Scottish Oriental Smaller Companies Trust PLC (SST) has published its Annual Financial Report for the year ended 31 August 2026, revealing a net asset value total return of negative 6.5 per cent against a benchmark MSCI AC Asia ex Japan Small Cap Index return of 19.8 per cent. The underperformance triggered a conditional tender offer linked to a five-year performance period that began in September 2021, though the Board subsequently announced it would not proceed with the tender and instead launched a formal Strategic Review. The trust, which invests primarily in Asian smaller companies and is managed by FSSA, held shareholders' funds of £341.6 million and a market capitalisation of £303.9 million at the period end.

Key Points

  • Scottish Oriental Smaller Companies Trust PLC (SST)
  • NAV total return fell 6.5% for the year to 31 August 2026, triggering the five-year conditional tender offer after the trust's NAV total return of 28.0% trailed the benchmark's 48.5% over the full performance period
  • Shareholders' funds of £341.6m; NAV per share of 306.9p; share price of 273.0p; discount to NAV of 11.0%; final dividend of 2.9p per share proposed, payable 5 February 2027
  • Investors should watch for the outcome of the Strategic Review, being conducted with adviser Investec Bank plc, and the AGM on 27 January 2027

NAV Fell 6.5% as Consumer and South Asian Exposure Dragged on SST's Year to August 2026

The trust's portfolio suffered from two principal headwinds during the year: heavy exposure to consumer companies in South and Southeast Asia, and underweight positions in industrial and information technology sectors. Markets in Taiwan and South Korea, particularly technology stocks, delivered strong gains that the portfolio was poorly positioned to capture. The share price total return was negative 7.9 per cent, while the discount to NAV widened from 9.6 per cent to 11.0 per cent. The Board described the result as poor both in absolute terms and relative to the benchmark, and stated it shares shareholders' disappointment.

Five-Year Conditional Tender Offer Triggered but Replaced by Formal Strategic Review with Investec Bank

The conditional tender offer, announced in November 2021, required SST's NAV total return to exceed the benchmark over the five years to 31 August 2026 or a tender of up to 25 per cent of issued share capital would be put to shareholders. The trust outperformed comfortably in the first three years — returning 17.5 per cent against 0.9 per cent for the index — but underperformed sharply in the final two years, returning 9.0 per cent versus 47.2 per cent for the index. Given voting intention indications received, the Board announced on 13 October 2026 it would not proceed with the tender and instead appointed Investec Bank plc to conduct a formal Strategic Review of the company's future options.

Management Fees Cut and Investment Policy Amendment Proposed Ahead of January 2027 AGM

With effect from 1 March 2026, the annual management fee was reduced to 0.70 per cent on the lower of market capitalisation and net assets up to £250 million, and 0.65 per cent above that threshold, down from the previous flat rate of 0.75 per cent. The performance fee was removed entirely. At the AGM, scheduled for 27 January 2027 at Investec Bank's London offices, shareholders will also be asked to approve a revised investment policy replacing the existing US$5 billion market capitalisation limit with a float-adjusted cap tied to the largest constituent of the MSCI AC Asia ex Japan Small Cap Index at the time of first investment.

SST Proposes Unchanged 2.9p Final Dividend as Revenue Earnings Per Share Fall to 2.58p

Revenue earnings per share declined to 2.58p from 4.51p the prior year, primarily reflecting lower dividend income from portfolio holdings compared with an unusually strong prior period that included significant special dividends. The Board proposed a final dividend of 2.9p per share, unchanged from 2025, partly funded from revenue reserves. No special dividend is proposed, compared with 0.5p in 2025. Subject to shareholder approval, the dividend will be paid on 5 February 2027 to shareholders on the register at the close of business on 8 January 2027, with shares marked ex-dividend on 7 January 2027.