Dunedin Smaller Companies Trust; update on merger

Dunedin Smaller Companies Investment Trust (DNDL.L Market Cap. 144m, FTSE Small Cap index, 301p, 3.2% of JIC Portfolio and 0.0% of JIC Top 10)

On 4thSeptember DNDL issued a circular outlining the details of the proposed merger with Standard Life Smaller Companies Investment Trust, (SLS)Ā 

Conclusion: When I bought this trust in June one of the main attractions was that itĀ stood at a discount to NAV of around 17%. The announcement of the merger has seen the discount narrow to around 7.0%, similar to the current discount on the Standard Life Smaller Companies Trust. I am minded to collect my 5.5p dividend, let the merger go through and then make a decision as to whether to hold on to SLS or rotate into another trust standing at a higher discount. I guess there is a risk that other former DNDL shareholders will sell and that the discount on the larger SLS trust widens. I will keep a close eye on the holding over the coming weeks and should the discount to NAV narrow further, I may be tempted to sell. Iā€™m up 8.3% since buying in early June.Ā Ā Holder!
The full announcement can be seenĀ HERE

Main points:

DNDL shareholders will receive New Shares in SLS based on a 4thOctober calculation date of the FAV (NAV minus costs of the merger) of both trusts.

It gives an illustration: If the calculation date had been 30thAugust, theĀ FAV per Dunedin Share would have been 324.05 pence and the FAV per SLS Share would have been 560.99 pence. This would have produced a conversion ratio of 0.577639. Therefore, a holder of 1,000 Shares would receive 577 New Shares with an aggregate net asset value of Ā£3,237 and an illustrative market value of Ā£3,012 and would have received a final interim dividend of Ā£55.

The costs of implementing the scheme are estimated at Ā£1.8m or 3.76p per share, or roughly 1.1% of the NAV.

The final interim dividend of 5.5p per share will be paid on 3rdOctober to shareholders on the register on 21stSeptember. Ex-dividend date: Thursday 21stSeptember.

Based on 30thAugust calculations Dunedin Shareholders will end up with approximately 27.4% of the issued share capital of the enlarged SLS Trust.

Two General Meetings have been convened for 28th September and 8thOctober to implement the proposals.

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