Dominic Neary

The New York-based activist investor informed the company that it would vote in favour of the proposal to roll over the assets of Brown Advisory US Smaller Companies into JPMorgan US Smaller Companies, while opting for a full cash exit. Saba Capital Management owns a 16% stake in the trust.

As part of the agreement, Saba has given a number of undertakings, including that it will not put forward proposals to JPMorgan shareholders or requisition a general meeting of the fund. The agreement is in place until October 7, 2027.

In a statement, the board of Brown Advisory US Smaller Companies confirmed that Saba “(together with its managed funds and clients) does not currently hold any interest in JUSC.”

Brown Advisory US Smaller Companies said in an update that its NAV per share was 1,697.91p, which also represents a conservative estimate of its capital NAV, as current-year revenue income is insufficient to cover expenses. The trust had £186.2m in total assets.

The decision to roll over its assets into peer JPMorgan US Smaller Companies, which holds £245m in total assets, followed a three-month strategic review launched in July after the board acknowledged that recent returns had lagged the benchmark by a “significant margin”.

As a result, the boards of both trusts proposed terms for the combination, which will see shareholders rolled into the peer fund managed by JPMorgan or have their holdings realised for cash.

Chair Dominic Neary of JPMorgan US Smaller Companies, said: “I am delighted to announce a proposed combination with BASC and look forward to welcoming those shareholders who participate in the rollover option.

“With increased scale ever more important in the investment trust market, shareholders in the combined JUSC will benefit from an enlarged vehicle, with improved liquidity and lower ongoing costs.”

JPMorgan US Smaller Companies and its fund manager, JPMorgan, agreed to cut the annual management fee for the combined trust to 0.65% for the first £200m of net assets, falling to 0.60% thereafter.

It will maintain its active share buyback policy and continuation votes, supplemented by a conditional 30% tender offer every five years if performance lags the Russell 2000 benchmark and the share price discount exceeds 5%, starting from January 2027.