REG - JPMorgan Japanese IT - Publication of Prospectus and Circular

JPMorgan Japanese Investment TrustAnnouncement

19/09/2024 15:00

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RNS Number : 9274E  JPMorgan Japanese Inv. Trust PLC  19 September 2024

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, 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.

 

JFJ Legal Entity Identifier: 549300JZW3TSSO464R15

19 September 2024

 

JPMORGAN JAPANESE INVESTMENT TRUST PLC

 

Combination with JPMorgan Japan Small Cap Growth & Income plc ("JSGI")

Publication of Prospectus and Circular

 

Introduction

Further to the announcement of 31 July 2024, the Board of JPMorgan Japanese
Investment Trust plc (the "Company" or "JFJ") is pleased to announce that the
Company has today published a circular (the "Circular") and a prospectus (the
"Prospectus") in connection with the proposed combination (the "Combination")
of the Company with JPMorgan Japan Small Cap Growth & Income plc ("JSGI").

The Combination will be undertaken by way of a scheme of reconstruction and
members' voluntary winding-up of JSGI under s110 of the Insolvency Act 1986
(the "Scheme"), under which a proportion of JSGI's assets will be transferred
to JFJ in exchange for the issue of new JFJ shares to JSGI shareholders who
roll over, or are deemed to roll over, their interests in JSGI into new JFJ
shares (the "Transaction"). Under the terms of the Scheme, JSGI shareholders
will be entitled to elect to receive cash in respect of part or all of their
shareholding, subject to an aggregate limit of 25 per cent. of  JSGI's issued
share capital (excluding any treasury shares).

The Circular provides the Company's shareholders (the "Shareholders") with
further details of the Scheme.  A general meeting of the Company has been
convened for 11.00 a.m. on 10 October 2024 (the "General Meeting") to seek
approval from Shareholders for the implementation of the Scheme.  Approval
from JSGI Shareholders will also be required to implement the Scheme.

The Prospectus has been approved by the Financial Conduct Authority, and the
Prospectus and Circular will shortly be available for inspection at the
National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and on the Company's
website at JPMorgan Japanese Investment Trust plc | J.P. Morgan Asset
Management
(https://am.jpmorgan.com/gb/en/asset-management/per/products/jpmorgan-japanese-investment-trust-plc-gb0001740025?gad_source=1&gclid=EAIaIQobChMIm8OnkPbHiAMVlptQBh3NtCnyEAAYASAAEgLKfvD_BwE&gclsrc=aw.ds)
.

Benefits of the Combination

The Combination is expected to result in the following substantial benefits
for Shareholders:

·             Increased scale: JFJ is a constituent of the FTSE
250 Index, with a market capitalisation of £770 million and net assets of
£875 million as at 13 September 2024.  It is the largest Japanese equity
investment trust. The Transaction will increase the net assets of JFJ to up to
approximately £1.0 billion, assuming that the Cash Option is taken up in
full. The expected benefits should include increased secondary market
liquidity and a greater relevance to larger investors as a direct consequence
of size.

·             Reduced management fees: Conditional on the Scheme
becoming effective, and with effect from 1 October 2024, the Board has agreed
a reduced investment management fee with JPMorgan for JFJ that is expected to
reduce the blended annual management fee from 0.57% on net assets per annum to
0.48% on net assets per annum following completion of the Scheme (based on the
net assets of both companies as at 13 September 2024 and assuming the Cash
Option is taken up in full). The marginal fee rate will be 0.35% on net assets
in excess of £750 million. For JSGI Shareholders electing for the Rollover
Option, this represents a significant reduction in headline management fees
from 0.83%.

·             Lower ongoing charges: JFJ's expected ongoing
charges ratio (OCR), pro forma for the Transaction (and excluding the costs
and JPMorgan Costs Contribution in relation to the Transaction) is expected to
be 0.62% in the 12 months following the Transaction (based on net assets of
both companies as at 13 September 2024 and assuming the Cash Option is taken
up in full). This compares to JFJ's OCR of 0.75% for the six months ended 31
March 2024.

·             Introduction of continuation vote: As part of its
commitment to the highest standards of corporate governance, the Board is also
proposing an amendment to the Articles at the General Meeting to introduce a
continuation vote which would be held at the Company's annual general meeting
to be held in 2029 and, if passed, at every fifth annual general meeting
thereafter.

·             Cost contribution: JPMorgan has agreed to cover the
fixed costs of the Transaction, reducing the effective implementation costs
for each of the Company and JSGI such that there is no NAV dilution for either
JFJ or for JSGI Shareholders receiving New Shares pursuant to the Transaction
from these fixed costs.

Overview of the Scheme

Pursuant to the Scheme, JSGI will be put into liquidation and its assets split
notionally into three pools in respect of: (i) the interests of JSGI
Shareholders who elect, or are deemed to elect, to roll over into the enlarged
JFJ (the "Rollover Pool"); (ii) the interests of JSGI Shareholders who elect
for the Cash Option (the "Cash Pool"); and (iii) a provision sufficient to
meet any current and future, actual and contingent liabilities of JSGI,
including repayment of JSGI's existing loan facility (the "Liquidation Pool").

Under the Scheme, JSGI Shareholders will be entitled to elect to receive cash
in respect of part or all of their shareholding, subject to an aggregate limit
of 25% of JSGI's issued share capital (excluding shares held in treasury) at a
2% discount to the JSGI Residual FAV less the costs of realising the assets
required to create the Cash Pool (the "Cash Option"). New Shares will be
issued as the default option under the Scheme in the event that either no
election, or a partial election, for the Cash Option is made by a JSGI
Shareholder or because an election for the Cash Option is scaled back in
accordance with the Scheme (the "Rollover Option").

The Scheme will be implemented on a formula asset value ("FAV") to FAV basis.
FAVs for the purposes of the Scheme will be calculated in accordance with
JFJ's and JSGI's normal accounting policies and will take into account the
adjustments outlined below. FAVs will be calculated based on the NAVs (cum
income, debt at fair value, if applicable) of the respective companies, on the
Calculation Date.

The JSGI residual formula asset value ("JSGI Residual FAV") shall be equal to
the gross assets of JSGI as at the Calculation Date less: (i) the value of the
cash and other assets appropriated to the Liquidation Pool (which includes any
assets attributable to any Dissenting JSGI Shareholders); and (ii) any
dividend which has been declared as at the Calculation Date but not paid to
JSGI Shareholders, and not accounted for in the JSGI NAV, but excluding any
adjustment for the JPMorgan Costs Contribution; plus (iii) an amount equal to
any costs relating to the realignment of the JSGI Portfolio in relation to the
Transaction already incurred.

The JSGI Cash Pool FAV shall be equal to the JSGI Residual FAV multiplied by
the proportion of the issued share capital of JSGI electing for the Cash
Option to JSGI's issued share capital (excluding shares held in treasury)
minus: (i) 2% (the "Cash Option Discount"); and (ii) the costs incurred in
realising portfolio assets to create the Cash Pool (the "Cash Pool Realisation
Costs").

The JSGI Cash FAV per Share shall equal the JSGI Cash Pool FAV divided by the
number of JSGI Shares in respect of which JSGI Shareholders have elected for
the Cash Option, subject to an aggregate limit of 25% of JSGI's issued share
capital (excluding shares held in treasury).

The JSGI Rollover Pool FAV shall be equal to the JSGI Residual FAV multiplied
by the proportion of the issued share capital of JSGI not electing for the
Cash Option to JSGI's issued share capital (excluding shares held in
treasury): (i) plus an amount reflecting the benefit of the JPMorgan Costs
Contribution to JSGI (being equal to the fixed costs of the Proposals payable
by JSGI); (ii) less the portfolio realignment costs, including both disposals
and acquisitions, whether already incurred or estimated still to be incurred,
as part of the Transaction by JSGI and JFJ and either before or after the
Effective Date, but excluding the Cash Pool Realisation Costs (the
"Realignment Costs"); and (iii) plus an amount equal to the aggregate value of
the Cash Option Discount, capped at the value of the Realignment Costs. Any
remaining benefit from the Cash Option Discount, after the application of the
cap, will be for ongoing shareholders in the enlarged JFJ.

The JSGI Rollover FAV per Share shall equal the JSGI Rollover Pool FAV divided
by the number of JSGI Shares in respect of which JSGI Shareholders have
elected, or are deemed to have elected, for the Rollover Option.

The JFJ FAV shall be equal to the net assets of JFJ as at the Calculation
Date: (i) less any direct Transaction costs not already incorporated into the
JFJ NAV; (ii) plus an amount reflecting the benefit of the JPMorgan Costs
Contribution to JFJ (being equal to the fixed costs of the Proposals payable
by JFJ); and (iii) plus an amount equal to any costs relating to the
realignment of the Portfolio in relation to the Transaction already incurred.

The JFJ FAV per Share shall be equal to the JFJ FAV divided by the issued
share capital of JFJ (excluding Shares held in treasury).

JSGI Shareholders who elect (or are deemed to have elected) for the Rollover
Option shall have New Shares issued to them based on the ratio of the JSGI
Rollover FAV per Share to the JFJ FAV per Share, multiplied by the number of
JSGI Shares in respect of which they have elected, or are deemed to have
elected, for the Rollover Option.

Overseas JSGI Shareholders

To the extent that an Overseas JSGI Shareholder is entitled to and would
otherwise receive New Shares under the Scheme, either because no election, or
a partial election, for the Cash Option was made and they are deemed to have
elected for the Rollover Option in respect of all or some of their JSGI Shares
or because an election for the Cash Option is scaled back in accordance with
the Scheme, then (unless they have satisfied the Directors and the JSGI
Directors that they are entitled to receive and hold New Shares without
breaching any relevant securities laws and without the need for compliance on
the part of the Company or JGSI with any overseas laws, regulations, filing
requirements or the equivalent) such New Shares will be issued to the
Liquidators as nominees for the relevant Overseas JSGI Shareholder and sold by
the Liquidators in the market.

Conditions of the Issue and the Scheme

The Issue and the Scheme are conditional upon the:

·             passing of the Issue Resolution at the General
Meeting and such resolution becoming unconditional in all respects;

·             passing of the JSGI Resolutions to approve the
Scheme and the winding-up of JSGI at the JSGI General Meetings and the Scheme
becoming unconditional in all respects (including the Transfer Agreement
becoming unconditional in all respects);

·             FCA agreeing to admit the New Shares to listing in
the closed-ended investment funds category of the Official List and the London
Stock Exchange agreeing to admit the New Shares to trading on its Main Market,
subject only to allotment; and

·             Directors and JSGI Directors resolving to proceed
with the Scheme.

Unless the conditions referred to above have been satisfied or, to the extent
permitted, waived by both the Company and JSGI on or before 30 November 2024,
the Scheme will not become effective and the New Shares will not be issued.

Manager's contribution to costs

The Manager has undertaken to make a contribution to JFJ equal to the total
fixed costs of the Transaction of each of JFJ and JSGI (the "JPMorgan Costs
Contribution"), contingent on the Transaction being fully implemented and
subject to JPMorgan agreeing the costs being incurred. For the avoidance of
doubt, the following costs shall not constitute fixed costs of the Transaction
for the purposes of calculating the JPMorgan Costs Contribution: (i) any costs
of the realignment and/or realisation of the JSGI Portfolio, which costs shall
be borne solely by JSGI; (ii) any realignment costs, stamp duty, SDRT or other
transaction tax incurred by JFJ for the acquisition of the Rollover Pool,
which costs shall be borne solely by JFJ, but which, for the avoidance of
doubt, will not be reflected in the JFJ FAV; and (iii) listing fees in respect
of the listing of the New Shares issued in connection with the Scheme, which
costs shall be borne by JFJ, but which, for the avoidance of doubt, will not
be reflected in the JFJ FAV.

The financial value of the JPMorgan Costs Contribution will be credited
against the costs of the Proposals as described above to the benefit of
continuing shareholders (which excludes, to the extent of their actual
participation in the Cash Option, those JSGI shareholders who elect for the
Cash Option).

The amount of the JPMorgan Costs Contribution may, at the option of JPMorgan,
be deducted from the amounts payable by JFJ to JPMorgan under the Investment
Management Agreement.

JPMorgan has also agreed to waive any termination fees payable under its
investment management agreement with JSGI which will terminate upon completion
of the Transaction.

In the event that implementation of the Scheme does not proceed, each party
will bear its own costs, save that JPMorgan has agreed to make a contribution
to cover some of the Company's costs in certain prescribed circumstances.

Dividend policy

The Company is managed to produce capital growth and not to produce any
particular level of dividend and therefore the level of dividend will vary.
The Company currently has a policy of paying out the majority of revenue
available each year. The dividend reflects the available revenue for
distribution each year and accordingly there are likely to be fluctuations
year on year.

The Board notes that JSGI has paid an enhanced dividend since 2018. Following
completion of the Transaction, the enlarged Board intends to undertake a
review of JFJ's dividend policy, including consulting with JFJ's major
shareholders.

Board structure

Conditional on the Scheme becoming effective and with effect from Admission,
Tom Walker will be appointed to the Board.

Tom Walker was appointed as a director of JSGI in 2019. He was a portfolio
manager at Martin Currie Investment Management Limited where latterly he
headed up their Global Long Term Unconstrained equity team. He qualified as a
chartered accountant with Thomson McLintock, now KPMG, then moved into
investment management with Edinburgh Fund Managers and subsequently worked in
Hong Kong with Baring Asset Management before joining Martin Currie. He is a
non-executive Director of Lowland Investment Company PLC.

The Board of the enlarged JFJ will therefore consist of the six current
Directors of JFJ and one director from the board of JSGI following
implementation of the Scheme. It is expected that the Board of the enlarged
JFJ will, subject to meeting the requirement for an appropriate level of
diversity on the Board (taking into account relevant skills, experience,
gender, social and ethnic backgrounds), revert to six Directors over the
medium-term.

Revised management fee arrangements

The existing annual management fee payable by the Company to the Manager is
calculated on a tiered basis by reference to the Net Asset Value, as follows:

• 0.65% on the first £465 million of the Net Asset Value;

• 0.485% above £465 million and up to £930 million of the Net Asset Value;
and

• 0.40% on the Net Asset Value in excess of £930 million.

With effect from 1 October 2024, and conditional on the Scheme becoming
effective, the Investment Management Agreement has been amended such that the
existing management fee shall be reduced to a tiered fee structure by
reference to the Net Asset Value on the following basis:

• 0.6% on the first £500 million of the Net Asset Value;

• 0.4% above £500 million and up to £750 million of the Net Asset Value;
and

• 0.35% on the Net Asset Value in excess of £750 million.

As detailed above, the Manager has agreed to make the JPMorgan Costs
Contribution to the costs of the Scheme pursuant to which the Manager may
elect to waive its entitlement to be paid its management fee with effect from
Admission until such time as the value of such waived management fee equals
the JPMorgan Costs Contribution.

Amendments to Articles

Resolution 2 to be proposed at the General Meeting seeks approval to amend the
Articles to include new Articles 151 and 152, and to amend Article 103, as set
out in Part 3 of the Circular. The Scheme is not conditional on the passing of
Resolution 2.

Continuation vote

The Board is proposing an amendment to the Articles to introduce a provision
requiring a continuation vote to be proposed to Shareholders as an ordinary
resolution at the annual general meeting of the Company to be held in 2029
and, if passed, at every fifth annual general meeting thereafter.

If any such resolution is not passed, the Board shall, at a general meeting to
be held within six months of the date on which such resolution is not passed,
put forward proposals to Shareholders for the reconstruction, reorganisation
or winding-up of the Company.

Resolution 2 to be proposed at the General Meeting seeks approval to amend the
Articles to incorporate the continuation vote, to increase the aggregate cap
on Directors' remuneration given the increased size of the Board if the Scheme
becomes effective and to adopt market practice by permitting the Board to
require a compulsory transfer of Shares by a Shareholder should that
Shareholder subject the Company to onerous legislative or regulatory
obligations.

 

Timetable

General Meeting

 Posting of Circular and Forms of Proxy for the General Meeting              19 September 2024
 Latest time and date for receipt of Forms of Proxy for the General Meeting  11.00 a.m. on 8 October 2024
 General Meeting                                                             11.00 a.m. on 10 October 2024
 Announcement of results of the General Meeting                              10 October

 

Scheme

 Publication of Prospectus                                                     19 September 2024
 First JSGI General Meeting                                                    10.00 a.m. on 10 October 2024
 Record Date for entitlements under the Scheme                                 6.00 p.m. on 11 October 2024
 JSGI Shares disabled in CREST (for settlement)                                Close of business on 11 October 2024
 Trading in JSGI Shares on the London Stock Exchange suspended                 14 October 2024
 Calculation Date for the Scheme                                               Close of business on 21 October 2024
 Reclassification of JSGI Shares                                               8.00 a.m. on 23 October 2024
 Suspension of listing of JSGI Shares                                          7.30 a.m. on 24 October 2024
 Second JSGI General Meeting                                                   10.00 a.m. on 24 October 2024
 Effective Date for implementation of the Scheme                               24 October 2024
 Announcement of Results of the Scheme and respective FAVs per share           24 October 2024
 Admission, CREST accounts credited and dealings in New JFJ Shares commences   8.00 a.m. on 25 October 2024
 Certificates despatched by post in respect of New JFJ Shares in certificated  Week commencing 4 November 2024
 form
 Cancellation of listing of Reclassified JSGI Shares                           As soon as practicable after the Effective Date

 

References to times are to London time unless otherwise stated.  Any changes
to the expected timetable set out above will be notified to the market by the
Company via an RIS announcement.

Capitalised terms used but not defined in this announcement will have the same
meaning as set out in the Circular.

 

FURTHER INFORMATION

For further information please contact:

 JPMorgan Japanese Investment Trust plc                                         Contact via Company Secretary

 Stephen Cohen

 JPMorgan Funds Limited (Company Secretary)                                     +44 (0) 20 7742 4000

 Investec Bank plc (Sponsor, Financial Adviser and Broker to JPMorgan Japanese  +44 (0) 20 7597 4000
 Investment Trust plc)

 Lucy Lewis

 Tom Skinner

 Denis Flanagan

 JPMorgan Funds Limited                                                         +44 (0) 20 7742 4000

 Simon Crinage

 Katie Standley (for JPMorgan Japanese)

 

Important Information

The information in this announcement is for background purposes only and does
not purport to be full or complete. No reliance may be placed for any purpose
on the information contained in this announcement or its accuracy or
completeness. The material contained in this announcement is given as at the
date of its publication (unless otherwise marked) and is subject to updating,
revision and amendment. In particular, any proposals referred to herein are
subject to revision and amendment.

The New JFJ Shares have not been, and will not be, registered under the U.S.
Securities Act of 1933 (as amended) (the "Securities Act") or with any
securities regulatory authority of any state or other jurisdiction of the
United States, and may not be offered or sold in the United States or to, or
for the account or benefit of, U.S. persons absent registration or an
exemption from registration under the Securities Act. The Company does not
intend to register any of the securities in the United States or to conduct a
public offering of the securities in the United States.  Moreover, the new
JFJ Shares have not been, nor will they be, registered under the applicable
securities laws of Australia, Canada, Japan, the Republic of South Africa, or
any member state of the EEA (other than any member state of the EEA where the
shares are lawfully marketed). Further, JFJ is not, and will not be,
registered under the US Investment Company Act of 1940, as amended.

The value of shares and the income from them is not guaranteed and can fall as
well as rise due to stock market and currency movements.  When you sell your
investment you may get back less than you originally invested. Figures refer
to past performance and past performance should not be considered a reliable
indicator of future results. Returns may increase or decrease as a result of
currency fluctuations.

This announcement may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends", "may", "might",
"will" or "should" or, in each case, their negative or other variations or
similar expressions. All statements other than statements of historical facts
included in this announcement, including, without limitation, those regarding
the JFJ's or JSGI's respective financial positions, strategies, plans,
proposed acquisitions and objectives, are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties and,
accordingly, JFJ's or JSGI's actual future financial results and operational
performance may differ materially from the results and performance expressed
in, or implied by, the statements. These forward-looking statements speak only
as at the date of this announcement and cannot be relied upon as a guide to
future performance. Subject to their respective legal and regulatory
obligations, each of JFJ, JSGI and JPMorgan expressly disclaims any
obligations or undertaking to update or revise any forward-looking statements
contained herein to reflect any change in expectations with regard thereto or
any change in events, conditions or circumstances on which any such statement
is based unless required to do so by law or any appropriate regulatory
authority.

Investec Bank plc ("Investec") which is authorised in the United Kingdom by
the Prudential Regulatory Authority and regulated by the Financial Conduct
Authority and the Prudential Regulatory Authority is acting exclusively for
JFJ and for no-one else in connection with the Transaction, will not regard
any other person as it client in relation to the Transaction and will not be
responsible to anyone other than JFJ for providing the protections afforded to
its clients or for providing advice in relation to the Transaction, or any of
the other matters referred to in this announcement.  This does not exclude
any responsibilities or liabilities of Investec under the Financial Services
and Markets Act 2000, as amended, or the regulatory regime established
thereunder.

None of JFJ, JPMorgan, or Investec, or any of their respective affiliates,
accepts any responsibility or liability whatsoever for, or makes any
representation or warranty, express or implied, as to this announcement,
including the truth, accuracy or completeness of the information in this
announcement (or whether any information has been omitted from the
announcement) or any other information relating to any of them, whether
written, oral or in a visual or electronic form, and howsoever transmitted or
made available or for any loss howsoever arising from any use of the
announcement or its contents or otherwise arising in connection therewith.
Each of JFJ, JPMorgan and Investec, and their respective affiliates,
accordingly disclaim all and any liability whether arising in tort, contract
or otherwise which they might otherwise have in respect of this announcement
or its contents or otherwise arising in connection therewith.

 

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