Merger of the Rathbone Blue Chip Income and Growth Fund into the Rathbone Income Fund

This note is to inform you of a proposed merger of the net assets of the Rathbone Blue Chip Income and Growth Fund into the Rathbone Income Fund.

By merging the funds, both of which have similar investment objectives, a larger fund will be created, and investors should see benefits in terms of economies of scale, lower expenses and a greater opportunity for objectives to be achieved through access to a wider asset base. 



The costs of the merger are being borne by Rathbone Unit Trust Management Limited.   Further information is set out below.

The rationale for the proposed merger is due to Rathbone Unit Trust Management Ltd operating two funds, both of which are classified by the Investment Association within the UK Equity Income sector.

   

Both funds follow the same investment process, have broadly similar investment objectives, but are managed by different managers within the same investment team. Both have good long-term records of dividend and capital growth. However, while the Rathbone Income Fund has been attractive to a broad investor base, the Rathbone Blue Chip Income and Growth Fund has failed to resonate with investors, in our view, because there has been too little differentiation between the two funds. We attempted to differentiate the Rathbone Blue Chip Income and Growth Fund by making it a more focussed, higher conviction portfolio, but a result has been greater volatility, which is perhaps not the best outcome for investors.

The funds and the merger

In order for the merger to be effected, the unitholders of the Rathbone Blue Chip Income and Growth Fund must approve the merger at an Extraordinary General Meeting (EGM) that will take place on 3rd October 2018. In order for the merger to be effective, the special resolutions to be considered at the EGM of the fund require the approval of 75% of those present, and voting in person or by proxy. Please note we would require the election form to be received by investors 48 hours in advance of the EGM, which has been sent by post.

Under the proposal, if the merger is approved by the unitholders, then the net assets of the Rathbone Blue Chip Income and Growth Fund will be merged into the Rathbone Income Fund. In return for this transfer of net assets, the holders of I-Class and R-Class units in the Rathbone Blue Chip Income and Growth Fund will, on  5th October 2018 (effective date), receive I-Class and R-Class units respectively in the Rathbone Income Fund.

Likely impact for unitholders

It is anticipated that the impact is likely to be positive in that the net asset value of the Rathbone Income Fund will increase as a result of the merger, and each unitholder's pro-rata costs should decrease, given the fixed costs of the fund will be spread over a larger asset base.

Given the similarities in investment approach between both funds, we do not expect the merger to have any material impact on the holdings of the Rathbone Income Fund. Further, we do not expect that there will be any significant rebalancing of the Rathbone Income Fund, either before or after the merger takes effect.

Operation of the merger

The key dates for the operation of the merger are as follows:

The result of the EGM will be posted on our website at rutm.com on the 3rd October 2018.

The SEDOL and ISIN codes for the two funds are as follows:

Redemption of units in the Rathbone Income Fund

Unitholders in the Rathbone Income Fund should note that if they do not wish to continue to hold units in the fund after the effective date, they will have the right to redeem part or all of their shares at any time, free of any charge (except for any charge necessary for the fund to meet disinvestment costs), and subject to the procedures in the latest prospectus of the fund.

Unless unitholders would like to redeem their units, they do not need to take any further action in relation to the proposed merger. If the merger is approved and they do not redeem their units, they will continue to be held in the Rathbone Income Fund.

Please note that unitholders who are normally resident in the UK may be liable to UK taxation on capital gains arising from the sale or other disposal, including redemption, of their units

Further details relating to unit redemptions can be obtained from the dealing office on 0330 123 3810.

Costs

Rathbone Unit Trust Management Limited will bear all of its costs and the costs of the fund’s legal advisers arising from the merger.

Next steps 

Please inform those clients who own the Rathbone Blue Chip Income and Growth Fund and the Rathbone Income Fund of the attached circular. Please ensure that your clients are aware of the election form and receive this form 48 hours in advance of the EGM.

Additional information 

You have the right to obtain a copy of the report in relation to certain aspects of the merger as required by Article 42 of the UCITS Directive.

Should you wish to obtain a copy of this document please contact us on 0330 123 3810 or email rutm@rathbones.com.