Publication of Winding Up Circular (7671W)

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RNS Number : 7671W

Morant Wright Japan Inc. Tst. Ltd

24 November 2010

Morant Wright Japan Income Trust Limited (the "Company")

(a closed-ended investment company incorporated with limited liability under the laws of Guernsey with registered number 43839)

24th November 2010

Publication of Winding Up Circular

The Board of Morant Wright Japan Income Trust Limited today announce a proposal to appoint a liquidator and to place the Company into voluntary winding up which is to be put forward for consideration by Shareholders at a general meeting. In respect to this, the Company has published a circular (the "Circular") providing details of the Proposal and further information regarding the unwinding of the Swap and the Final Interim Dividend.

The Proposal is conditional on Shareholders passing the Liquidation Resolution at the forthcoming EGM on 15 December 2010. Terms used in this announcement have the same meaning as set out in the Circular.

Background to the Proposal

The Company was incorporated on 25 October 2005 as a closed-ended company with the investment objective of generating absolute returns for investors through a policy of investing in Japanese equities which the Investment Manager considered were strong but undervalued. In November 2005 the Company carried out an Offer and Placing raising approximately GBP142.2 million of initial capital (the "Issue"). In order to provide the Company with a high dividend yield, the Company entered into a cross currency swap arrangement with a five-year maturity (the "Swap Agreement") in respect of substantially the whole of the net proceeds of the Issue.

As set out in the Company's Prospectus dated 9 November 2005, the Swap Agreement has a five year maturity and will be unwound on 30 November 2010. Following the unwinding of the Swap, the Directors expect to resolve to declare a final interim dividend (the "Final Interim Dividend") on or around 2 December 2010. Further details regarding the unwinding of the Swap and the Final Interim Dividend are set out in sections 2 and 3, respectively, below.

Pursuant to the Articles of the Company, the Company has a fixed life of approximately five years and is due to be wound up on or around 15 December 2010 subject to the prior approval of the Shareholders by ordinary resolution. In relation to the proposed resolution to wind up the Company, the Articles provide that the Shareholders voting in favour of this resolution will collectively have sufficient votes for the resolution to be passed irrespective of the number of votes cast against.

In accordance with the provisions of the Articles summarised above, the Company has today announced a proposal to appoint a liquidator and to place the Company into voluntary winding up (the "Proposal") which is to be put forward for consideration by Shareholders at a general meeting to be held in Guernsey on 15 December 2010 at 10.00 a.m. (the "Extraordinary General Meeting"). The Notice of Extraordinary General Meeting is set out at the end of the Circular.

The Liquidation Resolution is subject to Shareholder approval by ordinary resolution at the Extraordinary General Meeting.

Dealings in the Shares will be suspended with effect from 7.30 a.m. on 15 December 2010.

At close of business on 22 November 2010, the Company's Shares were trading at a price of 43.75 pence. The Company's latest published NAV per Share is 45.97 pence and, as at 22 November 2010, its net assets were GBP65,353,435.93. In the event that the Liquidation Resolution is approved by Shareholders, the Liquidator currently intends, as soon as practicable following the passing of the Liquidation Resolution, to make an initial capital distribution to Shareholders on the Register at 7.30 a.m. as at 15 December 2010.

Currency Hedging Structure and the Swap Agreement

At inception the Company entered into the Swap Agreement with the Swap Counterparty. Pursuant to the Swap Agreement the Company paid substantially the whole of the Net Issue Proceeds of the Placing and the Offer (the "Sterling Principal") to the Swap Counterparty and in return, the Company received the equivalent amount in Yen (the "Yen Principal") based on prevailing exchange rates at that time.

The terms of the Swap Agreement require the gross assets of the Company to cover at least twice the sterling mark-to-market value of the Swap (where such value is negative) (the "Asset Coverage Ratio"). In the event that the Company's investments decreased in value and/or the value of Sterling depreciated against the Yen such that the Asset Coverage Ratio was not met, the Company was required to unwind a proportion of the Swap in order to meet the Asset Coverage Ratio. Since entering into the Swap, the Company has undertaken partial unwindings of the Swap on three occasions which, in aggregate, related to 50 per cent. of the original Swap notional amount.

The Investment Manager has realised the Japanese equity investments in the Company's investment portfolio during November 2010. The proceeds from such realisation will be used to repay the Yen Principal to the Swap Counterparty. The Investment Manager intends to hold the Company's assets in Sterling from 30 November 2010 onwards following the unwinding of the Swap.

On 30 November 2010 the remaining amount of the Swap will be unwound and the following payments are due to be made:

(a) the fifth anniversary interest payment - the Swap Counterparty is required to pay an interest payment of approximately GBP1.1 million to the Company and the Company is required to pay an interest payment of JPY 172.6 million to the Swap Counterparty; and

(b) the repayment of the principal - the Swap Counterparty is required to repay the notional Sterling Principal of GBP69.5 million to the Company and the Company is required to repay the notional Yen Principal of JPY 14.4 billion.

Final Interim Dividend

Subject to the Directors being able to do so in accordance with applicable law and regulation (including, without limitation, the Companies Law), the Directors intend to declare a Final Interim Dividend following the unwinding of the Swap. It is expected that the Final Interim Dividend will be paid to Shareholders on 14 December 2010. The Directors currently expect that the Final Interim Dividend will return income to Shareholders representing the net fifth anniversary interest payment received pursuant to the Swap (as summarised above) and the majority of retained income received from the Company's Japanese Equities Portfolio that has not already been distributed or utilised (which currently amounts to approximately GBP1,315,127).

Further details of the Final Interim Dividend are expected to be announced through the regulatory information service on or around 2 December 2010.

The Winding-up

The Liquidation Resolution will be proposed at the EGM and, if approved, will put the Company into voluntary winding-up.

If the Liquidation Resolution is approved by Shareholders at the EGM, Mr James Robert Toynton of Grant Thornton Limited will be appointed as the Company's Liquidator. Upon the appointment of the Liquidator at the Extraordinary General Meeting, all powers of the Board will cease and the Liquidator will be responsible for the affairs of the Company until it is wound up. The Investment Management Agreement between the Company and the Investment Manager will also be terminated upon the conclusion of the Extraordinary General Meeting if the Liquidation Resolution is approved.

The Liquidator will retain the Company's other current service providers (its Custodian, Northern Trust Global Services Limited and its Administrator, Secretary and Registrar, Northern Trust International Fund Administration Services (Guernsey) Limited) until the dissolution of the Company, at which point the Company's agreements with those service providers will be terminated.

The Liquidator will wind up the Company in accordance with the Companies Law. All distributions made by the Liquidator pursuant to the winding-up will be subject to the retention of certain assets in order to provide for the cost of implementation of the Proposal, any outstanding fees and payables of the Company (including the Liquidator's own fees) and an amount which the Liquidator considers sufficient to meet any contingent and unknown liabilities of the Company (the "Retention"). The Retention is not currently expected to exceed GBP50,000.

The Liquidator currently intends, as soon as practicable following the passing of the Liquidation Resolution, to make an initial capital distribution to Shareholders on the Register at 7.30 a.m. as at 15 December 2010. Any unutilised amount within the Retention will potentially be available for future distributions to Shareholders.

If the Liquidation Resolution is approved by Shareholders at the EGM, it is expected that the Guernsey Financial Services Commission will suspend the Company's authorisation under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended, and, once the liquidation is complete that authorisation will be cancelled.

If the Liquidation Resolution is not approved by Shareholders, the EGM will be adjourned following the vote on the Liquidation Resolution and the Directors will formulate proposals regarding the future of the Company. Those proposals will be announced through a regulatory information service as soon as practicable following the date of the EGM. Shareholders should note that it is highly unlikely that the Liquidation Resolution will not be approved owing to the provisions of the Articles that apply to the number of votes attaching to Shares voting for the Liquidation Resolution and the fact that the Directors intend to vote the Shares beneficially owned by them in favour of the Liquidation Resolution.

Cancellation of the Company's listing

In connection with the Company's entry into liquidation, the Company proposes to seek the cancellation of the listing of its Shares on the CISX and the Official List of the UKLA and their trading on the Main Market of the London Stock Exchange plc.

In the event that the Liquidation Resolution is approved by Shareholders the Company's listing on the Official List of the UK Listing Authority will be cancelled with effect from 8.00 a.m. on 16 December 2010. Application has also been made by the Company to cancel the listing of the Shares on the CISX with effect from 8.00 a.m. on 16 December 2010.

Estimated costs and net proceeds of the winding-up

It is anticipated that the costs and expenses of implementing the Proposal will be approximately GBP240,000 (which includes the Liquidator's estimated expenses of GBP25,000). When making distributions pursuant to the winding-up the Liquidator will establish a Retention of such amount as he considers appropriate, for the payment of his own fees and those of the Company's advisors in connection with the winding-up, as well as other payables.

Expected Timetable

 
 Final Interim Dividend declared                  on or around 2 December 2010 
---------------------------------  ------------------------------------------- 
 Final Interim Dividend Record                  expected to be 5.00 p.m. on 10 
  Date                                                           December 2010 
---------------------------------  ------------------------------------------- 
 Latest time and date for receipt                 By 10.00 a.m. on 13 December 
  of Forms of Proxy                                                       2010 
---------------------------------  ------------------------------------------- 
 Final Interim Dividend paid                   expected to be 14 December 2010 
---------------------------------  ------------------------------------------- 
 Suspension of dealings in the                   7.30 a.m. on 15 December 2010 
  Shares 
---------------------------------  ------------------------------------------- 
 Extraordinary General Meeting                  10.00 a.m. on 15 December 2010 
---------------------------------  ------------------------------------------- 
 Announcement of the result of                     by 6.00 p.m. on 15 December 
  the EGM                                                                 2010 
---------------------------------  ------------------------------------------- 
 Cancellation of the listing of                  8.00 a.m. on 16 December 2010 
  the Shares 
---------------------------------  ------------------------------------------- 
 

Enquiries

 
 Morant Wright Management Limited 
  Ian Wright 
  tephen Morant                                 [phone] 
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 J.P. Morgan Cazenove 
 William Simmonds 
  Edward Gibson-Watt                            [phone] 
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A copy of the Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do

This information is provided by RNS

The company news service from the London Stock Exchange

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