Interactive Investor

UK equity investment trust survives continuation vote

6th April 2021 13:41

Kyle Caldwell from interactive investor

Two long-term shareholders’ attempts to shut the investment trust have been unsuccessful. 

Two long-term shareholders in Strategic Equity Capital (LSE:SEC) have been unsuccessful in their attempts to shut the investment trust.

Shareholders voted in favour of Strategic Equity Capital continuing, with 82% of votes cast in favour at a general meeting at the end of March. Just over two-thirds (67.6%) of shareholders voted.

Ian Armitage and Jonathan Morgan, who own 7.7% of SEC, called for the trust to be wound up. The duo criticised the trust’s performance and its persistently wide discount.

Since last May, the trust has been overseen by Gresham House. Ken Wotton was appointed lead manager in September. It was previously managed by GVQ Investment Management.

Richard Hills, chairman of Strategic Equity Capital, said: “We are grateful for the support of a significant majority of shareholders for the continuation of the company. The company’s net asset value (NAV) has risen 33% (28 September 2020 to 29 March 2021) since Ken Wotton was appointed lead fund manager in September and the company’s share price is at an all-time high.

“Nevertheless, the board acknowledges shareholders’ frustration that the discount to NAV remains wide and we will be looking at ways to address this. We will update the market in due course.”

Numis, the investment trust analyst, says it does not expect this to be the end of the story, due to the trust’s wide discount (of around 15%).  

“It has a register that includes a number of value investors, as well as the investors who have indicated that they would like an exit.

“The board has highlighted that it is looking at ways to address the discount and we would expect it to follow up with further measures, although the nature of the portfolio and relatively small size may limit the board’s options,” says Numis.

The portfolio is concentrated (holding 15 to 25 companies) and invests in smaller companies, those with a market capitalisation of under £300 million.

Continuation votes are a permanent feature for some trusts, occurring once a year or every two, three or five years. In other cases, a continuation vote is triggered if a trust persistently performs poorly or has traded on a wide discount for long periods. The former usually leads to the latter.

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