JMI.L Regulatory News (JMI)

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.

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 and on the Company's website at 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], 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

SCHEME

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: