Recommended Proposals
13 7월 2001 - 12:49AM
UK Regulatory
RNS Number:8306G
Henderson Japanese Smlr Cos Tst PLC
12 July 2001
Henderson Japanese Smaller Companies Trust plc (the "Company")
Recommended Proposals for the winding-up and scheme of reconstruction of the
Company
Introduction
The board of Directors (the "Board") announced on 16 May 2001 that, following
consultation with the Company's then principal shareholders, the Directors had
concluded that proposals should be put to the Company's shareholders
("Shareholders") for the voluntary liquidation of the Company so as to provide
Shareholders with an opportunity to realise some or all of their investment in
the Company for cash together with the option to roll over their investment
into an open-ended vehicle managed by Henderson Global Investors ("HGI").
Background to the Proposals
The Board's belief at the time of the launch of the Company in October 1993
that the Japanese economy was about to recover and that smaller company stocks
would outperform larger company stocks in Japan as they had tended to do over
the previous 25 years, has proved misplaced. The asset class of smaller
Japanese companies has remained out of favour with investors and this has been
reflected in the discounts at which Japanese smaller companies investment
trusts have traded over recent years.
In addition, the Board has been particularly concerned that the investment
performance of the Company over much of the past three years has consistently
lagged behind that of its main benchmark, the TSE Second Section Index, and
also TOPIX, the index of the TSE First Section. Furthermore, the discount to
net asset value at which the shares in the Company ("Shares") have traded has
often been greater than that of peer Japanese smaller companies investment
trusts, notwithstanding that since the approval of a buy-back programme at the
Company's AGM in November 1999 approximately 20 per cent. of the then issued
Shares have been bought back.
The annual reports to Shareholders have noted the measures that the Board and
HGI, as the Company's investment manager, have taken with the aim of improving
the Company's performance: the rebalancing of the portfolio from its
concentration on value stocks by increasing its holding of growth stocks, the
reduction in the size of the relatively illiquid micro-portfolio, the transfer
of responsibility for the investment of the portfolio from London to Tokyo and
the introduction of an incentive management fee against a reduction in the
basic management fee. In recent months there has been some improvement in the
performance of the Company relative to its peers, but earlier
underperformance, combined with the uncertain outlook for the Japanese economy
and stockmarkets, makes it unlikely, in the Board's opinion, that the net
asset value per Share will have increased to the price at which Shares were
first issued at the Company's launch before a continuation vote would have to
be put to Shareholders at the Company's AGM in 2003.
In these circumstances the Board is conscious of the undertaking in the
Company's original prospectus that in the event that Shares traded at a
substantial and sustained discount to net asset value it would consider what
action should be taken. After considering with its advisers and principal
Shareholders the various options available to the Company, the Board has
concluded that Shareholders' interests will best be served by being given the
opportunity to maintain their exposure to Japanese equities or to realise
their holding for cash or, in certain circumstances as set out below, to
receive an in-specie distribution of the Company's investments. The proposals
detailed below (the "Proposals") are designed to implement that conclusion.
Options for Shareholders under the proposals
The Proposals, which are subject to the approval of Shareholders at two
extraordinary general meetings (together the "Meetings"), provide for the
reconstruction of the Company pursuant to a scheme of reconstruction under
section 110 of the Insolvency Act (the "Scheme") and for the division of the
Company's undertaking based upon elections ("Elections") made by Shareholders.
Shareholders who are on the share register at 5.00 pm on 1 August 2001 (other
than overseas shareholders), may elect to receive, in any proportion:
- shares in the Henderson Japan Capital Growth Fund (the
"Japan Fund"), a sub-fund of the Henderson Global
Funds which is an open-ended investment company (the
"Japan Fund Option"); and/or
- for Shareholders holding in excess of 5 per cent. of
the Company's issued share capital on the record date
("In-specie Eligible Shareholders"), an in-specie
distribution of investments of the Company (the "In-
specie Option"); and/or
- Cash (the "Cash Option").
(a) Japan Fund Option
Shareholders electing for the Japan Fund Option will receive shares in the
Henderson Japan Capital Growth Fund ("Japan Fund Shares"). The Japan Fund is a
sub-fund of Henderson Global Funds, an open-ended investment company, which
aims to provide capital growth by investing in Japanese companies. By contrast
with the Company, the Japan Fund is not restricted in the size of companies in
which it can invest and currently maintains a core portfolio of larger and
medium sized companies. The Japan Fund is managed by William Garnett, who has
14 years' experience of managing Japanese equities. The Japan Fund qualifies
as an investment for ISAs and PEPs. As at 9 July 2001 (the latest practicable
date prior to the printing of the circular), the net asset value of the Japan
Fund was approximately #41.8 million comprising 36 holdings.
(b) In-specie Option
Shareholders who hold in excess of 5 per cent. of the Company's issued share
capital at 5.00 pm on 1 August 2001 may elect to receive an in-specie
distribution of the Company's investments in respect of the whole or any part
of their holding representing in excess of 5 per cent. of the Company's issued
share capital. Subject as provided below, an In-specie Eligible Shareholder
who elects for this option will receive as nearly as may be a proportional
share of the investments of the Company, based upon the portfolio of the
Company at the time of passing of the resolutions to be proposed at the first
Meeting and having an aggregate value as at the calculation date equal to the
terminal asset value.
HGI may, at its discretion and with the agreement of the liquidators, deem it
appropriate to exclude any such investments from those to be distributed
pursuant to the In-specie Option. In such event or as a result of market
movements or to take account of fractional entitlements of investments, the
investments to be distributed will then be adjusted in such manner as HGI,
with the agreement of the Company's liquidators, may determine or an amount of
cash added in lieu.
(c) Cash Option
Shareholders may also elect to receive cash in respect of all or part of their
holding of Shares. The amount of cash to be received for each Share in respect
of which an election for the Cash Option is made (or deemed to be made) will
be the terminal asset value calculated in accordance with the terms of the
Scheme.
Whilst the exact amount payable to Shareholders cannot be calculated until the
calculation date (expected to be 9 August 2001), on the basis of the net asset
value per Share of 46.81p on 9 July 2001 (the latest practicable date prior to
the printing of the circular), the Directors estimate that the terminal asset
value (excluding any portfolio realisation costs) would have been 45.93p per
Share. It should be noted that this figure is given for illustrative purposes
only and should not be regarded as a forecast.
Warrantholders
The terms and conditions of the warrants in the Company ("Warrants") enable
the holding of a Warrant to subscribe for one Share at a subscription price of
100p on either of the two remaining subscription dates of 30 November 2001 and
30 November 2002. As at 15 May 2001 (the day prior to the announcement of the
Company's intention to put forward winding-up proposals) the mid-market price
of a share was 46p. The terms and conditions also provide for the potential
compensation of holders of Warrants should the Company be wound up prior to 30
November 2002, the final date of exercise of the Warrants. These provisions
operate by reference to the average price of a Warrant in the 10 days prior to
the Directors announcing their intention to wind up the Company and to the
distribution which a Shareholder would receive, on a winding-up, if all
Warrants were exercised. Based upon the net asset value per Share of 46.81p as
at 9 July 2001 (the latest practicable date prior to the printing of the
circular) and then adjusted in accordance with the terms and conditions of the
Warrants, no compensation would be payable to holders of Warrants.
Under the terms and conditions of the Warrants, the Company is not required to
seek the approval of the holders of the Warrants for either the implementation
of the Scheme or the winding-up of the Company.
Implementation of the Proposals
For the purposes of implementing the Proposals, Shares will be reclassified
pursuant to a special resolution to be proposed at the first Meeting in
accordance with elections made by Shareholders ("Elections") and deemed
Elections. A special resolution will also be proposed at the first Meeting to
approve the Scheme.
Following the Company being placed into members' voluntary liquidation at the
second Meeting, the liquidators will set aside in a liquidation pool, to be
established by them in accordance with the Scheme (the "Liquidation Pool"),
sufficient assets to meet the Company's actual and contingent liabilities
including, the expenses of the Scheme. The remaining assets will then be
divided in accordance with elections and either realised to meet the sums due
to Shareholders who have validly elected (or are deemed to have elected) to
receive cash, transferred to the Japan Fund in consideration for the issue of
Japan Fund Shares or distributed to In-specie Eligible Shareholders by way of
a distribution in kind in the Company's winding-up.
It is currently estimated by the liquidators that the amount to be set aside
in the Liquidation Pool to provide for contingencies over and above the
Company's known liabilities will be #100,000. To the extent that the amount
set aside for liabilities is not required, any cash balance remaining in the
hands of the liquidators on the termination of the liquidation will be paid as
one or more liquidation distributions to the Shareholders on the share
register on the effective date, provided that if such amount payable to any
Shareholder is less than #3, it will be distributed to the Japan Fund. The
precise timing of any distribution will depend on the progress of the
liquidation and the receipt by the liquidators of confirmation from the
appropriate tax authorities that the Company has no outstanding tax
liabilities.
Under the terms of the Scheme, a portfolio of Japanese securities and cash
will be transferred by the liquidators to the Japan Fund in consideration for
the issue of Japan Fund Shares to Shareholders who elect or are deemed to
elect for the Japan Fund Option. Japan Fund Shares will be issued for this
purpose at the issue price at 12.00 noon on the effective date of the Scheme
(expected to be 13 August 2001), as calculated by Henderson Investment Funds
Limited and no initial charge will be levied in relation to them.
The Proposals are conditional, inter alia, upon the passing by Shareholders of
the resolutions to be proposed at the Meetings. If the Proposals are not
approved in full by Shareholders on or before 31 October 2001 the Scheme will
not be implemented, the Company will continue in existence as before and the
Directors will consider all of the options which remain available to them.
Benefits of the Proposals
The Board believes the Proposals provide a number of attractive features for
Shareholders:
- greater choice and more flexibility for Shareholders than
if the Company is simply wound up, as Shareholders may
choose to retain an ongoing Japanese equity exposure
through the Japan Fund and/or, if eligible, an in-specie
distribution of the Company's assets and/or cash;
- Japan Fund Shares are priced at their net asset value and
no initial charge will be levied by Henderson Investment
Funds Limited on Japan Fund Shares to be issued pursuant
to the Proposals;
- those Shareholders who are subject to capital gains tax
who wish to maintain their exposure to Japanese equities
will be able to roll over their investment in the Company
into Japan Fund Shares without crystallising an immediate
charge to capital gains tax;
- for those In-specie Eligible Shareholders who wish to
retain a direct exposure by holding Japanese securities,
the Proposals provide for an in-specie distribution of
the investments of the Company at close to net asset
value; and
- for those Shareholders who wish to realise some or all of
their investment, the Proposals provide the opportunity
to receive cash at close to net asset value.
Failure to make an Election
If the Proposals become effective, Shareholders, other than overseas
shareholders, who make no Election will be deemed to have elected for the
Japan Fund Option in respect of their total holding of Shares.
Costs and Expenses
The direct costs of the Proposals, excluding any portfolio realisation costs
which may be incurred, are estimated to amount to 0.88p per Share,
representing 1.88 per cent. of the net asset value per Share of 46.81p as at 9
July 2001 (the latest practicable date prior to the printing of the circular).
Management Agreement
If the Proposals are approved, the existing management agreement between the
Company and HGI will be terminated on the effective date. HGI has agreed to
waive its right to receive a fee in respect of the termination of this
agreement which would have amounted to #431,126 (excluding VAT).
Interim Dividend
The Directors do not intend to pay a dividend to Shareholders in respect of
the current financial year.
Overseas Shareholders
Overseas Shareholders will not receive a form of election. If the Proposals
become effective, Overseas Shareholders will be deemed to have made an
election for the Cash Option.
It is the responsibility of Shareholders who are resident in, or citizens of,
jurisdictions outside the United Kingdom to inform themselves about and
observe any legal requirements in their relevant jurisdiction. Shareholders
who are subject to taxation outside the United Kingdom should consult their
tax advisers as to the treatment of the cash proceeds received by them under
the Proposals.
Dealings and Settlement
(a) Shares and Warrants
If the Proposals are approved, the following will occur:
Registers
The registers of Shares and Warrants will be closed and both the Shares and
Warrants will be disabled in CREST at 5.00 pm on 1 August 2001. The last day
for dealings in either Shares or Warrants on the London Stock Exchange, for
normal account settlement (to enable settlement prior to the Record Date),
will accordingly be 27 July 2001. As from 27 July 2001, dealings should be for
cash settlement only and will be registered in the normal way if the transfer,
accompanied by the documents of title, is received by the registrar by 5.00 pm
on 1 August 2001. Transfers received after that time will be returned to the
person(s) lodging them.
After the liquidation of the Company and the making of any final distribution
to Shareholders out of the Liquidation Pool, existing certificates in respect
of Shares and Warrants will cease to be of value for any purpose and any
existing credit of Shares and Warrants in any stock account in CREST will be
redundant.
Dealings
Application will be made to the London Stock Exchange for dealings in the
reclassified shares to commence at 8.00 am on 10 August 2001 and it is
expected that dealings will be suspended at 8.00 am on 13 August 2001. The
reclassified shares are expected to be delisted some time after the Company's
assets have been transferred to the Japan Fund or distributed in kind to In-
specie Eligible Shareholders in accordance with the Scheme.
(b) Japan Fund Shares
If the Proposals are approved, Japan Fund Shares are expected to be issued on
13 August 2001 and contract notes despatched on 14 August 2001.
(c) In-specie Distributions
Transfers of securities and cash to In-specie Eligible Shareholders are
expected to be made in the week commencing 20 August 2001.
(d) Cash
Cheques in respect of the initial distribution payable to those Shareholders
electing to receive cash are expected to be despatched in the week commencing
20 August 2001. Amounts receivable by Shareholders who are entitled to receive
a distribution of over #100,000 and who have completed the relevant account
details on the form of election, are expected to be despatched by CHAPS, at
the recipient's expense, in the week commencing 20 August 2001.
Shareholder Meetings
First Extraordinary General Meeting
The first Meeting is being convened for 10.30 am on 3 August 2001. At this
Meeting, at which all Shareholders may attend and vote, special resolutions
will be proposed to approve the Scheme, to reclassify Shares pursuant to
Elections under the Scheme, to make the necessary changes to the Articles and
to authorise the implementation of the Scheme by the liquidators. The Scheme
will not become effective until the passing of the resolutions to be proposed
at the second Meeting.
The quorum requirement for the first Meeting will be two persons entitled to
attend and vote, each being a Shareholder or a proxy.
The resolutions will require the approval of not less than 75 per cent. of the
votes cast by those Shareholders present in person on a show of hands or
present in person or by proxy on a poll.
Second Extraordinary General Meeting
The second Meeting is being convened for 10.30 am on 13 August 2001. At this
Meeting, at which all Shareholders may attend and vote, a special resolution
will be proposed to approve the winding-up of the Company and to appoint the
liquidators and an extraordinary resolution will be proposed to confer
appropriate powers on them. The resolutions to be proposed at the second
Meeting are conditional upon the Scheme being approved at the first Meeting.
The quorum requirement for the second Meeting will be two persons entitled to
attend and vote, each being a Shareholder or a proxy.
The resolutions will require the approval of not less than 75 per cent. of the
votes cast by those Shareholders present in person on a show of hands or
present in person or by a proxy on a poll.
If the Proposals are approved they will bind all Shareholders whether or not
they have voted in favour of the Proposals at the meetings, except for those
Shareholders who validly dissent as provided in section 111(2) of the
Insolvency Act 1986.
Shareholder Intentions
Shareholders representing 41.7 per cent. of the Company's issued share capital
have indicated their intention to vote in favour of the resolutions to be
proposed at the Meetings.
Recommendation
The Board, which has been advised by Hoare Govett, believes that the Proposals
set out in the circular despatched to Shareholders today are in the best
interests of the Company and of Shareholders as a whole. In providing its
advice Hoare Govett has taken into account the Directors' commercial
assessment of the Proposals.
Accordingly, the Board unanimously recommends Shareholders to vote in favour
of the resolutions to be proposed at the Meetings irrespective of any Election
they may wish to make. The Directors, who own 94,603 Shares in aggregate
(representing 0.12 per cent. of the Shares in issue), intend to vote their
entire holdings in favour of the Proposals.
The choice between the options available under the Proposals is a matter for
each Shareholder to make and will be influenced by Shareholders' individual
financial and tax circumstances and their investment objectives. Shareholders
should seek advice from their own independent financial advisers authorised
under the Financial Services Act 1986.
Enquiries:
Anthony Loehnis 020 7925 1144
Chairman
Stephen Westwood 020 7818 5517
Henderson Global Investors Limited
Bob Cowdell 020 7678 8000
Hoare Govett Limited
Hoare Govett Limited, which is regulated by the Securities and Futures
Authority Limited, has approved the contents of this document solely for the
purposes of Section 57 of the Financial Services Act 1986. Hoare Govett
Limited is acting exclusively for Henderson Japanese Smaller Companies Trust
plc and for no-one else and will not be responsible to anyone other than
Henderson Japanese Smaller Companies Trust plc for providing the protections
afforded its customers or for providing advice in relation to the Scheme or
any matter referred to in this announcement.
Hend.Jap.Sml.Co (LSE:HJS)
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