Avi Japan Opportunity Trust PLC (AJOT)

(Alliance News) - Fidelity Japan Trust PLC on Friday rejected a proposed merger with AVI Japan Opportunity Trust PLC, saying its own investment team is "one of the best resourced in the industry".

AVI Japan on Thursday had said it proposed a merger with Fidelity Japan to create a larger, more liquid investment trust focused on Japanese equities, but complained that the Fidelity Japan board hasn't engaged in "constructive dialogue" over the idea.

AVI Japan Opportunity said the merger of the two London Main Market listings has the backing of Fidelity Japan Trust's largest shareholder, City of London Investment Management Co Ltd, which has a 23% stake.

However, Fidelity Japan early Friday said its board reviewed and rejected the non-binding indicative proposal from AVI Japan and is recommending shareholders vote for continuation of the trust at its annual general meeting in May.

AVI Japan argued that Fidelity Japan shareholders would benefit from its own share price's narrower discount to net asset value, which it put at 0.05% on average for its shares since 2018, compared to 9.35% for Fidelity Japan.

"We have sought to engage with the FJV board on numerous occasions to discuss the combination of the two companies to create a market leading Japanese investment trust," said AVI Japan Chair Norman Crighton.

"We were disappointed to read in FJV's final results statements that the FJV board recommends a continuation of the status quo, with no liquidity offered until 2028, instead of engaging in constructive dialogue regarding our proposal, which we believe is in the best interests of all shareholders."

Fidelity Japan holds its continuation vote on May 21.

"The board believes it is appropriate to allow all shareholders a chance to vote on the company's continuation in May and does not consider it is in shareholders' interests to take forward the AJOT proposals in isolation at this time," said Fidelity Japan Chair David Graham.

"Regardless of the outcome of the continuation vote, the board will always consider any proposal it receives as a matter of good corporate governance."

Fidelity Japan noted that managers Fidelity have had a presence in Japan since 1969 and its own NAV is up 146% in the past 10 years, compared to 140% for its reference index.

Fidelity Japan shares were down 1.2% to 165.00 pence in London on Friday morning, giving the trust a market capitalisation of GBP187.6 million.

AVI Japan shares were down 1.2% to 149.00p for a GBP202.8 million market cap.

By Tom Waite, Alliance News editor

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