JPMorgan Income & Capital IT PLC
14 January 2008
JPMorgan Income & Capital Investment Trust plc ('the Company')
The Company has today published a circular ('the Circular') with details of
recommended proposals for a members' voluntary winding-up and scheme of
reconstruction of the Company. Capitalised terms in this announcement have the
same meaning as that set out the Circular to Shareholders dated 11 January 2008.
JPMorgan Income & Capital Investment Trust plc was launched in March 2002 to
provide regular quarterly income and capital growth to its Ordinary Shareholders
and a final capital entitlement of 154.15p to its ZDP Shareholders. The Company
has a planned life to 29 February 2008, and the Board of the Company has today
announced recommended Proposals for a members' voluntary winding-up and scheme
of reconstruction of the Company. Under the Proposals, Shareholders who wish to
continue their investment in the Company can do so in a tax-efficient manner in
a new investment trust, called JPMorgan Income & Capital Trust plc (''JPMICT''),
which will also be managed by JPMorgan Asset Management (UK) Limited.
Under the Proposals, Shareholders will have the option to:
• rollover all or part of their investment in the Company into JPMICT by
electing to receive, in any combination, ordinary shares in JPMICT, zero
dividend preference shares in JPMICT or units issued by the JPMICT (each
comprising two ordinary shares and one zero dividend preference share in JPMICT)
(collectively referred to as ''JPMICT Securities''); and/or
• elect to receive cash in respect of some or all of their holding.
Performance of the Company
The Company has performed well since its launch in 2002 when it was established
as the rollover vehicle to The Fleming Income & Capital Investment Trust plc.
The Company has produced the following unaudited total returns (that is returns
including reinvestment of net dividends) over the various periods set out below
to 31 December 2007:
Total return performance (per cent.) to 31 December 2007
3 years 5 years launch
Unit (share price total return)
(unaudited) 60.0 194.4 75.5
Ordinary Share (share price total return)
(unaudited) 89.4 421.1 106.0
ZDP Share (share price total return)
(unaudited) 16.4 62.5 46.0
Benchmark (total return)* 38.5 76.8 51.7
* Composite total return benchmark consisting of 67.5 per cent. FTSE 350
Index (excluding investment trusts) and 32.5 per cent. Merrill Lynch 1-3 year UK
Sterling Corporate Index. Before 1 March 2006, the Company was utilising the
Merrill Lynch 5-10 year UK Sterling Corporate Index for bonds. Source:
Fundamental Data, Thomson Financial Datastream
Under the Proposals, the Company will be wound up on 29 February 2008 by means
of a members' voluntary liquidation. A new investment trust, JPMICT, will be
launched as a successor vehicle to the Company to provide Shareholders with a
tax efficient rollover opportunity.
Shareholders can elect to receive any combination of the following in respect of
all or part of their holding:
• JPMICT Ordinary Shares; and/or
• JPMICT ZDP Shares; and/or
• JPMICT Units (comprising two JPMICT Ordinary Shares and one JPMICT ZDP
If a Shareholder fails to make an Election, he will be deemed to have elected
for Equivalent JPMICT Securities, subject to any scaling back of Elections as
described in Part II of the Circular.
Benefits of the Proposals
The Directors consider that the Proposals should have the following benefits for
all Shareholders participating in the Scheme:
• they provide Shareholders with a greater choice than if the Company
were simply to be wound up, since the Proposals enable Shareholders to (i)
continue their investment exposure through JPMICT Securities; (ii) receive cash;
or (iii) receive a combination of cash and JPMICT Securities; and
• they save on certain dealing costs that would otherwise be incurred on
the realisation of the Company's portfolio on a winding-up as certain assets are
expected to be transferred to JPMICT.
The Directors consider that the Proposals should have the following benefits for
Shareholders who receive JPMICT Securities in the Scheme:
• they will enable Shareholders to retain market exposure through a new
investment trust managed by JPMorgan Asset Management and to continue to receive
investment returns without triggering an immediate liability to capital gains
• they will enable Shareholders to avoid dealing and other costs
associated with a share purchase in the secondary market.
Details of JPMICT
JPMICT is a new closed-ended investment company incorporated in England and set
up as a successor vehicle for the Company. JPMICT has a fixed life of
approximately 10 years and will be wound up on 28 February 2018 at the same time
as the JPMICT ZDP Shares are due to be redeemed unless, prior to that date,
Shareholders and Unitholders approve alternative arrangements by special
resolution. The board of directors of JPMICT is the same as that of the Company.
Investment objective and policy of JPMICT
The investment objective of JPMICT is to meet the final capital entitlement of
the JPMICT ZDP Shareholders and to provide JPMICT Ordinary Shareholders with
regular quarterly income as well as capital growth. JPMICT will seek to achieve
its objective by investing principally in UK equities and investment grade fixed
income securities. After its launch, once JPMICT's assets are fully invested, it
is expected that approximately 90 per cent. of its assets will be invested in UK
equities and 10 per cent. of its assets will be invested in fixed interest
securities with an average rating of investment grade or higher.
JPMICT will retain the flexibility to vary the percentage of its assets
attributable to UK equities and fixed interest securities according to the
allocation it considers would achieve the best absolute returns, having regard
to the investment objective of JPMICT.
The composite benchmark of JPMICT is the FTSE 350 Index (excluding investment
trusts) (90%) and the Merrill Lynch 5-10 year UK Sterling Corporate Index (10%).
Characteristics of JPMICT Securities
The main characteristics of JPMICT Ordinary Shares, JPMICT ZDP Shares and JPMICT
Units are summarised below:
JPMICT Ordinary Shares
The directors of JPMICT intend, in the absence of unforeseen circumstances and
assuming sufficient distributable reserves, to pay quarterly interim dividends
amounting to 5.0p per JPMICT Ordinary Share in respect of the period from 3
March 2008 to 28 February 2009, being JPMICT's first full financial year
(representing an initial annualised dividend yield of 5.0 per cent. per annum on
the Rollover Price of an Ordinary Share over that period). Dividends are
expected to be paid in July, October, January and April in respect of the
quarterly periods to the end of May, August, November and February each year. To
facilitate the timing of their payment, all dividends will be interim dividends.
The JPMICT Directors' aim in each subsequent financial year, circumstances
permitting, will be to pay three equal quarterly interim dividends and to vary
the fourth so as to achieve the appropriate total payment for the year.
These statements of intention by JPMICT relate to dividends only, are not a
profit forecast and are based on the assumptions set out in Part 5 of the
Prospectus. In the event that any of the assumptions are not met, this may
affect the ability of JPMICT to meet its intended level of dividend
JPMICT Ordinary Shares are designed to provide a geared exposure to the capital
performance of JPMICT's investment portfolio.
JPMICT Ordinary Shares will be entitled to attend and vote at all general
meetings of JPMICT and, on a poll, to one vote for each share held.
On a winding-up of JPMICT, holders of JPMICT Ordinary Shares will be entitled,
after the repayment of any indebtedness (including any bank borrowings) and the
prior capital entitlements of the holders of JPMICT ZDP Shares have been met in
full, to all of JPMICT's net surplus assets.
JPMICT ZDP Shares
The JPMICT ZDP Shares are designed to provide a pre-determined final capital
entitlement ranking behind all other liabilities of JPMICT and JPMICT's other
creditors, but in priority to the JPMICT Ordinary Shares save in respect of the
JPMICT Ordinary Shareholders' entitlement to revenue profits. Their holders will
have no entitlement to income and therefore the whole of any return will take
the form of capital.
The holders of JPMICT ZDP Shares will have an initial capital entitlement of
100p per share on 3 March 2008, which will increase at a monthly compound rate
such that the final capital entitlement will be 192.13p per share on the Final
Redemption Date, equating to a 6.75 per cent. compound per annum gross
redemption yield. JPMICT ZDP Shareholders should note that the pre-determined
capital entitlement of the JPMICT ZDP Shares is not guaranteed or protected.
Holders of JPMICT ZDP Shares will be entitled to attend and vote at all general
meetings of JPMICT and, on a poll, to one vote for each JPMICT ZDP Share held.
Holders of JPMICT ZDP Shares will not, however, be entitled to vote on
resolutions relating to the payment of dividends to JPMICT Ordinary Shareholders
out of the revenue profits of JPMICT. The separate approval of holders of JPMICT
ZDP Shares as a class will be required for certain proposals which would be
likely to affect their position, including any material change in JPMICT's
investment policy, any variation of the winding-up provisions in JPMICT's
Articles or any issue of shares, or securities convertible or exchangeable into
shares (ranking pari passu with or in priority to the JPMICT ZDP Shares), other
than additional JPMICT ZDP Shares provided that the ZDP Cover test in respect of
the JPMICT ZDP Shares in JPMICT's Articles is satisfied. The ZDP Cover measures
the cover provided by the assets of JPMICT over the final entitlement of the
JPMICT ZDP Shares, taking account the estimated costs and expenses to be charged
to the capital account over the life of JPMICT and of any borrowings.
Further details of the rights attaching to the JPMICT ZDP Shares, and the
arrangements for their redemption are set out in Part I of the Prospectus.
Each JPMICT Unit comprises two JPMICT Ordinary Shares and one JPMICT ZDP Share
and their characteristics are similar to those that an ordinary share in JPMICT
would have in the absence of its split capital structure. The presence of two
Ordinary Shares to one ZDP Share in a JPMICT Unit means that the capital base of
a JPMICT Unit is, on the basis of their respective Rollover Prices, split
between JPMICT Ordinary Shares and JPMICT ZDP Shares in the ratio of 2:1,
compared with a ratio of 1.5:1 for JPMICT as a whole, based on the Target Ratio
of JPMICT Ordinary Shares to JPMICT ZDP Shares set out below. As a result, the
returns provided by a JPMICT Unit will be more geared to the growth or decline
in the assets of JPMICT than an ordinary share in a non split capital structure.
In addition, the dividend yield from a JPMICT Unit will also be greater than
that provided by an ordinary share in an ungeared structure. On application to
JPMICT's registrar, each JPMICT Unit may be separated into two JPMICT Ordinary
Shares and one JPMICT ZDP Share and traded separately on the London Stock
Exchange. Similarly, JPMICT Ordinary Shares and JPMICT ZDP Shares may be
combined into JPMICT Units at any time on application to JPMICT's registrar.
It is not intended that JPMICT will be geared through the use of bank debt on
launch nor is it intended that bank debt will be used to provide long term
The JPMICT Board reserves the right to utilise borrowings representing up to a
maximum of 15 per cent. of net asset value at the time of drawdown and only on a
short term basis for the purposes of liquidity, including, where necessary, the
making of investments and the gearing of the assets of JPMICT on such occasions
where the Manager, as authorised by the JPMICT Board, believes that gearing will
enhance returns to Shareholders. No borrowings may be made if, at the time of
drawdown, it would reduce the ZDP Cover to less than 1.15 times.
Manager of JPMICT
The manager of JPMICT will be JPMorgan Asset Management (UK) Limited. JPMICT's
portfolio will be managed by Jamieson Streeter, an employee of the Manager, who
currently manages the Company's equities portfolio and has managed this
portfolio since the Company's inception. Jamieson Streeter has been managing
investment funds since April 1987.
JPMorgan Asset Management (UK) Limited will receive a management fee, payable
monthly in arrears, equivalent to 0.85 per cent. per annum of JPMICT's net
assets (defined in JPMICT's management agreement as the total assets of JPMICT
less its liabilities but excluding any shareholder entitlement accounted for as
a liability in JPMICT's financial statements). To the extent that JPMICT's
portfolio comprises holdings in investment funds from which the Manager or any
of its associates receives a management or advisory fee based wholly or partly
on assets or income, these are excluded from the calculation and, therefore,
attract no management fee.
Discount control measures
JPMICT has the authority to make market purchases of up to 14.99 per cent. of
both the JPMICT Ordinary Shares and JPMICT ZDP Shares respectively following the
implementation of the Proposals.
The JPMICT Directors will consider repurchasing JPMICT Ordinary Shares and
JPMICT ZDP Shares in the market if they believe it to be in Shareholders'
interests, in particular as a means of correcting any imbalance between supply
of and demand for the JPMICT Ordinary Shares and JPMICT ZDP Shares. Any purchase
of JPMICT Ordinary Shares and JPMICT ZDP Shares will be in accordance with
JPMICT's Articles and the Listing Rules in force at the time.
JPMICT is permitted to hold Shares acquired by way of market purchase in
treasury, rather than having to cancel them. Such Shares may be subsequently
cancelled or sold for cash. Accordingly, JPMICT's share capital purchased
pursuant to Share buy-backs may be held in treasury. This will give JPMICT the
ability to sell Shares from treasury quickly and in a cost efficient manner, and
would provide JPMICT with additional flexibility in the management of its
The numbers of JPMICT Ordinary Shares and JPMICT ZDP Shares initially issued are
to be such that there is an initial capital structure which will comprise 60 per
cent. JPMICT Ordinary Shares and 40 per cent. JPMICT ZDP Shares (the ''Target
Ratio'') and such that the initial gross assets of JPMICT will comprise
approximately 60 per cent. assets attributable to the JPMICT Ordinary Shares and
40 per cent. assets attributable to the JPMICT ZDP Shares. These proportions may
diverge by up to + / - 2.5 per cent. in respect of each element in order to
reduce the extent to which Elections under the Scheme and applications under the
Placing and Offer have to be scaled back, subject to the ZDP Cover being at
least 1.15 times as at Admission and the JPMICT Board being satisfied that
JPMICT will be able to pay the quarterly interim dividends as set out in the
Scaling back of Elections and deemed Elections for JPMICT Securities
JPMICT will seek initially to achieve the Target Ratio as described above in
order to balance the share capital of JPMICT.
If Elections for JPMICT Securities under the Scheme and subscriptions for JPMICT
Securities under the JPMICT Placing and Offer do not achieve the Target Ratio,
the directors of JPMICT reserve the right (in consultation with the Manager and
Winterflood Securities) to scale back the issue of the relevant class of JPMICT
Entitlements under the Proposals
Entitlement of Ordinary Shareholders
In accordance with the Articles of Association, Ordinary Shareholders will
receive, as a Final Interim Dividend, the Directors' best estimate of the
revenue profits of the Company (including accumulated revenue reserves)
available for distribution. The undistributed revenue profits earned by the
Company in respect of the period up to and including 29 February 2008 (including
accumulated revenue reserves) will be paid as a Final Interim Dividend on 28
February 2008 to Ordinary Shareholders on the Register as at 5.00 p.m. on 15
February 2008. The undistributed revenue profits earned by the Company in
respect of the period up to and including 29 February 2008 (which will form the
Final Interim Dividend), will include dividends in respect of securities held by
the Company which have been declared ex dividend, but where the actual cash
amount of the dividend will not have been received prior to 28 February 2008.
The Final Interim Dividend is estimated to be at least 7p per Ordinary Share.
The Company's Articles of Association provide for Ordinary Shareholders to
receive the balance of the net assets of the Company after payment to the ZDP
Shareholders of their aggregate Capital Entitlement.
The entitlement of each Ordinary Shareholder will be the Terminal Asset Value of
the Ordinary Shares which will be calculated as at the Calculation Date by
deducting from the assets of the Company the aggregate Capital Entitlement of
the ZDP Shareholders, the expenses of the Scheme payable by the Company and the
amount to be set aside in the Liquidation Fund. This latter amount will include
amongst other things the ongoing actual and contingent liabilities of the
Company and the Retention required by the Liquidators. In respect of Ordinary
Shareholders who elect (or are deemed to have elected) to receive JPMICT
Securities, stamp duty and stamp duty reserve tax payable on the transfer of the
assets from the Company to JPMICT will also be deducted.
The number of JPMICT Securities which Ordinary Shareholders electing for JPMICT
Securities will be entitled to receive will be calculated by dividing on the
Calculation Date the Terminal Asset Value of all their Ordinary Shares in
respect of which they have made or are deemed to have made an Election for
JPMICT Securities, by the Rollover Price for the relevant class of JPMICT
The Liquidators will set aside sufficient assets in the Liquidation Fund of the
Company to meet its liabilities. The Liquidators will also provide in the
Liquidation Fund for a Retention which they consider sufficient to meet any
contingent and unknown liabilities of the Company. The Retention is currently
expected to amount to approximately £150,000.
To the extent that any part of the Liquidation Fund is not required to meet the
Company's liabilities, the balance remaining in the hands of the Liquidators
will be paid as one or more liquidation distributions to holders of Ordinary
Shares (whether those Shares are held in the form of Shares or Units) who are on
the Register at the close of business on the Effective Date on a pari passu
basis pro rata to their respective holdings, provided that if any such amount
otherwise payable to a Ordinary Shareholder or Unitholder is less than £5.00, it
will not be paid to such Ordinary Shareholder or Unitholder but will be
transferred by the Liquidators to a charity, the Army Benevolent Fund
(Registered Charity Number 211645) (the ''Nominated Charity'').
Entitlement of ZDP Shareholders
Under the Company's Articles of Association, holders of ZDP Shares are entitled
to receive a final capital entitlement of 154.15p per ZDP Share upon liquidation
of the Company on 29 February 2008 (their ''Capital Entitlement'').
The number of JPMICT Securities to which ZDP Shareholders electing to receive
JPMICT Securities will be entitled to receive will be calculated by dividing on
the Calculation Date the aggregate Capital Entitlement of all their ZDP Shares
(on the basis of 154.15p per ZDP Share multiplied by number of ZDP Shares in
respect of which an Election is made or deemed to be made for JPMICT
Securities), by the Rollover Price for the relevant class of JPMICT Securities.
Entitlement of Unitholders
Shareholders holding their Shares in the form of Units will be entitled to, in
respect of each Unit, an amount equal to the Capital Entitlement in respect of
the ZDP Share element of the Unit and an amount equal to the Terminal Asset
Value in respect of the Ordinary Share element of the Unit.
The number of JPMICT Securities to which Unitholders electing for JPMICT
Securities will be entitled will be calculated by dividing on the Calculation
Date the aggregate value of the ZDP Shares (on the basis of the Capital
Entitlement of 154.15p per ZDP Share) and Ordinary Shares (on the basis of
Terminal Asset Value per Ordinary Share) comprised in the Units in respect of
which they made or are deemed to have made an Election for JPMICT Securities by
the Rollover Price for the relevant class of JPMICT Securities.
Costs and expenses
The Company will bear the costs of the Proposals, including the costs of
realizing the Company's assets. Such costs (excluding realisation costs) are
not expected to exceed £638,950 (including VAT) and inclusive of the Retention
In respect of the costs of launching JPMICT, if the Proposals are approved and
(i) the Manager will effectively bear a proportion of the
costs of the establishment of JPMICT. This contribution will be calculated as
the amount required to reduce the costs of establishment and admission of JPMICT
(including any placing fees due to Winterflood Securities) to a level where the
initial net asset value per JPMICT Ordinary Share shall be at least 99p. In this
context the initial net asset value per JPMICT Ordinary Share shall be
calculated as the net assets attributable to each JPMICT Ordinary Share after
provision for the costs of establishment and Admission of JPMICT net of the
Manager's contribution but before any provision for the costs of acquiring the
investment portfolio whether via transfer from the Company or by other means.
(ii) the remaining launch costs of JPMICT will be borne by
JPMICT and charged to its capital account. Under the above arrangements, such
costs will not exceed 1 per cent. of the gross proceeds of the issue of JPMICT
Ordinary Shares including VAT which is irrecoverable.
(iii) the contribution to be made by the Manager shall be made by
providing management services under its management agreement with JPMICT without
payment of any management fee up to the value required to ensure the net initial
net asset value per JPMICT Ordinary Share is 99p.
If the Proposals are not approved or are not implemented, the Manager and JPMICT
will not bear any costs and the entire costs payable in respect of launching
JPMICT will be borne by the Company (in addition to the costs of the Proposals
and realising the Company's assets). Such costs are not expected to exceed
£396,000 (including VAT if applicable).
Cash payments to Shareholders
Shareholders who wish to receive cash under the Scheme in respect of their
Shares must elect for the Cash Option, as Shareholders who fail to make a valid
Election will be deemed to have elected for Equivalent JPMICT Securities, unless
they are Restricted Shareholders, in which case they shall be deemed to have
elected for cash.
Restricted Shareholders and Overseas Shareholders
Restricted Shareholders will not receive a Form of Election and will be deemed
to have elected for the Cash Option and will receive cash from the Company in
respect of their entire holding of Shares unless they have satisfied the
Directors, the Liquidators and the JPMICT Directors that it is lawful for JPMICT
to issue JPMICT Securities to them under any relevant overseas laws and
Overseas Shareholders may participate in the Scheme however it is their
responsibility to satisfy themselves as to the full observance of the laws of
the relevant jurisdiction in connection with the Proposals, further details of
which are set out in Part III of the Circular.
If the Proposals are not approved
If the Scheme is not approved by Ordinary Shareholders at the First EGM or if
the Scheme does not become unconditional, the winding up resolution will, in any
event, be put to Ordinary Shareholders at the Second EGM. The Second EGM will be
convened on 29 February 2008 and as set out above there shall be weighted voting
rights for the winding-up resolution and the vote of those OrdinaryShareholders
entitled to vote shall be taken on a poll. In these circumstances, all
Shareholders will receive a cash distribution in the Company's liquidation.
Day from which it is advised that dealings in Shares and Units will be
for cash settlement only and immediate delivery of documents of title 5.00 p.m. on 13 February
Record Date for the Final Interim Dividend for Ordinary
Shareholders 5.00 p.m. on 15 February
Latest time for receipt of Forms of Proxy from Ordinary Shareholders
for use at the First EGM 2.30 p.m. on 18 February
Latest time for receipt of Forms of Election from Shareholders and
Unitholders 5.00 p.m. on 18 February
Closing of Register and Record Date for participation in the
Proposals 5.00 p.m. on 18 February
First EGM 2.30 p.m. on 20 February
Latest time for receipt of completed Application Forms and payment
under the Offer 5.00 p.m. on 20 February
Calculation Date close of business on 26 February
Latest time for receipt of Forms of Proxy from Ordinary Shareholders
for use at the Second EGM 9.30 a.m. on 27 February
Final Interim Dividend paid to Ordinary Shareholders 28 February
Opening of the Company's registers and commencement of dealings
in respect of the Reclassified Shares 8.00 a.m. on 28 February
Dealings in Reclassified Shares suspended 7.30 a.m. on 29 February
Second EGM 9.30 a.m. on 29 February
Effective Date and Transfer Date 29 February
CREST accounts credited 3 March
Admission of JPMICT Securities 3 March
Dealings in JPMICT Securities commence 8.00 a.m. on 3 March
Cheques expected to be despatched in respect of the Cash Option
and CREST payments made to Ordinary Shareholders, ZDP as soon as practicable
Shareholders and Unitholders after 3 March
Share certificates for JPMICT Securities issued under the Scheme
expected to be despatched on or as soon as practicable
after 3 March
Winterflood Investment Trusts
Jane Lewis 020 3100 0295
JPMorgan Asset Management
David Barron 020 7742 3475
Craig Cleland 020 7742 3418
Richard Plaskett 020 7742 3422
Tony Langham 020 7294 3617
Charlie Field 020 7294 3616
Rachel O'Hare 020 7294 3625
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