Publication of Circular

RNS Number : 5151Y

Atlantis Japan Growth Fund Ld

22 February 2013

 



FOR IMMEDIATE RELEASE

22 February 2013

Atlantis Japan Growth Fund Limited

Publication of circular

Proposed amendment to the terms of Redemption Facility and introduction of Discount Control Mechanism

1.   Introduction

On 8 February 2013, the Board of Atlantis Japan Growth Fund Limited (the "Company") announced its intention to put forward proposals to Shareholders to amend the terms of the Redemption Facility as currently operated by the Company.

Further to this announcement, the Board announces today the publication of a shareholder circular (the "Circular") and notice of extraordinary general meeting ("EGM") to be held on 12 March 2013.

2.   The Redemption Facility

At an extraordinary general meeting of the Company held on 15 December 2010, Shareholders approved the adoption of new articles of incorporation including the terms of the Redemption Facility. The Company is proposing to modify the operation of this Redemption Facility.

The Redemption Facility was introduced as a means by which the liquidity in the Company's Shares could be improved and the discount to Net Asset Value per Share at which the Shares traded might be minimised.  A mechanism was adopted whereby Shareholders could dispose of some or all of their Shares without being dependent on the market liquidity of the Shares. By providing this alternative means of disposing of their Shares and, in effect, providing a backstop to the market, it was hoped that Shareholders would benefit from the increased liquidity and that the rating of the Company's Shares would improve.

The Board believes that the Redemption Facility has indeed served to improve the liquidity in the Company's Shares and that the market has rewarded the Company with a significantly higher rating.  The discount to Net Asset Value per Share has tightened significantly from over 15 per cent. in October 2010 prior to the announcement of the introduction of the Redemption Facility to an average of approximately 5 per cent. over the six months to 7 February 2013, being the day before the announcement of the Board's proposals to amend the Redemption Facility.

A further objective of the Redemption Facility was to encourage investors to use the Company to gain exposure to Japanese equities with an ability to add exposure to less well known or liquid securities.  The Directors had hoped that, in time, new Share issuance, as well as redemptions, would be possible if investor demand for Japanese exposure increased. However, the global economic environment has remained challenging and Japan has remained a market out of favour with many investors.  As a result, new Share issuance by the Company has not been possible.  While new investors have been attracted to invest in the Company, this has not outweighed selling demand.

It remains the Board's view that Japan is an attractive area for investment.  The Board notes that the recent stimulatory pronouncements from Prime Minister Shinzo Abe's new LDP-led government and that government's willingness to accept a depreciating yen has resulted in a strong rally in the TOPIX index.  The forthcoming appointment of a new Bank of Japan governor in March, an announced fiscal package of around ￥13 trillion and the prospect of an LDP success in the Upper House elections in July should help maintain the stock market's positive momentum. 

The Company's Sub-Adviser, AIRC in Tokyo, expects strong Japanese stock markets in the coming quarters supported by continuing low interest rates, increasing exports later in the year, positive industrial output by spring/summer and improving prospects for GDP growth and corporate earnings in fiscal years 2013 and 2014.  The Company, through AIRC, continues to place stress on value and growth, a strategy that has worked well over the longer term and especially in stronger stock markets. 

After so many years of lacklustre Japanese markets, the Board is concerned not to damage the prospects for achieving positive investment performance with the impact further redemptions might have on the Company's expense ratios and its ability to retain use of current borrowing facilities.

2.1 Amendment to terms of the Redemption Facility

The Board has consulted with major Shareholders and is keen to protect the interests of all Shareholders by minimising the effects of the reducing size of the assets of the Company.  In particular, the Directors are mindful of the increasing percentage holdings of long-term supportive Shareholders who do not wish to sell or reduce their investment in the Company but also do not wish their percentage holding to increase significantly beyond current levels and the potential for an increased total expense ratio.

Accordingly, the Board is proposing that:

●    the Redemption Facility be operated at six-monthly intervals on 31 March and 30 September (or, if such date is not a Business Day, the previous Business Day) of each year, instead of the current four-monthly intervals. The first Redemption Point is expected to be on 30 April 2013, available to Shareholders that have held their Shares continuously since 31 October 2012; and

●    total redemptions at each Redemption Point be limited to 5 per cent. of the issued share capital at that time.  At each Redemption Point, each Shareholder shall be entitled to request the redemption of 5 per cent. of its holding of Shares held at the immediately preceding Redemption Point and held continuously at all times since that date, rounded down to the nearest whole number (the "Basic Entitlement"). Shareholders will be entitled to request the redemption of Shares in excess of their Basic Entitlement to the extent that other Shareholders redeem less than their Basic Entitlement or do not seek to redeem their Shares at the relevant Redemption Point. Any such excess Redemption Requests will be satisfied pro rata in proportion to the amount in excess of the Basic Entitlement (rounded down to the nearest whole number of Shares).

Save for the above proposed amendments, the Board shall operate the Redemption Facility on the same terms as outlined in the circular to Shareholders dated 30 November 2010 and as set out in the Articles, subject always to the Board's absolute discretion to accept or decline redemption requests and to determine the procedures for the redemption of the Shares (subject to the facilities and requirements of CREST and The Companies (Guernsey) Law, 2008).

Notwithstanding the Directors' absolute discretion to amend the Redemption Facility to adopt the above changes, the Board considers it appropriate to seek Shareholder approval at the EGM to approve the adoption of the revised terms of the Redemption Facility.

The reduction in the frequency of the operation of the Redemption Facility and the introduction of a cap on redemptions may restrict the ability of Shareholders to redeem their holdings but the Board believes this is outweighed by the benefits.

Redemption procedure

As announced on 8 February 2013, the 28 February 2013 Redemption Point has been postponed in light of the Board's proposals to amend the terms of the existing Redemption Facility.

If the amendments to the Redemption Facility are approved at the EGM, the first Redemption Point under the revised terms is expected to be on 30 April 2013.  An announcement of the exact timing will be made following the conclusion of the EGM.  The right of Shareholders to request the redemption of all or any of their Shares on any Redemption Point shall be exercised by the Shareholder delivering to the receiving agent (or to such other person as the Directors may designate for this purpose) a duly completed Redemption Request. Redemption Request forms are available upon request from the Administrator.

If the amendments to the Redemption Facility are not approved at the EGM, the 28 February 2013 Redemption Point is expected to be on 30 April 2013.  An announcement of the exact timing will be made following the conclusion of the EGM.  In this scenario the Redemption Facility will continue three times per year and operate in accordance with its existing terms.

Shareholders who are in any doubt about their tax position on redemption of their Shares should consult their professional adviser.

2.2 Introduction of Discount Control Mechanism

The Board has also resolved, that upon approval by Shareholders of the Proposals, it will introduce a discount control mechanism whereby the Company will hold a continuation vote if the Shares have traded, on average, at a discount of more than 10 per cent. to the Net Asset Value per Share during any rolling 90 day period, in normal market conditions.

If the obligation to hold a continuation vote is triggered, the vote will be held no later than the next practicable annual general meeting of the Company.

3.   Extraordinary General Meeting

The Proposals require the approval of Shareholders. A notice convening an EGM to be held on 12 March 2013, is set out in the Circular.

The Circular contains full details in relation to the proposed amendment of the terms of the Redemption Facility (the "Proposals") and notice of EGM.

4.   Recommendation

The Board considers that the Proposals and the Resolution to be proposed at the EGM are in the best interests of the Company and Shareholders as a whole.

The Board unanimously recommends Shareholders to vote in favour of the Resolution to be proposed at the EGM.

Those Directors who hold Shares intend to vote in favour of the Resolution in respect of their own beneficial and non-beneficial holdings of Shares (amounting in aggregate to 135,000 Shares, representing approximately 0.26% per cent. of the issued share capital of the Company.

A copy of the Circular has been posted to all shareholders today and will shortly be available for inspection at the National Storage Mechanism which is located at http://www.morningstar.co.uk/uk/NSM

DEFINITIONS

In the Circular the words and expressions listed below have the meanings set out opposite them, except where the context otherwise requires:

Administrator	Northern Trust International Fund Administration Services (Guernsey) Limited
Articles	the Articles of Incorporation of the Company
Board or Directors	the board of directors of the Company or any duly constituted committee thereof
Business Day	any day on which banks are open for business in London and Guernsey (excluding Saturdays, Sundays and public holidays)
Circular	the circular to Shareholders dated 22 February 2013
Company	Atlantis Japan Growth Fund Limited
CREST	the system for the paperless settlement of trades in securities and the holding of uncertificated securities operated by Euroclear
EGM	the extraordinary general meeting of the Company to consider the Resolution, convened for 12 March 2013 at 9:00 a.m. or any adjournment thereof
Form of Proxy	the form of proxy provided with this document for use in connection with the EGM by Shareholders
Net Asset Value per Share	the value of the assets of the Company less its liabilities, determined in accordance with the accounting principles adopted by the Company from time to time and the Articles, divided by the number of Shares in issue (excluding Shares held in treasury)
Proposals	the proposed revision to the terms of the Redemption Facility
Redemption Facility	the redemption facility as operated by the Company in accordance with the terms detailed in the circular to Shareholders dated 30 November 2010, and as amended from time to time
Redemption Point	5.00 p.m. on the Business Day on which holders of Shares which have applied to have Shares redeemed will be considered for redemption at the discretion of the Board
Redemption Request	a written notice in the form from time to time prescribed by the Company and available upon request from the Administrator
Resolution	the ordinary resolution to be proposed at the EGM
Shareholder	a holder of Shares
Shares	ordinary share(s) of no par value
Sub-Adviser or AIRC	Atlantis Investment Research Corporation

Expected Timetable

10 March 2013 at 9:00 a.m.	Last date and time for Forms of Proxy to be returned
12 March 2013 at 9:00 a.m.	Extraordinary General Meeting of the Company
30 April 2013	Next Redemption Point

Enquiries

Tim Guinness

Chairman, Atlantis Japan Growth Fund Ltd

Tel:       [phone]

William Marle / John Armstrong-Denby

Edmond de Rothschild

Tel:       [phone]

Andrew Maiden

Northern Trust International Fund Administration Services (Guernsey) Limited

Tel:       [phone]

Email:   [e-mail]

 

END

 

 

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