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
and on the Company's website at
JPMorgan Japanese Investment Trust plc | J.P. Morgan Asset
Management.
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 form
|
Week commencing 4 November
2024
|
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
Stephen Cohen
|
Contact via Company
Secretary
|
JPMorgan Funds Limited (Company Secretary)
|
+44 (0) 20 7742 4000
|
Investec Bank plc (Sponsor, Financial Adviser and Broker to
JPMorgan Japanese Investment Trust
plc)
Lucy Lewis
Tom Skinner
Denis Flanagan
|
+44 (0) 20 7597 4000
|
|
|
JPMorgan Funds Limited
Simon Crinage
Katie Standley (for JPMorgan
Japanese)
|
+44 (0) 20 7742 4000
|
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.