TIDMJMF
RNS Number : 3043T
JPMorgan Mid Cap Invest Trust PLC
14 November 2023
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
IN WHOLE OR IN PART, IN OR INTO, THE UNITED STATES OF AMERICA
(INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED
STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW
ZEALAND, THE REPUBLIC OF SOUTH AFRICA, IN ANY MEMBER STATE OF THE
EEA OR IN ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE
UNLAWFUL.
This announcement is not an offer to sell, or a solicitation of
an offer to acquire, securities in the United States or in any
other jurisdiction in which the same would be unlawful. Neither
this announcement nor any part of it shall form the basis of or be
relied on in connection with or act as an inducement to enter into
any contract or commitment whatsoever.
14 November 2023
JPMorgan Mid Cap Investment Trust plc
Legal Entity Identifier: 549300QED7IGEP4UFN49
Proposed Combination with JPMorgan UK Smaller Companies
Investment Trust plc
Introduction
The Board of JPMorgan Mid Cap Investment Trust plc (the
"Company" or "JMF") is pleased to announce that it has signed Heads
of Terms with the Board of JPMorgan UK Smaller Companies Investment
Trust plc ("JMI") in respect of a proposed combination of the
Company and JMI. The combination, if approved by each company's
shareholders, will be effected by way of a scheme of reconstruction
of the Company under section 110 of the Insolvency Act 1986 (the
"Scheme") and issuance of new ordinary shares of JMI as
consideration for the transfer of part of the Company's assets
(together with the Scheme, the "Transaction"). Under the terms of
the Scheme, an up to 15 per cent. cash exit opportunity will be
offered to enable the Company's shareholders to realise part of
their investment in the Company.
The Board of the Company believes that the Transaction will
enable those JMF shareholders rolling over into JMI to benefit
from, inter alia, continued exposure to a UK long-only equity
strategy delivered by one of the leading managers of closed-ended
investment vehicles in the UK, and also the greater economies of
scale that are expected to result from the enlarged asset base,
including cost efficiencies and greater liquidity in JMI's
shares.
As at 10 November 2023 JMI had net assets of GBP228 million and
on a net asset value total return basis, it has outperformed its
benchmark, The Numis Smaller Companies plus AIM (excluding
Investment Companies) Index over one (+5.3 per cent.), three (+1.0
per cent.), five (+28.6 per cent.) and ten (+34.4 per cent.) years
to 31 October 2023 [1] . Both the Company and JMI invest for
capital growth and, whilst JMI's investment objective is to invest
in a diversified portfolio of UK listed smaller companies, as
opposed to the Company's objective of investing in medium-sized UK
listed companies, there is a significant overlap in the holdings of
the two portfolios, with both portfolios managed by the same lead
portfolio managers. As at 31 October 2023 there was a commonality
in portfolio holdings between JMI and JMF of c.50%.
The current investment manager of both companies, JPMorgan Funds
Limited ("JPMorgan"), and the Company's lead portfolio managers,
Georgina Brittain and Katen Patel, will, following the successful
completion of the Transaction, continue to manage the enlarged JMI,
investing in accordance with JMI's existing investment objective
and policy.
In addition, although the Company's objective is to deliver
capital growth, the level of dividends paid by JMI is a key
consideration for the Board of the Company. As part of the
Transaction, the Board of JMI has agreed to implement an enhanced
dividend policy targeting a 4 per cent. yield on net asset value
per annum, calculated on the basis of 4 per cent. of net asset
value as at the end of the preceding financial year, payable in
equal quarterly instalments. Based upon a net asset value of
971.37p (as at 10 November 2023), the Company's total dividend of
31.75p for the 2022/2023 financial year represented a dividend
yield of 3.26 per cent.
Summary of the Scheme
The Transaction will be effected by way of a scheme of
reconstruction of the Company under section 110 of the Insolvency
Act 1986, resulting in the Company's voluntary liquidation and the
transfer of part of the Company's assets to JMI in exchange for the
issue of new ordinary shares of JMI (" New JMI Shares ") to
existing JMF shareholders (" JMF Shareholders "). The number of New
JMI Shares issued to JMF Shareholders will be determined on a
Formula Asset Value ("FAV") for FAV basis. The FAVs shall be
calculated based on the net asset value of each of the Company and
JMI on an agreed calculation date, less each party's transaction
costs.
In accordance with customary practice for such transactions
involving investment trusts, the City Code on Takeovers and Mergers
is not expected to apply to the Transaction. The Transaction will
be subject to, inter alia, the approval of JMF Shareholders and the
shareholders of JMI, in addition to necessary regulatory and tax
approvals.
Subject to, and conditional on, the Scheme becoming
unconditional and the Transaction completing successfully, JMF
Shareholders will be entitled to elect to receive in respect of
some or all of their JMF shares:
(i) New JMI Shares; and/or
(ii) a cash distribution (the "Cash Option") which, on an
aggregate basis will be limited to 15 per cent. of the Company's
shares in issue (excluding treasury shares). Should total elections
for the Cash Option exceed 15 per cent. of the Company's shares in
issue (excluding treasury shares), excess elections for the Cash
Option will be scaled back into New JMI Shares on a pro rata
basis.
New JMI Shares will be issued as the default option under the
Scheme in the event that JMF Shareholders do not make a valid
election under the Scheme or only elect for the Cash Option in
respect of a proportion of their shares, or to the extent elections
for the Cash Option are scaled back as a result of the Cash Option
being oversubscribed.
The Cash Option will be offered at a discount of 2 per cent. to
the Company's FAV (the "Cash Discount") less the costs of realising
the assets allocated to the cash pool. The Cash Discount will be
for the benefit of the enlarged JMI.
The assets subject to the Cash Option will be segregated from,
and treated as separate to, the assets to be transferred to JMI
pursuant to the Scheme.
Benefits of the Scheme
The board of directors of both JMI and JMF believe that the
Scheme has a strong rationale, which includes the following
benefits:
-- Scale: The enlarged JMI is expected to have net assets in
excess of GBP430 million [2] , creating a leading investment
vehicle for UK smaller companies that provides exposure to fast
growing, innovative companies that help drive the UK domestic
economy and an attractive dividend yield. The scale of the enlarged
company should improve secondary market liquidity for its
shareholders and will allow for cost efficiencies;
-- Reduced management fee for the enlarged JMI: Following
completion of the Transaction, JPMorgan has agreed to lower the
threshold for tiering the management fee payable by the enlarged
JMI from 0.65 per cent. p.a. on JMI's net assets up to GBP300
million and 0.55 per cent. p.a. thereafter to 0.65 per cent. p.a.
on JMI's net assets up to GBP200 million and 0.55 per cent. p.a.
thereafter (the "New Management Fee"), to align with the Company's
existing management fee.
The re-tiering of the management fee has the effect of
delivering a reduction in the blended fee rate for shareholders of
2.7 basis points, assuming that 85 per cent. of JMF's net assets
are rolled over into JMI following a full take-up of the Cash
Option;
-- Lower ongoing charges: Shareholders in the enlarged JMI are
expected to benefit from an ongoing expense ratio of c.0.80 per
cent., considerably lower than the Company's ongoing expense ratio
of 0.93 per cent. for the last financial year;
-- Contribution to costs: As described below, JPMorgan has
agreed to make a significant cost contribution in respect of the
Transaction by way of a fee waiver which is expected to offset some
of the direct transaction costs for shareholders in the enlarged
JMI;
-- Three-year continuation vote: At present, the Company does
not have a commitment to hold a continuation vote in the future.
The enlarged JMI will retain JMI's existing continuation vote which
is put to shareholders every three years; and
-- Shareholder diversification: The Transaction will allow a
number of shareholders to consolidate their holdings across the two
companies while also creating a more diverse shareholder base.
Costs of the Transaction
Each company will bear its own costs in respect of the
Transaction which will be reflected in the FAV for each
company.
For the avoidance of doubt, any costs of realignment or
realisation of the Company's portfolio prior to the Scheme becoming
effective, any stamp duty, stamp duty reserve tax or other
transaction tax, or investment costs incurred by JMI for the
acquisition of the Company's portfolio or the deployment of the
cash therein upon receipt shall be borne by the enlarged JMI,
including the London Stock Exchange admission fees.
JPMorgan Cost Contribution
JPMorgan has proposed a contribution to the costs of the
Transaction in the form of a fee waiver, being six months of the
New Management Fee payable by the enlarged JMI in respect of the
net asset value of the assets transferred from the Company to JMI
under the Scheme ("Cost Contribution").
The net asset value of the assets transferred under the Scheme
are currently estimated to be approximately GBP210 million [3]
.
The Cost Contribution will be for the benefit of the
shareholders of the enlarged JMI.
Debt Facilities
It is expected that the Company's existing facilities will be
repaid and closed prior to the implementation of the Scheme and JMI
has the capacity under its existing arrangements to maintain a
constant level of gearing inclusive of the capital being received
in the combination.
Final Dividend
There is no change proposed to the Company's final dividend,
which is due to be paid on 15 November 2023. The Company expects to
pay out a significant proportion of its accumulated revenue
reserves via a pre-liquidation dividend to all JMF Shareholders in
lieu of the first half yearly dividend payable in 2024.
Board Structure
Following completion of the Transaction, it is expected that the
Board of the enlarged JMI will consist of seven directors, four
from the current board of JMI and three new directors from the
board of the Company. It is intended that one of the former Company
directors will step down at, or prior to, the enlarged JMI's 2024
AGM.
New Name
It is proposed that the enlarged JMI will be renamed JPMorgan UK
Small Cap Growth & Income plc, with JUGI as the new ticker.
Expected Timetable
It is intended that the documentation in connection with the
Transaction will be posted to shareholders in January 2024, with a
view to convening general meetings in February 2024. The latest
date for the Scheme to be determined to be unconditional is 31
March 2024, unless extended by mutual agreement of the Company and
JMI.
The Chairman of the Company, John Evans, commented:
"The Board believes that the proposed combination with JPMorgan
UK Smaller Companies Investment Trust plc will provide shareholders
with continuity of investment process and philosophy but within a
broader market opportunity. The new combined vehicle will afford
the managers the freedom to allocate capital across the enlarged
universe where the opportunities are most attractive including
maintaining, if they consider it appropriate, a significant
exposure to constituents of the FTSE 250 Index, while also
investing in AIM traded companies.
The proposed combination will create a larger and more liquid
investment trust with significantly lower overall costs. It will
also make full use of the investment trust structure, with the new
enhanced dividend policy, providing income as well as the potential
for capital growth for its shareholders."
For further information please contact:
JPMorgan Mid Cap Investment Trust plc Contact via Company Secretary
John Evans
JPMorgan Funds Limited
Simon Crinage
Fin Bodman +44 (0) 20 7742 4000
JPMorgan Funds Limited (Company Secretary) +44 (0) 20 7742 4000
Investec Bank plc
David Yovichic
Tom Skinner
Helen Goldsmith +44 (0) 20 7597 4000
Important Information
This announcement contains information that is inside
information for the purposes of Article 7 of the UK version of
Regulation (EU) No. 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018, as amended (the Market
Abuse Regulation). The person responsible for arranging for the
release of this announcement on behalf of JPMorgan Mid Cap
Investment Trust plc is Alison Vincent of JPMorgan Funds
Limited.
[1] Source: J.P. Morgan Asset Management/Morningstar. Net asset
value performance data has been calculated on a NAV to NAV basis,
including ongoing charges and any applicable fees, with any income
reinvested, in GBP. NAV is the cum income NAV with debt at fair
value, diluted for treasury and/or subscription shares if
applicable, with any income reinvested. The performance of the
company's portfolio, or NAV performance, is not the same as share
price performance and shareholders may not realise returns which
are the same as NAV performance.
[2] Based on the latest estimated NAV of each of JMI and JMF and
assuming no take up of the Cash Option as at 10 November 2023.
[3] Based on the latest estimated NAV of JMF and assuming no
take up of the Cash Option as at 10 November 2023.
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