Rebels welcome engagement from Strategic Equity Capital trust board

Shareholders Ian Armitage and Jonathan Morgan recently complained about how the portfolio was being managed

Two shareholder rebels have welcomed engagement from the board of the Strategic Equity Capital (SEC) trust, with directors acknowledging their concerns.

Shareholders Ian Armitage and Jonathan Morgan, who together hold a 7.7% stake in the £201m trust, have publicly complained against how the portfolio was being managed and its sustained NAV discount.

The trust is currently trading at a 14.1% discount to an estimated NAV of £317m, according to Association of Investment Companies data.

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On 15 March 2021, they called the for SEC to be discontinued in an emerging general meeting after levelling accusations of mismanagement at the board.

This was ultimately defeated by 82% of shareholders (with 17% voting for its termination), though chairman Richard Hills recognised the “frustration” from investors.

After the 30 March 2021 meeting, non-executive director David Morrison also announced his resignation from the board.

His departure, along with the backing of 10% of other shareholders, has prompted Armitage and Morgan to make a further statement.

As well as being encouraged by additional support from their peers, the pair welcome the acknowledged of the board about the trust’s persistent discount and have vowed to constructively engage.

In a joint statement, they said: “We believe it is in all shareholders’ interests that best efforts should be made to tackle the persistent discount and await the board’s proposals with interest.”

The board had acted to rectify the discount in 2020, bringing in Ken Wotton to replace Jeff Harris as lead manager of its portfolio.According to AIC data, the trust has produced a NAV total return of 54.3% over five years while the UK Smaller Companies AIC sector has returned 75.8%.

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