Scottish Investment Trust to be taken over by JPMorgan Global Growth and Income – After an extensive review, the board of Scottish Investment Trust has decided that its best option is to combine the trust with JPMorgan Global Growth and Income.

The board says that a large number of proposals was received and evaluated with assistance from Stanhope Consulting, against a wide range of criteria. Consideration was given in turn to retaining the internal investment management structure; to appointing an external third party manager; and to effecting a combination with another investment trust. The board would like to thank all of those who participated in the process, including the incumbent management team.

Both trusts have a long history

Implementation of the transaction will result in all Scottish Investment Trust shareholders owning shares in JPMorgan Global Growth and Income. Coincidentally, both trusts were established in 1887. JPMorgan Global Growth and Income seeks to generate superior total returns from world stock markets, through investing in a diversified, but high conviction, portfolio of appropriately 50 – 90 stocks. Portfolio construction is driven by bottom-up stock selection, underpinned by fundamental research, rather than geographical or sector allocation. The investment strategy is style-agnostic, straddling the conventional classifications of value and growth. The investment management team comprises Helge Skibeli, Rajesh Tanna and Tim Woodhouse, supported by over 80 in-house research analysts located globally.

Benefits of the deal

The board has identified the following benefits:

• Strong investment performance: Over the 5 years ended 30 September 2021, the NAV total return of the JPMorgan trust has been 14.0% p.a. representing outperformance of 1.7% p.a. against the MSCI AC World Index in Sterling.
• Style-agnostic: The investment strategy is agnostic as between value and growth, focusing purely on the best total return opportunities.
• Deeply resourced capability: JPMorgan is one of the leading global asset managers with assets under management of US$2.7trn as at 30 September 2021, and the JGGI investment management team is supported by over 80 in-house research analysts located globally.
• Attractive dividend: JPMorgan Global Growth and Income has a distribution policy which targets aggregate dividends in each financial year representing at least 4% of its NAV at the end of the preceding financial year [The model proposed for JPMorgan European.].
• Scale: The combined company will have net assets in excess of £1.2bn, creating a leading investment vehicle for global equity investing that delivers an attractive dividend yield. The scale of the combined company should improve secondary market liquidity for shareholders and achieve cost efficiencies.
• Low ongoing charges: JPMorgan Global Growth and Income will adopt a new scaled annual management fee (0.55% on net assets up to £750m; 0.40% on net assets between £750m and £1.5bn; and 0.30% on net assets in excess of £1.5bn), which is expected to result in an initial weighted average annual management charge of 0.49% of net assets and forecast ongoing charges of 0.57% for the next twelve months. All in all, JPMorgan Global Growth and Income’s ongoing charges ratio is expected to drop by 0.11% from its current level and that is the major attraction of the deal for its shareholders.
• Leading investment trust platform: JPMorgan is one of the leading managers of closed-ended vehicles in the UK, managing 20 investment companies with an aggregate market cap in excess of £12.5bn. JPMorgan has extensive investment company management and marketing resources.
• Contribution from J.P. Morgan Asset Management: JPMorgan has agreed to make a costs contribution equivalent to the management fees payable by the enlarged vehicle in respect of the eight month period immediately following completion of the combination.
• Expected substantial uplift for Scottish Investment Trust shareholders provided that JPMorgan Global Growth and Income’s premium is maintained after the deal.

Circulars convening general meetings to approve the investment management change and the transaction will be sent to shareholders in due course, together with a prospectus published by JPMorgan Global Growth and Income. The investment management change is expected to take effect by mid-January 2022, and the transaction is anticipated to conclude in the first quarter of 2022.

[This looks like it could be a good outcome for Scottish Investment Trust shareholders. Normally, we would have been calling for dissenting investors to be offered a cash exit, but given that the JPMorgan trust trades at a premium, anyone who wants out should just be able to sell their shares in the market.]

SCIN / JGGI : Scottish Investment Trust to be taken over by JPMorgan Global Growth and Income