Fidelity Japan’s board has been talking to its shareholders post the announcement of its results and ahead of the upcoming continuation vote at its AGM. It now has the impression that shareholders will not support its continuation. It also says that it has subsequently received a small number of unsolicited and credible indicative proposals from outside parties (readers will remember that AVI Japan Opportunity has been vocal about its desire to absorb the company).
The continuation vote must still be put to the AGM on 21 May 2025. The board continues to recommend shareholders vote in favour of all the resolutions being put at the AGM, including the continuation resolution. It is also submitting a resolution which proposes to extend the time permitted to draw up proposals regarding the company’s voluntary liquidation and/or reorganisation in the event of an unsuccessful continuation vote.
At present the board would have three months from the date of the vote to draw up proposals and to convene and hold a general meeting. It is proposed to increase this to six months. The proposed new timeframe is felt to provide a more realistic time period to facilitate due diligence, for proposals to be fully considered, and is in line with market practice.
In the meantime, a strategic review will begin immediately. Stifel Nicolaus Europe Limited has been instructed to prepare a process which will invite formal proposals to be made privately to the board. The focus will be on those parties who are able to demonstrate a current record of managing Japanese equities in an existing London listed investment company structure. This process will include an invitation to AVI Japan Opportunity Trust Plc.
If the continuation resolution is not approved by a majority of shareholders at the AGM, the board is currently assuming that, as a result of the review, the company is likely to enter into a scheme of reconstruction pursuant to section 110 of the Insolvency Act 1986 later in 2025. Any s110 scheme would need 75% shareholder approval. As part of the review, the board will not actively consider the option of a transaction that would be subject to the Takeover Code, and do not believe such a transaction is a possible outcome of that review.
The board has decided to suspend share buybacks.
[If we look to past performance, returns on the two corporate governance-focused Japan small cap trusts – AVI Japan and Nippon Active Value – are way ahead of the competition. As I have indicated before, if it comes down to a choice between those two, I would pick the AVI trust. If shareholders want to stick with large caps, JPMorgan Japanese is demonstrating that it is navigating the current market turmoil better than the other contender Schroder Japan.]
FJV : Fidelity Japan bows to the inevitable and launches strategic review
