JMF.L Regulatory News (JMF)

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 £228 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 £430 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 £300 million and 0.55 per cent. p.a. thereafter to 0.65 per cent. p.a. on JMI's net assets up to £200 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 £210 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."

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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.