JP Morgan has announced the merger of its UK Smaller Companies and Mid Cap Investment Trusts into a single entity, the JP Morgan UK Small Cap Growth & Income (JUGI). This consolidation is set to create a trust with net assets exceeding £430 million. The merger has gained approval from both boards and is anticipated to offer shareholders cost efficiencies and an attractive yield.
The new trust will be managed by Georgina Brittain and Katen Patel, who will continue in their current roles. The merger strategy follows the successful precedent set by JP Morgan Elect's merger into the JPM Global Growth & Income trust last year. The UK Smaller Companies trust has shown strong performance, returning 37.3% over five years, which places it in the top quartile of the AIC UK Smaller Companies sector.
An enhanced dividend policy is part of the merger's appeal, targeting a 4% yield on net asset value (NAV) per annum, to be paid quarterly. To further benefit investors, management fees have been revised with new thresholds: 0.65% will be charged on net assets up to £200 million, and 0.55% on amounts beyond that threshold.
JP Morgan Mid Cap will undergo a voluntary liquidation, transferring some of its assets to the small cap vehicle in exchange for new ordinary shares. Shareholders can expect the mid cap trust's final dividend to be paid on Wednesday, along with a significant pre-liquidation dividend.
Investors are offered an option for a cash distribution from the cash pool, which is limited to 15% of shares in issuance and will be paid at a 2% discount to fair asset value (FAV), less asset realisation costs. Post-merger, JUGI's board will consist of seven directors and a continuation vote will take place every three years.
The transaction costs associated with the merger will be covered by each trust respectively, with JP Morgan proposing a fee waiver to facilitate the process. General meetings for shareholders are scheduled for February 2024, with the final decision on the scheme set for 31 March 2024.
Andrew Impey and John Evans, chairs of the respective trusts, have expressed optimism about the long-term investment prospects in UK smaller companies. The new vehicle aims to capitalize on opportunities within the FTSE 250 index and AIM traded companies. Shareholders can expect related documentation to be available in January 2024.
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