Sub-scale Dunedin Smaller Companies Investment Trust (DNDL) is to merge with the Harry Nimmo-steered Standard Life UK Smaller Companies Trust (SLS).

This development follows a strategic review of the company, among the more modestly sized in the Association of Investment Companies’ (AIC) UK smaller companies sector and struggling for attention as a result.

The combination follows the merger of the trust’s manager Aberdeen Asset Management with Standard Life, which has resulted in the fund being managed alongside a peer with ‘a very similar UK smaller companies mandate’.


Dunedin Smaller Companies’ modest size – it has total assets of £167.8m under management – and poor liquidity led to struggles in attracting investors.

That has in turn led to an ever widening discount between the portfolio’s underlying assets, or net asset value (NAV), and its share price. In contrast, Standard Life UK Smaller Companies total assets at last count amounted to a significantly chunkier £430.6m.

As James Barnes, the company’s chairman, explains: ‘Dunedin Smaller Companies Trust’s size and the secondary market liquidity in its shares makes it challenging to attract new investors. The proposed merger with Standard Life UK Smaller Companies Trust will resolve these issues, creating a merged trust with assets of over £550m and substantially greater secondary market liquidity.'

Barnes also points out that: ‘As Standard Life UK Smaller Companies Trust has consistently had a substantially stronger rating than the company, the board believes that the merger will result in the company’s shareholders benefiting from a significant increase in the market value of their investment.'

Over the 12 months ended 19 June 2018, the average discounts for the Dunedin and Standard Life trusts respectively were -17.4% and -3.8%.


The market reaction is telling, as shares in Dunedin Smaller Companies Trust, whose investments span the likes of Dechra Pharmaceuticals (DPH), power switching technology play XP Power (XPP) and Burford Capital (BUR:AIM), shoot up 11.4% to 318p on the news, while Standard Life UK Smaller Companies is unchanged at 512p.

XPP power kit box 3

Dunedin’s shareholders are enthused by the opportunity to be invested in a far bigger trust with a strong investment track record, a stronger rating, better liquidity and ‘a robust discount control mechanism’.

The enlarged portfolio will continue to be managed using the investment process developed by Nimmo (pictured below) that has served Standard Life UK Smaller Companies, also a backer of Dechra and XP Power as well as mixers marvel Fevertree Drinks (FEVR:AIM) to name but a few, so very well since 2003.

Standard Life - Harry Nimmo

As for the arcane details, the all-share merger will be effected by way of a scheme of reconstruction under section 110 of the Insolvency Act 1986, resulting in the voluntary liquidation of Dunedin and a roll-over of the fund’s assets into Standard Life UK Smaller Companies.

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Issue Date: 21 Jun 2018