I attended the AGM of the Scottish Oriental Smaller Companies Trust (SST) yesterday (19/2/2015). This is an investment trust that is focussed on China, South-East Asia and India – yes there is not much Scottish about it apart from the fact that it is registered in Edinburgh and managed by First State Investment Management who are headquartered there (but whose parent is actually the Commonwealth Bank of Australia).
Normally they hold their AGMs in Edinburgh but this year it was in First State’s offices in the City of London, on which I congratulated the Chairman. It may alternate in future. There were about 25 investors present, which is more than they get in Edinburgh.
When questions were invited I asked whether there were any plans to refresh the board bearing in mind that of the four directors two had been there since 2004 and Janet Morgan had actually been there since 1995. I considered this a breach of the UK Corporate Governance Code which suggests anyone who has served for more than 9 years is probably not independent and there should be proper justifications given on a “comply or explain” basis. Mr Ferguson said the board was being considered but they report against the AIC Code. I pointed out the same things as I have said at the Baronsmead VCTs and elsewhere (see article in our last Newsletter) – namely that the use of the AIC Code does not exempt them of responsibility under the main UK Code and in any case the AIC is a trade body that represents the interests of investment companies – it does not represent investors. I said there were good reasons for the 9 year rule in the main UK Code which was widely accepted and I opposed those who stayed longer in investment trusts.
The resolutions were then put in turn. After the first one had been voted upon I requested that the proxy counts were reported after each resolution as the intention apparently was only to give them out on a sheet at the end of the meeting. I asked for the votes against to be announced which they were. It is of course best practice to report all the proxy votes after the votes are taken on a show of hands and you can see below why the Chairman might not have wanted the numbers to come out until later. This is a common “sharp practice” when directors do not wish the proxy votes to be apparent to those present.
James Ferguson got 12,190 votes against his re-election as Chairman, but also 391,013 “Votes Withheld” (i.e. 4.2%) which is quite substantial. Janet Morgan got 30% of votes against and Alexandra Mackesy got 9% against . I voted against all three of these directors. I pointed out to the Chairman that he should take note of the large number of votes cast against the three directors.
There was then a useful presentation from Wee-Li Hee and Angus Tulloch representing the fund manager which I won’t cover here for reasons of brevity. But a full report is available to ShareSoc Members here.
In summary this was a useful meeting, educational and generally positive. But I would prefer a new Chairman sooner rather than later although he did run the meeting competently. Incidentally James Ferguson was of course a former Chairman of fund manager Stewart Ivory where Angus Tulloch was also a director. They were acquired by the Commonwealth Bank of Australia. It’s a small world is it not in the fund management business!
Roger Lawson
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