Montanaro European Smaller Companies has announced three strategic initiatives, aimed at improving liquidity and reducing the volatility of its discount.
The measures include introducing regular tender offers, an active share buy back policy, and reducing management fees.
The trust’s board has proposed a tender offer twice a year, allowing shareholders to tender their shares to the trust at a 5% discount to NAV, which the board said reflects wider spreads among small caps and the cost associated with the exercise.
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Each tender offer will be limited to a maximum of 5% of the investment trust’s total issued shares.
“It is hoped that these regular tender opportunities will improve liquidity for all shareholders and not engender the need for investors to take such opportunities that occur with one-off tenders,” the board said.
The trust expects the first tender offer to take place later this year, following the release of the its interim results in the autumn.
Meanwhile, the board has proposed a revision to its share buy back policy in order to pursue a more active approach to discount management. If the proposals are approved by shareholders, the board will target a single digit discount.
Montanaro European Smaller Companies currently trades at an 8.2% discount to its net asset value, according to the AIC.
Management fees will also be reduced at the start of April. The changes will see Montanaro receive 0.825% per year of the market cap of the investment trust up to £500m, down from 0.9%.
Fees on market cap between £500-750m have been revised from 0.75% to 0.70%, while Montanaro will continue to receive 0.65% above £750m.
Richard Curling, chair of Montanaro European Smaller Companies Trust, said :“The board is proposing an innovative package of measures designed to enhance our investment proposition. The Board believes that by reducing costs, reducing discount volatility and improving liquidity we are creating value for all our shareholders.
“The Montanaro European Smaller Companies Trust is in a strong position to benefit from the renewed investor interest in Europe, focusing on high quality growth opportunities.”