AVI Japan Opportunity Trust (AJOT) has proposed a merger with the £191m Fidelity Japan, ahead of the latter’s continuation vote in May.
AJOT said the merger would add “more firepower” to its ‘constructive activist’ investment approach, by allowing the trust to take more meaningful positions in companies.
Norman Crighton, chair of AJOT, said the board has closely followed Fidelity Japan over the last few years.
“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.
“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 shareholders will vote on the trust’s continuation on 21 May. The board have recommended voting in favour of continuation, and are yet to comment on the merger proposal.
AJOT has returned 77.9% over the last five years, according to FE Fundinfo, eclipsing Fidelity Japan’s 36.4% uplift over the same period.
See also: Trump places tariffs on all global trading partners, including 10% on UK
The proposal has been backed by Fidelity Japan’s largest shareholder City of London Investment Management, which holds a 23% stake in the investment trust.
City of London Investment Management’s Michael Sugrue said: “City of London Investment Management supports consolidation in the UK Investment Trust sector. We believe Trusts that deliver outperformance whilst protecting shareholder value through active discount management should be the beneficiaries.
“The manager of AJOT has delivered strong investment performance since inception and the ongoing discount control mechanisms implemented by the Board have protected shareholder value in an environment where many other closed end funds have seen their discounts significantly widen.”
AJOT are also planning to offer a cash exit of up to 25% to Fidelity Japan shareholders, if a deal can be agreed.
Fidelity Japan Trust currently trades at an 8.5% discount to NAV, while AJOT shares trade at a 2.38% discount, according to the AIC.
Last week (27 March), long-time Fidelity Japan portfolio manager Nick Price announced his retirement after 30 years at Fidelity.