REG - Brown Advisory US - Management Fee Amendment, Conditional Tender Offer

Brown Advisory Us Smaller CompaniesAnnouncement

11/02/2025 07:15

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RNS Number : 5893W  Brown Advisory US Smaller Cos. PLC  11 February 2025

11 February 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET
ABUSE REGULATION (EU) 596 / 2014 WHICH FORMS PART OF UK LAW BY VIRTUE OF THE
EUROPEAN UNION (WITHDRAWAL) ACT 2018

 

Brown Advisory US Smaller Companies PLC (the 'Company' or 'BASC')

Legal Entity Identifier: 549300HKKL9K1NY4TW55

 

Amendment to Management Fee and Introduction of Conditional Tender Offer

The Board of Brown Advisory US Smaller Companies PLC announces a change in the
management fees paid to Brown Advisory LLC (the 'Portfolio Manager'), and the
introduction of a performance-related tender offer (the 'Conditional Tender
Offer'), following an internal review.

Management fee

The Board reviews the total costs of the Company on a regular basis. The aim
is to ensure that the costs continue to represent good value to shareholders,
that they are competitive with similar investment products and consider the
quality and experience of the teams involved.

Following recent engagement with Brown Advisory, they have agreed to a reduced
tiered management fee replacing the current fee arrangements, effective from
and backdated to 1 January 2025.

Details of the amendments to the management fee arrangements are set out
below.

New fee arrangements

·    The management fee will be calculated based on the lower of the
Company's market capitalisation and net asset value (NAV), rather than NAV as
is currently the case; and

·    The management fee on the first £200m of assets will be reduced to
0.65%, from 0.7%, and will continue to be calculated on a tiered basis

From 1 January 2025, the management fee is therefore calculated at an annual
rate of:

·    0.65% on the first £200 million;

·    0.6% of the next £300 million; and

·    0.5% thereafter,

in each case of the lower of the Company's market capitalisation and the
Company's NAV.

The new fee arrangements do not introduce any performance fee or
performance-related elements.

The Board believes that the changes have the potential to reduce costs for
shareholders in both the short and long-term, and ensure stronger alignment
between the Portfolio Manager and investors.

The Portfolio Management Agreement between the Company, FundRock Partners
Limited (as the Company's AIFM) and the Portfolio Manager has been amended to
reflect the new management fee. No other changes have been made to the
agreement.

Conditional Tender Offer

The Board continues to have confidence in the Portfolio Manager in executing
the investment strategy of the Company and the long-term opportunities to be
found in the US smaller and medium-sized company sector, which is highly
diverse, and attractively valued compared to the wider US market.

Nonetheless, the Board has decided that should long-term performance not be
satisfactory for shareholders there should be a mechanism for them to realise
up to 100% of the issued share capital in the Company at close to the
prevailing NAV of the Company. Accordingly, should the NAV performance of the
Company not outperform the Company's benchmark (Sterling-adjusted Russell 2000
Total Return Index) for the period 1 July 2023 to 30 June 2028 (i.e. a total
period of five years with three and a half remaining), the Board intends to
offer shareholders a one-off opportunity to tender some or all their shares at
close to the prevailing NAV, less costs.

It should be noted that the Portfolio Manager outperformed the benchmark in
the period from taking over as Portfolio Manager of the Company on 1 April
2021 to 30 June 2023 by 3.3%.

The Board believes that such a Conditional Tender Offer will allow the Company
and its Portfolio Manager appropriate time to outperform against the Company's
benchmark and, in the event it does not, to offer shareholders a liquidity
event.

This redemption option will sit alongside the existing 3-year continuation
vote, which will be next held at the Company's Annual General Meeting (AGM) in
November 2026.

Chairman Stephen White, said: "The Board believes the changes to the Company's
fee structure and the introduction of the Conditional Tender Offer are firmly
in the best interests of shareholders as a whole. They will immediately reduce
costs, ensure shareholders benefit from economies of scale as the Company
grows and, if triggered, the Tender Offer provides an option for those
shareholders to dispose of their holdings at a level close to the prevailing
NAV if they so choose.

"We believe BASC offers a highly differentiated strategy, delivering exposure
to some of the most exciting companies in the world's largest and most dynamic
equity market. With US large caps, particularly the tech giants and the
"Magnificent 7", having driven equity markets to an unparalleled extent in
recent years, we believe American smaller and mid-cap businesses are very
attractively valued. Benefitting from the same deep equity market as their
larger peers, with the prospect of further rate cuts from the Fed and with a
business-friendly administration in place, companies with a more domestic bias
have a very favourable backdrop for growth."

For further information please contact:

FundRock Partners Limited, Company Secretary
ukfundscosec@apexgroup.com (mailto:ukfundscosec@apexgroup.com)

Lansons, PR Adviser

Ed Hooper
edh@lansons.com (mailto:edh@lansons.com)

 

Singer Capital Markets, Corporate Broker

Alan Geeves, William Gumpel, James Waterlow, Sam Greatrex (Sales)

Alaina Wong, Sam Butcher (Investment Banking)

020 7496 3000

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