Introduction of conditional tender offers

RNS Number : 2896T
Scottish Oriental Smlr Co Tst PLC
23 November 2021

This announcement contains inside information as defined under the Market Abuse Regulation (EU) No. 596/2014

Performance of the Company

As noted in the recent annual reports and accounts, having suffered a period of underperformance, the Board is pleased to announce that over the six months to 31 October 2021, the NAV total return of the Company has exceeded the MSCI AC Asia ex Japan Index by 17.0% and the MSCI AC Asia ex Japan Small Cap Index by 6.7%.

The Board is encouraged by this improvement in relative performance following its detailed review of FSSA (the "Manager") and having given active consideration to conducting a search to replace the Manager. In light of this review and the subsequent implementation of a plan targeted at improving investment performance, the Board believes that the Manager's performance should be assessed over an appropriate time period and against a suitable comparator index. Accordingly, the Board intends to adopt the MSCI AC Asia ex Japan Small Cap Index (in sterling) as its principal comparator index (the "Comparator index").

Conditional five-yearly tender offers

The Board also intends to introduce a performance-related conditional tender offer. Under the proposal, a tender offer will be made to shareholders for up to 25 per cent. of the Company's outstanding share capital at a 2 per cent. discount to formula asset value ("FAV"), being the net asset value of the tendered shares less the costs and expenses of the tender offer. The offer would be made if, over the next five years (from the start of the current financial year being 1 September 2021), and five yearly thereafter, the Company's NAV total return in sterling on a cum income basis does not exceed the total return of the Comparator index net of fees over the five year period on a cumulative basis. If the tender offer is triggered, it will be subject to shareholder approval at the relevant time. The five-yearly period has been chosen as this best corresponds with the Manager's typical investment time horizon.

Fixed rate borrowings

The Company has in place £30 million of long-term fixed rate borrowings repayable in 2041. In the event that these borrowings were to be repaid at today's date, the cost of doing so would be £35 million. This has been calculated based on a discounted principal amount and includes all future interest, discounted by a comparable US Treasury Bond yield plus a margin. The Board and the Manager will carefully consider the level of gearing (and potential repayment costs) prior to any conditional tender offer.

Share buy backs

The introduction of conditional tender offers will not affect the Board's current approach to discount management. The Board will continue to exercise its right to buy back shares when it believes this to be value accretive and in shareholders' interests. Since 1 January 2021 the Board has bought back 1,893,343 shares, representing 7.1% of the issued share capital.

The Board

As noted in the Chairman's statement in the recent annual report, succession planning is a regular item on the Board agenda, with the balance between diverse experience and longevity of service a consistent focus of discussions. The Chairman has indicated his intention to retire within the next 12 months and the Board will continue to evolve and be replenished with the best interests of shareholders as its primary objective.

Risk factors

Capital at risk. The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back significantly less than the original amount invested.

How to invest

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Important Information

This document has been prepared for informational purposes only and is only intended to provide a summary of the subject matter covered and does not purport to be comprehensive. The views expressed are the views of the writer at the time of issue and may change over time. It does not constitute investment advice and/or a recommendation and should not be used as the basis of any investment decision.

This document is not an offer document and does not constitute an offer or invitation or investment recommendation to distribute or purchase securities, shares, units or other interests or to enter into an investment agreement. No person should rely on the content and/or act on the basis of any material contained in this document.

Net Asset Value (NAV) performance is not the same as share price performance and shareholders may realise returns that are lower or higher than NAV performance.

This document is confidential and must not be copied, reproduced, circulated or transmitted, in whole or in part, and in any form or by any means without our prior written consent. The information contained within this document has been obtained from sources that we believe to be reliable and accurate at the time of issue but no representation or warranty, express or implied, is made as to the fairness, accuracy, or completeness of the information. We do not accept any liability whatsoever for any loss arising directly or indirectly from any use of this information.

References to "we" or "us" are references to First Sentier Group. In the UK, issued by First Sentier Investors (UK) Funds Limited which is authorised and regulated by the Financial Conduct Authority (registration number 143359). Registered office Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB number 2294743.

Scottish Oriental Smaller Companies Trust plc ("Company") is an investment trust, incorporated in Scotland with registered number SC0156108, whose shares have been admitted to the Official List of the London Stock Exchange plc. The Company is an alternative investment fund and has appointed First Sentier Investors (UK) Funds Limited as the alternative investment fund manager for the Company. Further information is available from Client Services, First Sentier Group, Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB or by telephoning 0800 587 4141 between 9am and 5pm Monday to Friday or by visiting www.scottishoriental.com. Telephone calls with First Sentier Group may be recorded.

First Sentier Group entities referred to in this document are part of First Sentier Group, a member of MUFG, a global financial group. First Sentier Group includes a number of entities in different jurisdictions. MUFG and its subsidiaries do not guarantee the performance of any investment or entity referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk including loss of income and capital invested.