelity Japan Trust Plc is George Bayer, Company Secretary.

 

For further information please contact:

 

 Fidelity Japan Trust Plc David Graham (Chairman) George Bayer (Company Secretary)  Via Stifel                 
 Stifel Edward Gibson-Watt Andrew Yeo                                               Tel. +44 (0) 20 7710 7600  
                                                                                                               

Legal Entity Identifier

549300ND695NEJ5GPI72

 

 

 



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