Atlantis Japan Growth Fund — Combination with NAVF offers benefits for all

Atlantis Japan Growth Fund (LSE: AJG)

Last close As at 21/05/2024

GBP1.72

0.00 (0.00%)

Market capitalisation

GBP71m

More on this equity

Research: Investment Companies

Atlantis Japan Growth Fund — Combination with NAVF offers benefits for all

The Atlantis Japan Growth Fund (AJG) board has announced that it has agreed heads of terms for a proposed combination of its assets with those of Nippon Active Value Fund (NAVF). The proposal is intended to address AJG’s relatively small size – current assets under management (AUM) total c £78m ¬– and follows recent disappointing relative performance. The combination, which is subject to the approval of the shareholders of both AJG and NAVF, offers AJG shareholders ongoing exposure to the attractive investment opportunities available in the Japanese market, especially among cash-rich smaller companies. They may also benefit from the expertise of NAVF’s managers. NAVF has been the top-performing Japanese fund since its inception in February 2020 and its managers have over 30 years’ experience as active managers in this market. The proposal also includes the option for AJG’s shareholders to realise a portion of their cash if desired. The enlarged NAVF will offer all shareholders greater liquidity, as well as a likely reduction in ongoing costs.

Joanne Collins

Written by

Joanne Collins

Analyst, Investment Trusts

Investment Companies

Atlantis Japan Growth Fund

Combination with NAVF offers benefits for all

Trading update

Investment trusts
Japanese equities

16 August 2023

Price

172.0p

Market cap

£70.1m

AUM

£77.4m

NAV*

187.8p

Discount to NAV

8.4%

*At 15 August 2023.

Shares in issue

40.7m

Yield, based on current share price and last four dividend payments

5.0%

Code/ISIN

AJG/GG00B61ND550

Primary exchange

LSE

AIC sector

Japanese smaller companies

Fund objective

Atlantis Japan Growth Fund (AJG) aims to achieve long-term capital growth through investment wholly or mainly in listed Japanese equities. All investments are currently in Japanese equities of varying market caps.

Analyst

Joanne Collins

+44 (0)20 3077 5700

Atlantis Japan Growth Fundis a research client of Edison Investment Research Limited

The Atlantis Japan Growth Fund (AJG) board has announced that it has agreed heads of terms for a proposed combination of its assets with those of Nippon Active Value Fund (NAVF). The proposal is intended to address AJG’s relatively small size – current assets under management (AUM) total c £78m – and follows recent disappointing relative performance. The combination, which is subject to the approval of the shareholders of both AJG and NAVF, offers AJG shareholders ongoing exposure to the attractive investment opportunities available in the Japanese market, especially among cash-rich smaller companies. They may also benefit from the expertise of NAVF’s managers. NAVF has been the top-performing Japanese fund since its inception in February 2020 and its managers have over 30 years’ experience as active managers in this market. The proposal also includes the option for AJG’s shareholders to realise a portion of their cash if desired. The enlarged NAVF will offer all shareholders greater liquidity, as well as a likely reduction in ongoing costs.

Main points

NAVF is a UK investment trust that targets capital growth through the active management of a portfolio of stocks whose operations, or revenues, are mainly driven from Japan. NAVF’s investment adviser, Rising Sun Management Limited, focuses on unlocking the value in under-valued, cash-rich smaller companies. AJG’s board believes this approach aligns with recent developments in Japanese corporate governance, which encourage companies to return cash to shareholders via increased dividends and share buybacks. In the board’s view, active engagement with corporates on these matters has delivered strong returns in recent years and should ensure continued improvement in shareholder returns over time.

NAVF was launched in February 2020 and has since delivered a total return of 45.6% in NAV terms (in GBP terms), above the TOPIX Index return of c 25% (in GBP terms). This compares with AJG’s NAV decline of c 13% over the same period, which has been due, in part, to the rotation away from the growth stocks favoured by its adviser (see March note for details).

The proposal to combine with NAVF, which comes after a year of dialogue with AJG’s major investors, offers AJG shareholders a partial cash exit option of up to 25% of AJG’s shares in issue, at a 2% discount to NAV.

NAVF’s current AUM total c £165m. In addition to the proposed combination with AJG, it is presently completing a merger with Aberdeen Japan Investment Trust, whose AUM total c £93m. Once these two transactions are complete, NAVF’s AUM will total c £336m, providing all shareholders with a much more liquid investment vehicle.

And with costs spread over a larger pool of assets, AJG’s board expects the ongoing cost ratio of the enlarged NAVF to be ‘significantly less’ than AJG’s.

The proposal comes ahead of a continuation vote scheduled for AJG’s AGM in December 2023 and is likely to be finalised in the first half of 2024.

General disclaimer and copyright

This report has been commissioned by Atlantis Japan Growth Fund and prepared and issued by Edison, in consideration of a fee payable by Atlantis Japan Growth Fund. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Atlantis Japan Growth Fund and prepared and issued by Edison, in consideration of a fee payable by Atlantis Japan Growth Fund. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Atlantis Japan Growth Fund

View All

Latest from the Investment Companies sector

View All Investment Companies content

Research: Financials

CoinShares International — Maintaining AUM leadership in Europe

CoinShares International (CS) delivered another solid set of quarterly results, with Q223 EBITDA of £12.8m versus £8.4m in Q123. Its asset management business generated fee revenue of £10.6m (down from £14.2m in Q222, but up from £9.2m in Q123) as total AUM rebounded to £2.14bn at end-June 2023 from £1.44bn at end-2022. Its capital market infrastructure activities (CSCM) posted a £10.0m gain in Q223, bolstered primarily by fixed income, staking and decentralised finance (DeFi) activities. CS is continuing to develop its active asset management business, starting with running its first strategy to generate a track record ahead of the formal launch towards the end of 2023.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free