The £306.8m trust, which has two share classed, GBP and Euro, announced on 16 June that notice had been served to the board by Emmanuel Gavaudan, principal of the company’s investment manager, to appoint two additional directors that he had nominated.
The board said in the stock exchange announcement there had been a formal evaluation of the board, as outlined in last year’s annual report and they “are satisfied that the current mix of skills and experience”.
However, the notice of requisition is valid and the board will issue a notice convening an EGM on or before 1 July 2022. In the meantime the board said it “will consult with shareholders to seek their views on these proposed appointments”.
Matthew Read, analyst at QuotedData, said shareholders “should be very concerned by this development”, particularly since Gavaudan, together with persons considered acting in concert with the investment manager, owned 28.1% of issued share capital as of 31 March.
“The best investment companies have boards that are independent of, and are therefore prepared to challenge, their investment managers,” said Read. “When appropriate, a board should have the means and be prepared to fire an investment manager to make sure that they continue to act in all shareholders’ interests.
“It is hard to see how allowing Emmanuel to fill the board with his mates helps the overwhelming majority of shareholders, who are external to this concert party.”
The Euro and sterling share classes are trading on discounts of 16.6% and 20.1% respectively.
Read said the recent move by Gavaudan would “likely push these discounts out even further” and said the manager should be focusing on “improving the fund’s performance, while simultaneously increasing its marketing efforts to raise awareness of the fund with potential investors”.
The analyst added the current board “should be commended on trying to maintain its independence and it is right to consult with other shareholders on these developments”.