It is the current intention to hold a “traditional” meeting to which all shareholders are invited and are most welcome to attend in person. After two years of COVID related restrictions your Board is delighted to be able to return to normal and looks forward to meeting shareholders in person on 20 July 2022.
The Articles of Association of your Company require that a continuation vote be held should the net asset value total return of the Ordinary shares be less than that of the total return of the FTSE All-Share Index over a stipulated five-year period.
The most recent five-year period ended on 31 March 2022 and the relevant returns were +11.2% for the NAV total return and +25.8% for the FTSE All-Share Index. Consequently, Resolution 12 in the Notice of AGM is an ordinary resolution for shareholders to approve that the Company continues in existence.
Your Board closely reviews performance over a number of periods, including that for the last five years and to monitor the requirement for a Continuation Vote (‘CV’). The performance deficit for the current period is substantial and in order to recommend voting in favour of the resolution the Board has to be confident that an improvement in relative performance is both likely and probable.
In reaching its decision to recommend continuation, the Board considered the following factors.
The five-year performance period since 31 March 2017 included a period in which substantial changes were made to the investment portfolio. Shareholders will recall that the remainder of the Corporate Bond portfolio was sold and there was significant change made to the structure of the equity portfolio. Consequently the “new” structure has not been running for the full five-year period.
Performance has not been consistently below the benchmark for the period and as mentioned earlier there have been periods of significant outperformance, most notably in the 2021 financial year. With only seven months until the end of the performance period remaining, the aggregate returns were comparable to the benchmark for the relevant timeframe. Unfortunately, relative performance in the later part of the financial year to 31 March 2022 has proved to be very disappointing for your Company.
The Board is supportive of the Investment Manager and its ability to successfully deliver the investment strategy for Shareholders in the future. The Board believes that the recent acquisition of the Investment Manager by Columbia Threadneedle Investments will also further broaden the resources available to the Fund Manager particularly in terms of research and corporate access.
As from 1 April 2022, a new and reduced fee rate for your Company has been introduced and the Board is pleased to note the Manager’s commitment to ensuring the Company remains competitive in terms of fees and total expense ratios.
Finally, the Board is much encouraged by the revenue performance of the Company. In particular, the underweight/nil positions in Banks and Integrated Oils (which recently has harmed relative capital returns) meant that the Company had no exposure to sectors of the Index that either substantially reduced or passed their dividends altogether in 2020/21. The buoyancy in the revenue account that has allowed the Board to continue to increase distributions to Shareholders against such a difficult background is down to the Manager’s portfolio positioning.
Despite the above, in reaching its decision to recommend continuation of the Company and having engaged with Shareholders, the Board did consider that it would be appropriate to make some changes to the Company’s structure. Resolution 13 (which is a special resolution) proposes that new Articles of Association be approved and adopted in order that the performance measurement period for the Company be changed from five years to three years. If approved this will mean that the current performance period that commenced on 1 April 2022 will end on 31 March 2025. A CV will be required to be held at the 2025 AGM if the net asset value total return for the Company for the three-year period is below that of the FTSE All-Share Index. The Board does not expect any change to the fund management process to be made despite the shorter performance period.
Your Board has taken independent advice on the Continuation Vote and proposed changes and would encourage Shareholders to vote in favour of Resolution 12, that the Company continues in existence and Resolution 13, that new Articles of Association be approved and adopted, as the Directors intend to do with their shareholdings.
|Date||Number of Sessions||First Session Starts||Last Session Ends|
|Wednesday 20th 2022||1||12:00 PM||01:00 PM|