Circular and Notice of Requisitioned GM
JANUS HENDERSON FUND MANAGEMENT UK LIMITED
THE EUROPEAN SMALLER COMPANIES TRUST PLC
Legal Entity Identifier: 213800N1B1HCQG2W4V90
8 January 2025
This announcement contains information that is inside information for the purposes of Article 7 of the UK version of Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended (the Market Abuse Regulation).
THE EUROPEAN SMALLER COMPANIES TRUST PLC
("ESCT" or the "Company")
Publication of a Circular and Notice of Requisitioned General Meeting
Performance Conditional Tender Offer and Discount Management Policy
YOUR VOICE MATTERS:
STAND AGAINST SABA, SAFEGUARD YOUR INVESTMENT
The Board of The European Smaller Companies Trust PLC, formerly known as TR European Growth Trust PLC, announces that it has today published a circular (the "Circular") to convene a general meeting (the "Requisitioned General Meeting") in response to a shareholder requisition (the "Requisition") received in respect of shares beneficially owned by Saba Capital Management, L.P. ("Saba") seeking to remove the Company's current independent board of directors and replace it with Saba's nominees.
The Requisitioned General Meeting will be held at 12.30 p.m. on 5 February 2025 at 201 Bishopsgate, London EC2M 3AE.
The Circular includes details of why the Board recommends shareholders should VOTE AGAINST ALL Resolutions. The Circular also includes details of the Board's proposals to introduce a performance conditional tender offer and a revised discount management policy. Details can be found at the Company's website: www.janushenderson.com/general-meeting-esct
James Williams, Chairman of The European Smaller Companies Trust PLC, said:
"The European Smaller Companies Trust is a well-managed investment company whose strategy has delivered long-term outperformance.
"Saba is attempting to take control of your Company by removing a highly qualified, independent board that acts in all shareholders' interests. It's clear that Saba's motives are self-serving. It would like to install directors who would not be independent of the Company's largest shareholder and has indicated that it may appoint itself as investment manager. This could endanger shareholder protections, radically alter the Company's investment risk profile and deny investors the opportunity to benefit from the proven European small cap investment strategy.
The Board is therefore recommending that shareholders VOTE AGAINST ALL Resolutions proposed. Saba is counting on a high proportion of shareholders not voting. Investor participation is key and will determine the Company's future."
ESCT IS A WELL MANAGED INVESTMENT COMPANY WHOSE STRATEGY HAS DELIVERED LONG-TERM OUTPERFORMANCE FOR YOU
· The independent Board and investment manager, Janus Henderson Investors, have delivered both long-term NAV and share price total returns, outperforming both the Company's peer group and its benchmark, the MSCI Europe (ex UK) Small Cap Index.
|
Total Return to 31 December 2024 (%) |
1 year |
3 years |
5 years |
10 years |
Inception1 |
|
ESCT NAV total return |
-0.9 |
-3.2 |
51.6 |
202.2 |
261.8 |
|
ESCT share price total return |
8.2 |
5.3 |
63.0 |
235.0 |
332.2 |
|
MSCI Europe (ex UK) small cap index2 |
-1.1 |
-7.4 |
27.0 |
138.3 |
171.9 |
|
AIC European Smaller Companies sector NAV total return3 |
2.1 |
-14.8 |
30.6 |
154.6 |
205.3 |
1 Being 1 July 2011, the date that Ollie Beckett was appointed as portfolio manager of ESCT
2 Prior to 30 June 2022, the benchmark was the Euromoney Smaller European Companies (ex UK) Index
3 Sector weighted average
Source: Morningstar Direct
Past performance is not a guarantee of future results
· Saba's claim that ESCT has underperformed is factually inaccurate and is not supported by Saba's own statement which notes that ESCT's total shareholder return has outperformed its benchmark by 11.0 per cent. over three years.
· The Company has a highly successful, proven investment strategy investing in European small caps. It is an exciting time for the sector, with European small caps trading at the widest discount to European large caps over the last 15 years. The sector is attractively valued and the Board believes it is the wrong time to divest from this theme.
· Saba's proposals for the future of the Company lack detail but indicate that they will not continue to invest in the European small cap sector. Any new investment strategy could radically alter your exposure away from European small cap equities and materially change your investment risk profile in a way that may not meet your investment objectives.
You should VOTE AGAINST ALL Resolutions to ensure that the Company may continue to meet its objective of delivering long-term performance with a proven strategy.
SABA IS ATTEMPTING TO TAKE CONTROL OF YOUR COMPANY
· If Saba wins the vote, it has indicated that the new directors may remove Janus Henderson Investors as investment manager and appoint Saba in its place. This will effectively enable Saba to take executive control of the Company.
· It is the Board's view that Saba is seeking to obtain control of your Company to be able to grow its own business and benefit from the fees it may earn as investment manager. There may be no shareholder vote required on the terms of the appointment of Saba as the new investment manager, including as to any fees payable to Saba.
· Saba's proposals lack clarity, creating uncertainty for your future investment. Saba has not made clear its intentions for the future of your Company and has given no clear liquidity proposals or strategy to manage the discount to NAV. The current Board has provided clear liquidity proposals.
You should VOTE AGAINST ALL Resolutions to protect your investment from Saba.
SABA WANTS TO REMOVE A STRONG, INDEPENDENT, HIGHLY QUALIFIED BOARD THAT ACTS IN YOUR INTERESTS AND SAFEGUARDS YOUR INVESTMENT
· Removing a strong, highly qualified independent Board, that acts in your interests, will reduce shareholder protections.
· Your current Board is solely accountable to you as a shareholder. It is our role to serve the interests of all shareholders, regardless of the size of your stake, and to provide effective stewardship of your Company and oversight of its key service providers, in particular, the investment manager.
· Saba is proposing to appoint two individuals to the Board, in place of your current independent Board. The two nominees bring little-to-no experience as directors of UK listed investment trusts and the Board is not aware that they have the relevant experience, including in Europe, to be your directors.
· The Board also does not consider the two nominees to be independent, as one is a partner of Saba and the other has been selected by Saba, the largest shareholder in the Company and the potential future investment manager. This means that the two Saba nominees may act in Saba's interests, rather than in the interests of ALL shareholders.
· If the independent Board is removed, we will no longer be able to safeguard your interests.
You should VOTE AGAINST ALL Resolutions to ensure that the Company retains an independent Board focused on protecting all shareholders' interests.
Saba's proposals for the future of your Company are lacking in detail and its statements in relation to the Company's performance are factually incorrect. Saba's attempt to take control of your Company is a threat to your investment and the safeguards that you currently have. Saba's move is opportunistic and will deny you the opportunity to continue to benefit from the existing and proven investment strategy.
Accordingly, the directors unanimously recommend shareholders VOTE AGAINST ALL the Resolutions proposed at the Requisitioned General Meeting.
LIQUIDITY PROPOSALS
The Company holds a continuation vote every three years at its Annual General Meeting ("AGM"), with the next vote to be held at the AGM in November 2025. If the continuation vote were to fail, the Board would put forward alternative proposals which may include a liquidation of the Company and the return of capital to shareholders.
In addition to periodic continuation votes, the Board 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 7,051,878 shares since October 2023 for a total amount of £12.2 million.
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.
YOUR VOICE MATTERS:
STAND AGAINST SABA, SAFEGUARD YOUR INVESTMENT
The Circular is available on the Company's website at www.janushenderson.com/general-meeting-esct
The Circular will shortly be available for inspection at the National Storage Mechanism which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Expected Timetable
|
Latest time and date for receipt of Forms of Proxy and electronic proxy appointments for the Requisitioned General Meeting*
|
12.30 p.m. on 3 February 2025 |
|
Requisitioned General Meeting
|
12.30 p.m. on 5 February 2025 |
|
Announcement of results of the Requisitioned General Meeting |
5 February 2025 |
*Shareholders should be aware that the deadlines for voting through platforms may be earlier than the Company's proxy voting deadline.
Defined terms used in this announcement shall, unless the context requires otherwise, have the meanings ascribed to them in the Circular.
Enquiries:
Janus Henderson Secretarial Services UK Limited
Corporate Secretary to The European Smaller Companies Trust PLC
+44 (0)20 7818 1818
Dan Howe
Head of Investment Trusts, Janus Henderson Investors
+44 (0)20 7818 1818
Winterflood Securities Limited
Neil Langford / Rose Ramsden (Corporate Finance)
Darren Willis / Innes Urquhart (Corporate Sales)
+44 (0)20 3100 0000
Edelman Smithfield
John Kiely / Latika Shah
+44 (0)7785 275 665 / +44 (0)7950 671 948
Georgeson
esct@georgeson.com
IMPORTANT INFORMATION
The person responsible for arranging for the release of this announcement on behalf of The European Smaller Companies Trust PLC is Janus Henderson Secretarial Services UK Limited.
This announcement does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to subscribe for or to acquire, any ordinary shares in the Company in any jurisdiction.
This announcement does not contain all the information set out in the Circular. Shareholders should read the Circular in full before deciding what action to take in respect of the Requisitioned General Meeting.
The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment, you may get back less than you originally invested. Figures refer to past performance and past performance should not be considered a reliable indicator of future results. Returns may increase or decrease as a result of currency fluctuations.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "might", "will" or "should" or, in each case, their negative or other variations or similar expressions. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, and objectives, are forward-looking statements.
Forward-looking statements are subject to risks and uncertainties and, accordingly, the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement and cannot be relied upon as a guide to future performance. Subject to its legal and regulatory obligations, the Company expressly disclaims any obligations or undertaking to update or revise any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based unless required to do so by law or any appropriate regulatory authority.
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