20 October 2021

JPMorgan Global Growth & Income plc

Legal Entity Identifier: 5493007C3I0O5PJKR078

Proposed combination with The Scottish Investment Trust PLC

Introduction

The Board of JPMorgan Global Growth & Income plc ("JGGI" or the "Company") is pleased to announce that it has signed Heads of Terms with the Board of The Scottish Investment Trust PLC ("SCIN") in respect of a proposed combination with SCIN (the "Transaction") to be effected by way of a section 110 scheme of reconstruction by SCIN and a transfer of assets to JGGI (the "Scheme").

JGGI shall continue to be managed by JPMorgan Funds Limited ("JPMorgan") and the Company shall continue to implement its existing investment strategy and dividend policy.

The Transaction is the outcome of a strategic review undertaken by the Board of SCIN and will bring together two of the oldest investment trusts in the sector, having both been incorporated in 1887, creating an enlarged entity that, on the basis of the existing net assets of JGGI and SCIN, will have net assets in excess of £1.2 billion.

(The above proposals are referred to herein as the "Proposals".)

The Board of JGGI believes that the Proposals will enable JGGI shareholders to benefit from the greater economies of scale that are expected to result from the enlarged asset base, in particular, an enhanced profile, greater liquidity in JGGI shares and cost efficiencies. The Company has agreed a new tiered management fee structure with JPMorgan, details of which are set out below, and the Transaction is expected to generate a reduction in ongoing charges of 11bps (under the revised management fee structure) as a result of the tiering arrangements and the fixed costs of the Company being spread across a larger asset base.

The Proposals will be subject to the approval by the shareholders of both JGGI and SCIN in addition to regulatory and tax approvals. A timetable and further details of the Proposals will be announced in due course.

Summary of the Scheme    

The Transaction will be effected by way of a scheme of reconstruction of SCIN under section 110 of the Insolvency Act 1986, resulting in the voluntary liquidation of SCIN and transfer of assets to JGGI. 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. However, the Transaction will be subject to other regulatory and tax approvals.  The Transaction will also be subject to, inter alia, approval by the shareholders and debt holders of each of SCIN and JGGI. 

The Scheme will be implemented on a Formula Asset Value ("FAV") for FAV basis with shareholders in SCIN receiving new ordinary shares in JGGI on implementation of the Scheme. The FAV of each company will be calculated using the net asset values of each company, adjusted for their respective allocations of costs and, in the case of SCIN, excluding SCIN's property, pension scheme, wholly-owned subsidiary (SIT Savings), and a liquidator's retention.

Allocation of costs will be determined by pooling the costs incurred by the two companies in connection with the transaction, offsetting the aggregate amount by the fee contribution from JPMorgan (as detailed below), and then apportioning the net costs pro rata by reference to their respective FAVs, subject to a maximum figure to be allocated to JGGI. Direct transactional costs incurred by either company in excess of an agreed cap will be disregarded for the purposes of pooling costs and will instead be met solely by the relevant company.

JPMorgan has agreed to make a contribution to the costs of the transaction in an amount equivalent to eight months of management fee payable by the enlarged vehicle, calculated by reference to JGGI's new management fee arrangements (as detailed below) and the value of the net assets of the enlarged JGGI (determined by reference to the FAVs of each company).

SCIN's property at 6 Albyn Place, Edinburgh, The Scottish Investment Trust pension scheme and SCIN's wholly-owned subsidiary (SIT Savings) will not transfer to JGGI, but will instead remain with the liquidator of SCIN, along with sufficient assets to meet SCIN's liabilities. The remaining assets will transfer to JGGI and it is intended that SCIN's secured notes due 2030 will be novated to JGGI on conclusion of the Scheme.

On completion of the Transaction, the JGGI Board will have representation from both JGGI and SCIN. As set out in the annual report and accounts for the year to 30 June 2021, JGGI will continue to be chaired by Nigel Wightman until his upcoming retirement at the 2021 AGM (on 27 October 2021), when he will be succeeded by Tristan Hillgarth. 

It is intended that, following the implementation of the Scheme, the Annual General Meetings of JGGI will be held in London and Edinburgh on alternate years to reflect both the English and Scottish heritage of the combined entity.

JPMorgan has agreed to be appointed as alternative investment fund manager of SCIN prior to implementation of the Scheme and will realign, and thereafter, manage the SCIN investment portfolio substantially in line with the investment policy and strategy of JGGI until implementation of the Scheme.

Management Fees

The Board of JGGI has agreed revised management fee arrangements with JPMorgan replacing the existing management fee and performance fee structure with a tiered management fee on the following basis:

·    0.55% on net assets up to £750 million;

·    0.40% on net assets between £750 million and £1.5bn; and

·    0.30% on net assets in excess of £1.5bn.

The revised fees shall be implemented with effect from 1 January 2022 and any performance fees accrued to that date shall be paid in full. No performance fee shall accrue or be payable following 1 January 2022.

Expected timetable

It is currently envisaged that a circular and notice of the general meeting setting out the details of the Scheme will be sent to the Company's shareholders in due course. The Transaction is anticipated to conclude in Q1 2022. 

The Chairman of JGGI, Nigel Wightman, commented:

"The Proposals will create a combined entity that will have significant scale and a revised fee structure that will allow both groups of shareholders to benefit from the greater scale and future growth of the trust. The Board expects that the enlarged company will have broad appeal among investors and is expected to be of sufficient size to enter the FTSE250 in due course. The Company will continue to benefit from the strength and depth of the JPMorgan management team and an investment strategy and process that has delivered strong results for shareholders. The Transaction brings together two of the oldest investment trusts in the sector, both incorporated in 1887, and creates a vehicle that can continue to serve shareholders' interests for many years to come."

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Important Information

This announcement contains information that is inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014. The person responsible for arranging for the release of this announcement on behalf of JPMorgan Global Growth & Income plc is Divya Amin of JPMorgan Funds Limited. Upon the publication of this announcement, this information is considered to be in the public domain.