Publication of Circular

RNS Number : 2109O

SchroderJapan Growth Fund PLC

08 October 2012

 



8 October 2012

Publication of Circular

The Board of Schroder Japan Growth Fund plc announces proposals which will allow the future net revenue of the Company to be paid out to Shareholders in the form of dividends. 

These proposals are conditional upon the approval of Shareholders in a General Meeting.  The Company has therefore today published a circular to Shareholders to provide details of these proposals and to call a general meeting to seek Shareholder approval to amend the Company's Articles. The General Meeting of the Company will be held at 31 Gresham Street, London, EC2V 7QA at 3.00 p.m. on Wednesday 7 November 2012.

Background to the proposals

In the Company's Half-Yearly Report to 31 January 2012 the Board announced proposals which would allow the future net revenue of the Company to be paid out to Shareholders in the form of dividends. The background to that announcement was that in recent years, the yield on the Japanese stock market, although volatile, had increased significantly and the Company was now producing revenue surpluses. However the Directors had been prevented by law from paying out this income to shareholders as dividends, due to the accumulated loss on the revenue account brought forward from prior years.

The Directors have concluded that this situation should be rectified and future net revenue earned by the portfolio should be paid out to investors in the form of dividends. Therefore, the Directors are seeking Shareholder approval to proposals under which the accumulated brought forward loss on revenue reserve will not inhibit the Company from paying dividends in the future.

The Company has been advised that the most efficient way of facilitating the change of dividend policy will be to remove the prohibition currently contained in the Company's Articles of Association on distributing capital profits by way of dividend or otherwise than by way of repurchase of the Company's issued share capital. Following recent changes to the tax and company law rules applicable to investment trusts that prohibition is no longer required. Its removal with effect from 7 November 2012 will enable the Company to pay out in the form of dividends to Shareholders all of its net revenue for accounting years beginning with the year to 31 July 2013. As a result of this change the Company will become legally able to distribute capital profits either in the form of dividends or in any other way.

Shareholders should note that the Directors only intend to distribute capital profits to the extent necessary to ensure that future net revenue earned by the portfolio is paid out to investors in the form of dividends in line with the new dividend policy.  The Directors do not intend to distribute in the form of a final dividend for the year ended 31 July 2012 any retained income which has arisen before 1 August 2012 unless this is required by HMRC, and may choose to retain an element of net revenue in future years which could be used to part fund dividend payments in the future.

The Directors intend the Company to continue to satisfy the continuing requirements for being an investment company under the Companies Act 2006 (which no longer require the distribution of capital profits to be restricted). In addition, these changes will not affect the Company's ability to be approved as an investment trust for UK tax purposes. However, failure to make these changes may prevent the Company from retaining its status as an investment trust.

In order better to reflect the increasing significance of income as part of total return, the Directors have, with effect from 1 August 2012, also adopted a revised allocation policy whereby management fees and finance costs are charged 70 per cent. to the capital account and 30 per cent. to the revenue account.

Shareholders should not expect future dividends to increase year on year as dividend income received from Japanese companies is expected to continue to be volatile.

There will be no change in investment policy or strategy to generate additional income.

Copies of the circular

A copy of the circular will shortly be available from the Company's website www.schroderjapangrowthfund.com. The circular has also been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do.

http://www.rns-pdf.londonstockexchange.com/rns/2109O_-2012-10-8.pdf 

Enquiries:

John Spedding

Schroder Investment Management Limited                                       

Tel: [phone]

 

END

 

 

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