The move comes months after its market value fell by 20% due to its high share buyback programme authorised by the board to support its weak share price.

AUSC endured a “disappointing” half year of underperformance for the first six months to 31 December, with the portfolio falling 3.5%, trailing the 4.6% total return from Deutsche Numis Smaller Companies plus AIM index.

The net asset value (NAV) of the portfolio rose a total of 15% with shareholder returns up 20%, but over five years the portfolio dipped by 3% with shareholders sitting on a 6% loss including dividends, while the Numis index returned 27% and 26% over those periods. The struggle followed the retirement of former fund manager Harry Nimmo in 2022, who had run the trust since 2003. Fund managers Abby Glennie and Amanda Yeaman replaced Nimmo following his retirement.

However, JUGI under JPMorgan fund managers Georgina Brittain and Katen Patel delivered over 46% and 155% in underlying investment returns over three and 10 years, beating the benchmark return of 36% and 69.6%, but it did underperform over five years. It offered a 4% dividend policy higher than AUSC’s 2.6% yield.

AUSC shareholders may take a cash exit, capped at 35% of AUSC’s issued share capital, with payouts calculated from AUSC’s leftover NAV after costs and wind-down provisions, scaled to how many shareholders choose cash and reduced by a 2% discount.

Following the merger, the enlarged JPMorgan trust will continue to be managed by JPMorgan Funds, with reduced management fees of 0.6% per annum on net assets up to £200m and 0.55% per annum on net assets above that. 

Shareholders would become part of one of the largest trusts in the UK smaller companies sector, with greater secondary market liquidity and marketability, said AUSC, adding that the benefits of the proposals also included better value for money with lower ongoing charges with the availability of a substantial cash exit and opportunity for a complementary shareholder base to consolidate their investments into a larger trust.

Liz Airey, chair of AUSC, said: “I am delighted that we can offer our shareholders the opportunity to rollover their holdings into an investment trust with exceptional long-term performance within the UK Smaller Companies sector.

“Those who elect to do this will also benefit from holding shares in a larger, and so more cost-efficient, company which should offer better trading liquidity.”

Katrina Hart, chair of JUGI, said: “This partnership will create an enlarged company that delivers meaningful benefits for both sets of shareholders, including improved market liquidity and a reduction in our ongoing costs ratio.

“This is JUGI’s second consolidation in the last three years and the board’s ambition is that JUGI is recognised as the pre-eminent investment trust investing in UK smaller companies,” she added.