The European Smaller Companies Trust — An attractive entry point to a small-cap specialist

The European Smaller Companies Trust (LSE: ESCT)

Last close As at 01/03/2024

154.00

0.50 (0.33%)

Market capitalisation

616m

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Research: Investment Companies

The European Smaller Companies Trust — An attractive entry point to a small-cap specialist

In contrast to many industry participants, The European Smaller Companies Trust’s (ESCT’s) manager, Ollie Beckett, is positive about the prospects for European small-cap companies as he believes that low valuations discount a recession. Although small-cap equities have outperformed large caps in Europe over the long term, unusually, small caps are currently in their third consecutive year of underperformance in anticipation of an economic downturn. The trust’s cyclical bias and a double-digit share price discount to NAV suggest a potentially attractive entry point if the European economy proves more resilient than many expect.

Melanie Jenner

Written by

Mel Jenner

Director, Investment Trusts

Investment Companies

The European Smaller Companies Trust

An attractive entry point to a small-cap specialist

Investment trusts
European smaller companies

7 August 2023

Price

160.0p

Market cap

£641m

Total assets

£775m

NAV*

184.3p

Discount to NAV

13.2%

*Including income. At 3 August 2023.

Dividend yield

2.8%

Shares in issue

400.9m

Code

ESCT

Primary exchange

LSE

AIC sector

European Smaller Companies

Financial year-end

30 June

52-week high/low

172.0p

124.5p

198.0p

148.7p

*Including income.

Gearing

Net gearing (at 30 June 2023)

13%

Fund objective

The European Smaller Companies Trust seeks capital growth by investing in smaller and medium-sized companies that are quoted, domiciled, listed or have operations in Europe (excluding the UK). The trust invests mainly in Western Europe with the portfolio typically holding more than 120 companies, with an average market cap of around £1bn and rarely above £3bn.

Bull points

The current discount offers an attractive entry point for long-term investors.

A truly diversified portfolio of interesting European smaller companies.

Exposure to the different stages in a company’s life cycle.

Bear points

Smaller companies can be higher risk and have limited liquidity.

Relatively high level of gearing will amplify capital losses in a falling market.

Risk of European economic weakness.

Analyst

Mel Jenner

+44 (0)20 3077 5700

The European Smaller Companies Trust is a research client of Edison Investment Research Limited

In contrast to many industry participants, The European Smaller Companies Trust’s (ESCT’s) manager, Ollie Beckett, is positive about the prospects for European small-cap companies as he believes that low valuations discount a recession. Although small-cap equities have outperformed large caps in Europe over the long term, unusually, small caps are currently in their third consecutive year of underperformance in anticipation of an economic downturn. The trust’s cyclical bias and a double-digit share price discount to NAV suggest a potentially attractive entry point if the European economy proves more resilient than many expect.

NAV outperformance vs the MSCI Europe ex-UK Small Cap Index (10 years)

Source: Refinitiv, Edison Investment Research

Why ESCT and why now?

European small-cap equities have outperformed their large-cap brethren in 14 of the last 21 calendar years, although they lagged in 2021 and 2022 and again in 2023 to-date due to recession concerns. In aggregate, European small-cap firms have higher earnings growth and more attractive valuations than larger European businesses. The smaller companies universe is around five times larger than that of large-cap firms in Europe and they are often under-researched, providing opportunities to find mispriced securities. European small-cap companies can provide exposure to niche businesses that are unavailable in the large-cap area.

Unlike its peers, ESCT is a true small-cap fund (more than 50% of the portfolio is invested in companies with a market cap below €1bn. It has a balance of value and growth stocks, and the manager is valuation aware and willing to look at out-of-favour areas of the market. At-end March 2023, the portfolio (adjusted for 14% gearing) was broken down: c 4% early cycle, c 41% quality growth, c 22% mature and c 33% turnarounds. The fund has a lower forecast P/E valuation and a higher return on equity versus the benchmark, although forecast earnings growth is lower.

Now could be a favourable time to consider ESCT as European small-cap equities are trading at the lower end of their historical valuation range. Also, the trust’s 13.2% share price discount to NAV is wider than most of its peers’ despite ESCT’s high-ranking NAV returns and is above its own 11.9% 10-year average. Given the trust’s cyclical bias and a meaningful level of net gearing, ESCT’s shares have the potential to re-rate if there is a recovery in the European economy.

ESCT is well positioned for an economic recovery

European small-cap company valuations are discounting a recession

Recession concerns are heavily reflected in the European small-cap equity market and 2023 is the third consecutive year where small-cap stocks are underperforming. Historically, they have outperformed due to smaller businesses’ higher growth prospects and strong balance sheets and they tend to be greater beneficiaries of M&A and capex spending.

European small-cap stocks are trading at a 20-year valuation discount to European large caps when they typically trade at a premium. The MSCI Europe Small Cap Index is also trading at a record P/E multiple discount versus the US S&P 500 Index since the data began in 2005. Hence, Beckett is unconcerned about a potential recession in Europe given the very attractive valuation multiples of European small-cap stocks.

The catalyst for a European small-cap rally

Inflation in Europe, and elsewhere, has proved to be more resilient than investors originally anticipated. However, signs that the inflation rate is peaking could provide the catalyst for a significant rally in European small-cap stocks. Meanwhile, a European economic hard landing may be avoided as the labour market is not collapsing and real wages are starting to level off, which is positive for the consumer. The Q223 earnings season is underway, and expectations are low, partly due to some areas of inventory destocking, which should be worked through. Historically, European small-cap stocks outperform when purchasing manager indices bottom, which the manager suggests could occur in Q323. He notes that there could be significant pent-up demand for European small-cap equities due their valuation anomaly.

ESCT’s portfolio construction

In line with ESCT’s investment process, Beckett remains very disciplined when it comes to valuation. Versus the competition, the trust has a more balanced portfolio and a longer list of stocks, and, in general, lower market caps. The manager reports that he is finding more ideas at the lower end of the capitalisation spectrum, which is overlooked by many investors.

Exhibit 1: ESCT’s portfolio metrics (at 31 May 2023)

ESCT

MSCI Europe ex UK Small Cap Index

Dividend yield forecast (%)

3.5

3.6

P/E forecast (x)

11.1

11.8

Return on equity (%)

15.1

13.1

Three-year historical EPS growth (%)

24.0

16.6

Next 12 months forecast EPS growth (%)

17.4

21.3

Net debt/EBITDA (x)*

1.5

1.8

Source: ESCT. Note: *Data at 31 March 2023.

Compared with its benchmark, the trust’s portfolio has a lower forward P/E multiple and a considerably higher return on equity. It has a lower forecast earnings growth, but Beckett suggests that the growth potential of portfolio companies could be underestimated. ESCT has a lower net debt to EBITDA multiple; but once inflation and interest rates peak the manager may increase the trust’s exposure to more leveraged businesses as they are very attractively valued.

Overweight industrials position should be beneficial in a recovery scenario

A direct comparison between ESCT’s sector exposure and that of its benchmark, the MSCI Europe ex UK Small Cap Index, is not possible as the classifications differ. For example, the trust splits its financial exposure between core financials (7.1%) and financial services (5.7%), which, in aggregate, is currently not dissimilar to the index’s 13.5% financial weighting.

A notable difference between ESCT and its benchmark is the trust’s higher industrial weighting (40.2% versus 27.4%). This puts the trust in a particularly favourable position to benefit from European small-cap stocks being a geared play on global GDP. ESCT also has higher exposure to the consumer, both in services and goods, compared with the benchmark.

Exhibit 2: Portfolio geographic (left) and sector (right) exposure (at 30 June 2023)

Source: ESCT, Edison Investment Research

Exhibit 2: Portfolio geographic (left) and sector (right) exposure (at 30 June 2023)

Source: ESCT, Edison Investment Research

Exhibits 2 and 3 illustrate ESCT’s geographic and sector breakdowns. Important things to note are that generally there have only been minor changes in the portfolio’s construction in the six months to 30 June 2023 in terms of both its geographic and sector weightings.

Exhibit 3: Portfolio geographic and sector exposure (% unless stated)

Geography

Portfolio end-Jun 2023

Portfolio end- Dec 2022

Change (pp)

Sector

Portfolio end-Jun 2023

Portfolio end- Dec 2022

Change (pp)

Germany

16.8

15.6

1.2

Industrials

40.2

38.6

1.7

France

14.5

15.1

(0.6)

Technology

11.6

10.1

1.5

Sweden

10.8

10.7

0.1

Consumer services

11.5

11.9

(0.4)

Italy

10.4

9.1

1.3

Consumer goods

8.4

11.1

(2.7)

Netherlands

10.4

9.0

1.4

Core financials

7.1

8.3

(1.2)

Switzerland

8.8

10.0

(1.2)

Basic materials

6.0

5.4

0.6

Spain

5.4

5.2

0.2

Financial services

5.7

6.4

(0.6)

Belgium

4.3

4.5

(0.2)

Energy

3.1

3.7

(0.6)

Greece

3.2

N/S

N/A

Healthcare

3.0

2.1

0.9

Finland

3.1

3.7

(0.6)

Real estate

2.4

1.4

1.0

Other

12.3

17.1

(4.8)

Utilities

1.0

1.2

(0.2)

100.0

100.0

 

100.0

100.0

Source: ESCT, Edison Investment Research. Note: N/S is not stated separately.

Recent portfolio activity

Beckett comments that portfolio activity is very stock specific, and valuation driven. Purchases can be classified in one of four ‘buckets’: early cycle, quality growth, mature and turnaround. Recent new additions to the fund include an IPO: Italian Design Brands (early cycle), which is a collection of high-end furniture and design companies. Forklift truck manufacturer Jungheinrich (mature) is back in the portfolio as its shares became oversold. ESCT has some off-benchmark Greek exposure including the recent purchase of Athens stock exchange Hellenic Exchanges (turnaround). Wind turbine manufacturer Nordex (mature) operates in a loss-making industry, but due to its necessity in the switch towards renewable energy, the EU is supporting these companies to achieve profitability.

Sales can also be classified in one of four buckets: bid, got it wrong, profit taking or opportunity cost. IT services business Majorel Group (bid) was one of many failed IPOs in 2021. The manager initiated a small position in the offering and topped it up afterwards at a much lower price. Majorel is an example of small-cap companies benefiting from M&A. Thule Group (profit taking), which manufactures roof boxes and cycle racks, had only been in the portfolio for a short while. The company’s charismatic CEO was fired by its chairman, which led to a fall in Thule’s share price, providing an attractive entry point. Beckett locked in profits after the shares rallied as he expects further senior management departures.

Performance: Very strong absolute and relative record

There are just four funds in the AIC European Smaller Companies sector, of which ESCT is the largest. It has a commendable performance record, with its NAV total return ranking first over the last one, three and 10 years and second over the last five years.

The only fund that has outranked ESCT over the last five years, Montanaro European Smaller Companies (MTE), is likely to have more volatile performance as it has a higher top 10 concentration (c 40% vs c 20% at ESCT). Also, around a third of its portfolio is technology, which is a high-beta sector, whereas ESCT has a much lower c 12% in technology stocks. This suggests that MTE’s performance is likely to struggle in a market where value and cyclical sectors are in favour. While JPMorgan European Discovery Trust (JEDT) also has a bias towards industrial stocks, there is a large performance disparity between the two funds, with ESCT generating much higher NAV total returns than JEDT over all periods shown.

Exhibit 4: AIC European Smaller Companies sector at 4 August 2023*

% unless stated

Market
cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount
(cum-fair)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield

The European Smaller Cos Trust

641.4

9.9

41.7

42.1

225.3

(14.1)

0.6

Yes

113

2.8

European Assets Trust

323.3

6.4

9.1

9.2

99.1

(8.7)

1.0

No

100

6.5

JPMorgan European Discovery Trust

619.7

(4.7)

6.6

7.7

123.3

(14.2)

0.9

No

110

2.3

Montanaro European Smaller Cos Tr

253.8

(0.4)

14.5

49.8

199.3

(12.4)

1.0

No

103

0.7

Simple average (4 funds)

459.6

2.8

18.0

27.2

161.7

(12.4)

0.9

106

3.1

ESCT rank

1

1

1

2

1

3

1

1

2

Source: Morningstar, Edison Investment Research. Note: *Performance to 3 August 2023. Based on ex-par NAV. TR, total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

Despite its strong performance, ESCT currently has the second-widest discount in the sector, which appears to be somewhat of an anomaly and could be a very favourable entry point for long-term investors. The trust has the lowest ongoing charge, c 30bp below the peer-group average, although it is the only fund eligible for a performance fee. ESCT currently has the highest level of gearing, which should meaningfully add to the fund’s capital growth in a rising market. Its dividend yield is below the mean; however, the trust has the highest ‘natural’ yield in the sector as European Assets Trust pays part of its dividend out of capital.

Exhibit 5: Five-year discrete performance data

12 months ending

Total share price return (%)

Total NAV return (%)

MSCI Europe ex- UK Small (%)

MSCI Eur ex-UK (%)

CBOE UK All Companies (%)

31/07/19

(9.7)

(8.8)

(2.7)

5.0

1.1

31/07/20

3.4

5.7

1.0

(2.8)

(18.5)

31/07/21

63.7

57.9

39.0

26.4

26.4

31/07/22

(19.0)

(15.2)

(13.5)

(6.5)

6.1

31/07/23

16.7

12.5

6.1

16.1

6.4

Source: Refinitiv. Note: All % on a total return basis in pounds sterling.

Beckett comments that ESCT’s performance this year has been ‘okay’, especially considering that value and small-cap stocks have been out of favour. The manager suggests that if the situation changes, the trust’s performance ‘should be pretty decent’.

Positive contributors to ESCT’s performance in 2023 include: AMG Critical Materials (a speciality metals producer that is benefiting from strong demand for lithium oxide); eDreams (an online travel company with very strong 2023 bookings); Mytilineos (an undervalued Greek renewable energy and aluminium producer); and Van Lanschot Kempen (an overcapitalised asset manager with an attractive dividend yield). Negative contributors include: Recticel (an insulation company that is receiving lower than expected proceeds for an asset sale; the company is trading at a significant discount to competitor Kingspan); u-Blox (a manufacturer of wireless communication modules that is a top 10 holding and has recently posted positive results, so Beckett remains positive about the position); and Viaplay (a streaming company whose management was overly bullish; it implemented higher prices but customers cancelled the service; the CEO was fired and Viaplay is now in a cost-cutting rather than a growth mode).

Exhibit 6: Investment trust performance to 31 July 2023

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Refinitiv, Edison Investment Research, Morningstar. Note: Three-, five- and 10-year performance figures annualised.

ESCT’s relative returns are shown in Exhibit 7. Its NAV and share price total returns are ahead of the MSCI Europe ex-UK Small Cap Index over all periods shown apart from the last month. Its outperformance versus the broad UK market is even greater over the last five and 10 years, particularly over the last decade.

Exhibit 7: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI Eur ex-UK Small Cap

1.9

2.4

0.3

10.0

21.3

15.1

37.8

NAV relative to MSCI Eur ex-UK Small Cap

(0.3)

1.6

1.2

6.0

17.9

15.5

27.8

Price relative to MSCI Europe ex-UK

2.7

1.6

(4.6)

0.5

12.9

3.2

60.5

NAV relative to MSCI Europe ex-UK

0.5

0.8

(3.8)

(3.1)

9.7

3.6

48.9

Price relative to CBOE UK All Companies

1.9

3.0

(1.0)

9.7

8.5

22.8

111.5

NAV relative to CBOE UK All Companies

(0.3)

2.2

(0.2)

5.7

5.5

23.2

96.2

Source: Refinitiv, Edison Investment Research. Note: Data to end-July 2023. Geometric calculation.

General disclaimer and copyright

This report has been commissioned by The European Smaller Companies Trust and prepared and issued by Edison, in consideration of a fee payable by The European Smaller Companies Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

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London, WC1R 4PS

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General disclaimer and copyright

This report has been commissioned by The European Smaller Companies Trust and prepared and issued by Edison, in consideration of a fee payable by The European Smaller Companies Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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