AVI Japan Opportunity Trust (AJOT) will be offering shareholders the opportunity to tender all or part of their shareholdings in the company at a 2% discount to NAV. When AJOT was launched in October 2018, its IPO prospectus said that the directors may, at their discretion, offer a full or a partial exit opportunity to shareholders in October 2022 and every two years thereafter. The rationale was that if the original investment thesis did not generate the expected returns, or if circumstances had changed to make Japan unattractive, shareholders would be offered the opportunity to exit at close to NAV if they wished.
AJOT’s board says that, although neither of the scenarios above have materialised (it and the manager firmly believe that the opportunities are now even more attractive than they were when the company was launched in 2018), the board believes shareholders should be offered an exit opportunity close to NAV on a regular basis. The board says that, although the tender price will be at a 2% discount to NAV, other costs and expenses incurred in relation to the tender will be borne by AJOT, and the tender is subject to approval by shareholders at a general meeting (the board expects to publish a circular in the coming weeks).
AJOT’s board says that it does not intend to participate in the tender offer and highlights that shareholders who wish to realise their shareholding may be able to achieve a higher price on the stock market than is expected to be offered under the 2024 exit opportunity. Accordingly, shareholders not wishing to realise their shareholding in AJOT should not take any action. Given the board’s keen focus on corporate governance, it says that it will in the future offer the exit opportunity on an annual basis (rather than biennially), with another exit opportunity being made available to shareholders in October 2025, and every twelve months thereafter.
AJOT’s board highlights that it has an active discount management policy, and monitors its discount/premium situation closely, seeking to ensure that shareholders are protected from the downside of a widening discount while also taking advantage of any premium at which the shares may trade to grow the trust. AJOT’s board says that it expects the proposed annual tender offers to enhance its existing approach to discount management, providing a strong platform for future growth of AJOT.
