Page 11 - DIY Investor Magazine | Issue 41

HOW IS THE NEW CONDITIONAL TENDER OFFER MECHANISM STRUCTURED AND WHAT ARE ITS TRIGGERS?
If the portfolio manager fails to deliver performance at least in line with the Tokyo Stock Price Index Total Return in sterling terms over the five-year period from 31 July 2024 to 31 July 2029, the board will propose a tender offer.
This offer would allow shareholders to tender 25% of SJG’s issued share capital at a price equal to the prevailing NAV less costs. This mechanism aligns the interests of the portfolio manager with those of the shareholders, ensuring a focus on sustained outperformance.
This mechanism follows
‘ALIGNS THE INTERESTS OF the previous conditional
THE PORTFOLIO MANAGER tender offer mechanism
WITH THOSE OF THE that was introduced in
SHAREHOLDERS, ENSURING A FOCUS ON SUSTAINED August 2020. Since that
OUTPERFORMANCE’ time, the portfolio manager
has met the requirements by
delivering sustained outperformance of the benchmark,
such outperformance compounding at 4.67% per annum to 31st May 2024, so it is not expected that the tender offer will be triggered on 31 July 2024.
WHAT DOES THE BOARD HOPE TO ACHIEVE WITH THESE CHANGES IN TERMS OF SHAREHOLDER VALUE?
The board aims to enhance overall shareholder value by making the trust more attractive to a broader range of investors. The enhanced dividend policy is designed to provide consistent and predictable returns, while the conditional tender offer mechanism ensures that the portfolio manager remains aligned with shareholders and focused on achieving strong performance.
Together, these measures should improve the trust’s appeal, support share price performance and ultimately deliver greater value to shareholders.
CONCLUSION
The new measures introduced by SJG aim to enhance shareholder value by making the trust more attractive to income-focused and growthseeking investors. Meanwhile, the conditional tender offer mechanism provides an effective tool for managing the trust’s market rating. The board is confident these measures will benefit shareholders and support the trust’s ongoing success.
‘MAKING THE TRUST MORE ATTRACTIVE TO INCOME- FOCUSED AND GROWTH-SEEKING INVESTORS’
CLICK HERE TO FIND OUT MORE ABOUT THE SCHRODER JAPAN TRUST PLC
11 DIY Investor Magazine
· August 2024
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RISK CONSIDERATIONS: SCHRODER JAPAN TRUST PLC
Capital erosion: Where fees are charged to capital instead of income, or a fixed distribution amount is paid regardless of the Company’s performance, there is the potential that performance or capital value may be eroded.
Concentration risk: The Company may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result i the company, both up or down.
Counterparty risk: The Company may have contractual agreements with counterparties. If a counterparty is unable to fulfil their obligations, the sum that they owe to the Company may be lost in part or in whole.
Currency risk: If the Company’s investments are denominated in currencies different to the currency
of the Company’s shares, the Company may lose
value as a result of movements in foreign exchange rates, otherwise known as currency rates.
Derivatives risk: Derivatives, which are financial instruments deriving their value from an underlying asset, may be used to manage the portfolio efficiently. A derivative may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the Company.
Gearing risk: The Company may borrow money to make further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase by more than the cost of borrowing, or reduce returns if they fail to do so. In falling markets, the whole of the value in such investments could be lost, which would result in losses to the Company.