The European Smaller Companies Trust (ESCT) which holds a continuation vote every three years has been giving consideration to additional liquidity opportunities for shareholders, both periodic events and ongoing market liquidity, and has determined to introduce a three-yearly performance conditional tender offer and to enhance its discount management policy to target a mid-single-digit discount.

Performance conditional tender offer
The board intends to introduce a three-yearly performance conditional tender offer for up to 15 per cent of the company’s issued share capital (excluding shares held in treasury), at a price equal to the prevailing NAV per share less 2 per cent less costs, in the event the company’s NAV total return does not exceed the benchmark total return over each performance period.

The initial performance period shall commence from the conclusion of the requisitioned general meeting and shall continue to the financial year-end on 30 June 2028, with subsequent performance periods being every three years thereafter.

The board reiterates its confidence in the investment manager’s ability to continue to deliver outperformance; however, this additional liquidity mechanism will provide shareholders with a partial exit at close to NAV should there be future periods of underperformance.

Discount management policy
The company has an active share buyback policy which seeks to mitigate discount volatility, manage the absolute discount relative to the peer group, provide liquidity to the market, and generate NAV accretion for shareholders. In accordance with this policy, the company has repurchased a total of 7,051,878 shares since October 2023 for a total amount of £12.2m.

The board intends to continue the operation of its share buyback policy with the additional target of maintaining a mid-single-digit discount, in normal market conditions, providing further support to the absolute rating of the company’s shares.

Shareholders should note that the operation of the share buyback policy may be limited while Saba holds a substantial interest in the company’s shares. Saba is seeking to utilise its shareholding to obtain effective control of the company. Further share repurchases will reduce the company’s issued share capital and may enable Saba to increase its interest in the shares and hence, effective control over the company. This is not in the interests of shareholders, and the board does not intend to take any action that would allow Saba the opportunity to increase its effective control over the company.

ESCT: The European Smaller Companies Trust introduces three-yearly conditional tender offer