JPMorgan Global Growth & Income — JPM Elect merger strengthens investment case

JPMorgan Global Growth & Income (LSE: JGGI)

Currency in GBP

Last close As at 04/02/2023

GBP4.69

16.50 (3.65%)

Market capitalisation

GBP1,451m

JPMorgan Global Growth & Income — JPM Elect merger strengthens investment case

JPMorgan Global Growth & Income (JGGI) yesterday announced that it has signed heads of terms with the board of JPMorgan Elect (JPE) in respect of a proposed merger with JPE, which will see assets transferred to JGGI. This merger follows JGGI’s well-received combination with Scottish Investment Trust, which was finalised in August this year. It will further increase JGGI’s assets under management by over £330m, to £1.64bn, making it one of the UK’s largest investment trusts and a leading investment vehicle for global equity, which also offers a relatively attractive dividend (currently 3.9%). Subject to the approval of the shareholders of both JGGI and JPE, and regulatory and tax clearances, it is expected the merger will be completed by the end of the calendar year.

Joanne Collins

Written by

Joanne Collins

Analyst, Investment Trusts

JPMorgan Global Growth & Income

JPM Elect merger strengthens investment case

Investment trusts
Global Equity Income

28 October 2022

Price Ord.

426.5p

Market cap

£1,288.6m

AUM

£1,310.7m

NAV*

433.8p

Discount to NAV

1.7%

*Including income. At 26 October 2022.

Yield

3.9%

Ordinary shares in issue

302.1m

Code/ISIN

JGGI

Primary exchange

LSE

AIC sector

Global Equity Income

52-week high/low*

474.0p

386.0p

462.3p

390.9p

*Including income.

Gearing

Net gearing at 30 Sept 2022

2.7%

Fund objective

JPMorgan Global Growth & Income aims to provide superior total returns and outperform the MSCI AC World Index (in sterling terms) over the long term by investing in companies based around the world. The company draws on an investment process underpinned by fundamental research. JGGI makes quarterly distributions, set at the beginning of each financial year, with the intention of paying a dividend equal to at least 4% of NAV at the time of announcement.

NAV performance, three years

Analyst

Joanne Collins

+44 (0)20 3077 5700

JPMorgan Global Growth & Income is a research client of Edison Investment Research Limited

JPMorgan Global Growth & Income (JGGI) yesterday announced that it has signed heads of terms with the board of JPMorgan Elect (JPE) in respect of a proposed merger with JPE, which will see assets transferred to JGGI. This merger follows JGGI’s well-received combination with Scottish Investment Trust, which was finalised in August this year. It will further increase JGGI’s assets under management by over £330m, to £1.64bn, making it one of the UK’s largest investment trusts and a leading investment vehicle for global equity, which also offers a relatively attractive dividend (currently 3.9%). Subject to the approval of the shareholders of both JGGI and JPE, and regulatory and tax clearances, it is expected the merger will be completed by the end of the calendar year.

Key takeaways

In our view, this merger appears to strengthen the already robust investment case for JGGI by enabling JGGI shareholders to benefit from greater economies of scale arising from an enlarged asset base, including greater liquidity in JGGI shares, and cost efficiencies.

JGGI will also benefit from lower costs following the merger, as its tiered management fee will have the effect of reducing the weighted average fee given the further growth in its NAV. JGGI estimates that based on valuations at 25 October 2022, following the merger, the weighted average management fee will decline to 0.46% of NAV. JGGI’s ongoing expense ratio will also be lower than the current 0.53% (at end September 2022) as the company’s fixed costs will be spread over a larger asset base.

JGGI will continue to implement its existing dividend policy and investment policy, which has delivered strong absolute returns and outperformance of its benchmark and peers over the long term. In the 10 years to end-September 2022, the company realised an annualised return of 13.1% in NAV terms and 13.8% in share price terms, compared to a benchmark return of 11.3%. (For further details see our latest JGGI update.)

Following the completion of the proposed merger, one director from JPE will be appointed as a non-executive director of JGGI, taking the number of JGGI board members initially to seven.

JPE has three share classes: Managed Growth, Managed Income and Managed Cash. As some assets held in the Managed Growth class are less liquid than JPE’s other holdings, they will be transferred into a newly created C share class of JGGI shares until these assets can be realised over time and re-invested in line with JGGI’s ordinary share investment policy. The C shares will then be converted to ordinary shares on an NAV basis. JPE’s other assets will be realised before the merger, then transitioned into assets in line with JGGI’s investment policy and transferred to JGGI at the completion of the merger, in exchange for new ordinary shares in JGGI.

JPMorgan has agreed to make a contribution to the cost of the merger, reducing the effective implementation costs for both JGGI and JPE.

General disclaimer and copyright

This report has been commissioned by JPMorgan Global Growth & Income and prepared and issued by Edison, in consideration of a fee payable by JPMorgan Global Growth & Income. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright 2022 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by JPMorgan Global Growth & Income and prepared and issued by Edison, in consideration of a fee payable by JPMorgan Global Growth & Income. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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