JPMorgan UK Smaller - Publication of Prospectus and Circular
23/01/2024 12:33
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RNS Number : 6506A JPMorgan UK Smaller Cos IT PLC 23 January 2024
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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.
23 January 2024
JPMorgan UK Smaller Companies Investment Trust plc
Legal Entity Identifier: 549300PXALXKUMU9JM18
Proposed combination with JPMorgan Mid Cap Investment Trust plc
Publication of Prospectus and Circular
The Board announced on 14 November 2023 that it had agreed heads of terms for
a combination of the Company with JPMorgan Mid Cap Investment Trust plc
("JMF") (the "Transaction"), to be implemented through a scheme of
reconstruction of JMF pursuant to section 110 of the Insolvency Act 1986 (the
"Scheme"). This will see the enlarged Company continue to be managed by
JPMorgan Funds Limited (the "Manager") (which delegates the management of the
Company's Portfolio to JPMorgan Asset Management (UK) Limited (the "Investment
Manager")) and continue to operate under its existing Investment Objective and
Policy.
Subject to the successful completion of the Transaction, the Board intends to
change the name of the Company from JPMorgan UK Smaller Companies Investment
Trust plc to JPMorgan UK Small Cap Growth & Income plc and adopt an
enhanced dividend policy. The proposals set out in this paragraph and above
are collectively referred to as the "Proposals".
As a result of the Proposals and the expected implementation of the enhanced
dividend policy following the successful completion of the Transaction (as
described further below), the Board will announce a pre-completion interim
dividend of 3.60 pence per Share on or around 23 January 2024 (the
"Pre-Completion Dividend"). The Pre-Completion Dividend will be paid in cash
only and is expected to be paid on 27 February 2024 to Shareholders on the
Register on 2 February 2024 (the "Pre-Completion Dividend Record Date"),
conditional on the passing of the JMF Resolution at the First JMF General
Meeting and the passing of the Allotment Resolution at the General Meeting.
The Board announces that the Company has today published a prospectus (the
"Prospectus") in relation to the issue of new ordinary shares in the capital
of the Company (the "Issue") pursuant to the Scheme together with a circular
to provide the Company's shareholders (the "JMI Shareholders") with further
details of the Transaction and to convene a general meeting of the Company
(the "General Meeting") to seek approval from JMI Shareholders for the
implementation of the Transaction (the "Circular").
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 www.jpmsmallercompanies.co.uk
(http://www.jpmsmallercompanies.co.uk) .
Benefits of the Transaction
The Board believes that the Transaction has the following benefits for
Shareholders of the enlarged Company (the "Shareholders"):
· the enlarged Company is expected to have an unaudited Net Asset Value
of approximately £430 million (based on valuations as at 18 January 2024 (the
"Latest Practicable Date")(( 1 (#_ftn1) )), creating a leading investment
vehicle for UK-listed or quoted smaller companies while also improving
secondary market liquidity for the Shareholders;
· Shareholders will benefit from the introduction of an enhanced
dividend policy, targeting a 4 per cent. yield on the NAV per annum,
calculated on the basis of 4 per cent. of audited NAV as at the end of the
preceding financial year of the Company;
· the Company will benefit from the New Management Fee and an enlarged
asset base, reducing the blended fee rate for Shareholders of 2 basis points,
assuming that 85 per cent. of the Company's net assets are rolled over into
the Company (on the assumption that there is full participation under the Cash
Option and no Dissenting JMF Shareholders);
· Shareholders will benefit from an ongoing expense ratio reduction of
approximately 20 basis points compared to the Company's previous accounting
period ended on 31 July 2023, as a result of the Company's fixed costs being
spread over a larger asset base and the cumulative changes to the management
fee, including the New Management Fee;
· the Manager has agreed to make the Manager's Contribution in respect
of the Scheme, reducing the effective implementation costs for the Company;
· the Board believes that Eligible JMF Shareholders who elect for the
Rollover Option will benefit from the Company's broader Investment Objective
and Policy which, as at 31 December 2023, has enabled the Company to have over
40 per cent. of its Portfolio invested in UK-listed and quoted companies with
market capitalisations ranging from £1 billion to £3 billion; and
· the Company's Shareholder register will become further diversified,
having introduced a number of new long-term JMF investors to the register
while also allowing a number of JMF Shareholders and Existing Shareholders to
consolidate their holdings across the two companies.
Combination with JMF
The combination, if approved by the shareholders of each of the Company and
JMF, will be implemented through a scheme of reconstruction under section 110
of the Insolvency Act, resulting in the voluntary liquidation of JMF and the
transfer of its assets to the Company in exchange for the issue of new Shares
("Scheme Shares") to Eligible JMF Shareholders and to the Liquidators of JMF
for sale in the market for the benefit of Excluded JMF Shareholders (being
Sanctions Restriction JMF Shareholders and Overseas Excluded JMF
Shareholders).
Subject to the passing of the JMF Resolutions, and the satisfaction of the
other conditions of the Issue (which are outlined below), the Scheme will take
effect on the Effective Date.
Under the Scheme, JMF will be put into member's voluntary liquidation and its
assets split into the following three pools:
(i) the pool of cash, undertaking and other assets to be
retained by the Liquidators to meet all known and unknown liabilities of JMF
and other contingencies (the "Liquidation Pool");
(ii) the pool of cash, undertaking and other assets
established for distribution to participating JMF Shareholders and
attributable to JMF Reclassified B Shares (excluding any JMF Shares held by
Dissenting JMF Shareholders) (the "Cash Pool"); and
(iii) the pool of cash, undertaking and other assets
attributable to the JMF Reclassified A Shares to be established under the
Scheme and to be transferred to the Company pursuant to the Transfer Agreement
in consideration for the issuance of the Scheme Shares to Eligible JMF
Shareholders and to the Liquidators for sale in the market for the benefit of
Excluded JMF Shareholders (the "Rollover Pool").
Details of the Issue
The number of Scheme Shares to be issued to Eligible JMF Shareholders, and to
the Liquidators appointed in respect of Excluded JMF Shareholders, will be
based on the FAV of each of the Company and JMF and will be reviewed by an
independent accountant. The FAV per JMI Share and the FAV per JMF Share will
be calculated to six decimal places (with 0.0000005 rounded down) as at the
Calculation Date in accordance with each company's respective normal
accounting policies.
Eligible JMF Shareholders will be issued Scheme Shares calculated by dividing
the FAV per JMF Share by the FAV per JMI Share and multiplying this ratio
(which will be calculated to six decimal places, with 0.0000005 rounded down)
by the number of JMF Shares owned as at the Record Date that will be
reclassified as JMF Reclassified A Shares.
The number of Scheme Shares which will be issued to Eligible JMF Shareholders
and the Liquidators appointed in respect of Excluded JMF Shareholders is not
known at the date of this Circular as it will be calculated in accordance with
the formula stated above at the Calculation Date. The number of Scheme Shares
to be issued will be announced through an RIS announcement as soon as
practicable following the Calculation Date. The Issue is not being
underwritten.
JMF Revolving Credit Facilities
JMF currently has in place a revolving credit facility with Scotiabank Europe
plc ("Scotia Revolving Credit Facility") and a second revolving credit
facility with ING Bank N.V. ("ING Revolving Credit Facility"), together the
"JMF Revolving Credit Facilities"). As at the Latest Practicable Date, JMF has
drawn debt amounting to £23 million in aggregate under the JMF Revolving
Credit Facilities (the "JMF Outstanding Debt Amount"). As a condition to the
implementation of the Scheme, the JMF Board will arrange for the JMF
Outstanding Debt Amount to be repaid in full prior to the Calculation Date,
such repayments to be made out of available cash and by realising assets in
the JMF Portfolio.
Amendment of the Investment Management Agreement
The existing annual management fee payable by the Company to the Manager (the
"Existing Management Fee") is calculated on a tiered basis by reference to the
Net Asset Value of the Company, on the following basis:
0.65 per cent. on the first £300 million of the Company's Net Asset Value;
and
0.55 per cent. on the Company's Net Asset Value in excess of £300 million.
Subject to the successful completion of the Transaction and with effect from
Admission, the Investment Management Agreement shall be amended such that the
Existing Management Fee shall be revised to a tiered fee structure by
reference to the Net Asset Value of the Company on the following basis (the
"New Management Fee"):
0.65 per cent. on the first £200 million of the Company's Net Asset Value;
and
0.55 per cent. on the Company's Net Asset Value in excess of £200 million.
Costs and Expenses of the Transaction
Costs of the Company
The costs incurred by the Company prior to the Effective Date in connection
with the implementation of the Transaction (which include legal fees,
financial advisory fees, other professional advisory fees, printing costs and
other applicable expenses but exclude, for the avoidance of doubt, any JMI
Acquisition Costs (as defined below)) will be borne by JMI Shareholders (the
"JMI Implementation Costs"). The JMI Implementation Costs are estimated to be
approximately £1.1 million (including irrecoverable VAT).
In addition, the enlarged Company, and therefore all Shareholders following
implementation of the Scheme, will bear the JMF Portfolio Realignment Costs
and any stamp duty, SDRT or other transaction tax, or investment costs it
incurs in connection with the acquisition of the assets comprised in the
Rollover Pool or the deployment of the cash therein upon receipt (the "JMI
Acquisition Costs").
The enlarged Company will also bear the London Stock Exchange admission fees
in respect of the admission of Scheme Shares.
Costs of JMF
The costs to be borne by JMF Shareholders, excluding the JMF Portfolio
Realignment Costs, are estimated to be approximately £1.1 million (including
irrecoverable VAT).
The costs of acquiring and disposing of investments in the Rollover Pool
transferred to the Company pursuant to the Transfer Agreement in order to
realign the Rollover Pool so that it is consistent with the Company's
Portfolio will be borne by the enlarged Company following the implementation
of the Scheme (the "JMF Portfolio Realignment Costs"). Accordingly, the JMF
Portfolio Realignment Costs will be excluded from the costs borne by JMF for
the purposes of the FAV calculation.
Manager's Contribution
The Manager has agreed to make a contribution (the "Manager's Contribution")
to the costs of the Transaction by way of a waiver of part of the New
Management Fee payable by the Company. The Manager's Contribution will be an
amount equal to six months of the Company's New Management Fee calculated on
the value of the net assets transferred to the Company by JMF pursuant to the
Scheme (the "Contribution Amount"). The financial value of the Contribution
Amount is estimated at approximately £514,554 million based on the estimated
unaudited Net Asset Value of the assets to be transferred to the Company as at
the Latest Practicable Date (assuming full participation by JMF Shareholders
under the Cash Option and no Dissenting JMF Shareholders).
Board structure
It is intended that, following the successful completion of the Transaction,
three current directors of JMF, being Richard Gubbins, Lisa Gordon and Hannah
Philp, will be appointed as non-executive Directors of the Company (the
"Prospective Directors"), such that the Board will initially consist of seven
directors, comprising four directors from the current Board and three
directors from the board of JMF (reducing to a maximum of six directors at, or
shortly prior to, the next AGM of the Company expected to be held in November
2024 with Andrew Impey and Richard Gubbins retiring from the Board at, or
shortly prior to, the next AGM and not standing for re-election).
Each of the Prospective Directors is independent of the Manager and the
Investment Manager.
Change of Company Name
The Directors have resolved to change the name of the Company to JPMorgan UK
Small Cap Growth & Income plc and change the ticker symbol of the Shares
to JUGI, subject to the successful completion of the Transaction.
The change of the name of the Company and ticker symbol will be announced to
the market by way of RIS announcement on or shortly after the Effective Date.
New enhanced dividend policy
Subject to the successful completion of the Transaction, the Company intends
to introduce an enhanced dividend policy, targeting a 4 per cent. yield on the
NAV per annum, calculated on the basis of 4 per cent. of audited NAV as at 31
July each year, being the end of the preceding financial year of the Company.
Under the enhanced dividend policy, the Company will move from a final annual
dividend to equal quarterly interim dividends, to be announced in August,
November, February and May and expected to be paid in October, January, April
and July each year.
Following the successful completion of the Transaction and in lieu of any
other interim dividend for the financial year of the Company ended 31 July
2024, the Company will announce in May 2024 an interim dividend of 2 per cent.
of the unaudited NAV of the enlarged Company as at the date of Admission which
is expected to be paid to Shareholders in July 2024.
Conditions of the Issue
The Scheme is conditional upon:
· the passing of the JMF Resolution to be proposed at the First JMF
General Meeting and the JMF Resolution to be proposed at the Second JMF
General Meeting or any adjournment of those meetings and such JMF Resolutions
becoming unconditional in all respects;
· approval of the Allotment Resolution by JMI Shareholders at the
General Meeting of the Company and such Resolution becoming unconditional in
all respects;
· the approval of the FCA and the London Stock Exchange to the
Admission of the Scheme Shares to listing on the premium listing category of
the Official List and to trading on the Main Market of the London Stock
Exchange, respectively occurring before 31 March 2024, or such other date as
may be mutually agreed between the Company, JMF and the Sponsor;
· the Sponsor Agreement not having been terminated in accordance with
its terms prior to Admission;
· confirmation of the JMF Board that the drawn debt under the JMF
Revolving Credit Facilities has been repaid in full; and
· the JMF Board resolving to proceed with the Scheme.
Admission and dealings
Applications will be made by the Company to the FCA for the Scheme Shares to
be admitted to the premium listing category of the Official List and to the
London Stock Exchange for the Scheme Shares to be admitted to trading on the
premium segment of the Main Market. If the Scheme becomes effective, it is
expected that the Scheme Shares will be admitted to the Official List and the
first day of dealings in such shares on the Main Market will be 28 February
2024.
Expected Timetable
GENERAL MEETING
Posting of Circular and Forms of Proxy for the General Meeting 23 January 2024
Latest time and date for receipt of Forms of Proxy for the General Meeting 12.00 p.m. on 8 February 2024
General Meeting 12.00 p.m. on 12 February 2024
Announcement of results of the General Meeting 12 February 2024
SCHEME
Publication of Prospectus 23 January 2024
Ex-dividend date for the Pre-Completion Dividend* 1 February 2024
Pre-Completion Dividend Record Date 2 February 2024
First JMF General Meeting 11.00 a.m. on 12 February 2024
Record Date for entitlements under the Scheme 6.00 p.m. on 20 February 2024
JMF Shares disabled in CREST 6.00 p.m. on 20 February 2024
Calculation Date for the Scheme 5.00 p.m. on 21 February 2024
Suspension of listing of JMF Shares and JMF's register closes 7.30 a.m. on 27 February 2024
Second JMF General Meeting 12.00 p.m. on 27 February 2024
Effective Date for implementation of the Scheme 27 February 2024
Announcement of results of the Scheme and respective FAVs per share 27 February 2024
Payment date for the Pre-Completion Dividend 27 February 2024
Admission and dealings in Scheme Shares commence 8.00 a.m. on 28 February 2024
CREST accounts credited to JMF Shareholders in respect of Scheme Shares in 8.00 a.m. on 28 February 2024
uncertificated form
Certificates despatched by post in respect of Scheme Shares 12 March 2024 (or as soon as practicable thereafter)
Cancellation of listing of JMF Shares as soon as practicable after the Effective Date
References to times are to London times 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.
*The Pre-Completion Dividend being the interim dividend of 3.60 pence per
Share to be announced on or around 23 January 2024 and is expected to be paid
on 27 February 2024, subject to the passing of the JMF Resolution at the First
JMF General Meeting and the passing of the Allotment Resolution at the General
Meeting.
Capitalised terms used but not defined in this announcement will have the same
meaning as set out in the Circular.
For further information please contact:
JPMorgan UK Smaller Companies Investment Trust plc Contact via Company Secretary
Andrew Impey
JPMorgan Funds Limited +44 (0) 20 7742 4000
Simon Crinage
Fin Bodman
JPMorgan Funds Limited (Company Secretary) +44 (0) 20 7742 4000
Panmure Gordon (UK) Limited
Alex Collins +44 (0) 20 7886 2767
Ailsa Macmaster +44 (0) 20 7886 2979
Ashwin Kohli +44 (0) 20 7886 2786
1 (#_ftnref1) Based on the estimated unaudited Net Asset Value
of the Company and JMF as at the Latest Practicable Date, assuming: (i) that
there are no Dissenting JMF Shareholders; and (ii) full participation by JMF
Shareholders under the Cash Option.
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