Yesterday I attended the Annual General Meeting of Alliance Trust (ATST) online. This at least enabled me to avoid travelling to Dundee and I am still avoiding physical meetings because of the Covid risk. From the experience of one tradesperson who visited us yesterday this is still very sensible I think – he caught it in London but had been very unwisely avoiding vaccination – as a result he spent several days in hospital with pneumonia despite being a young and fit person beforehand.
The Alliance Trust AGM was held as a “hybrid” meeting using the Lumi platform which enables on-line voting and was a very well managed event.
Alliance Trust is of course a generalist global trust and after a difficult few years in the past have now reverted to being one of those trusts suitable for widows and orphans, or anyone who desires a “simple, high-quality way to invest in global equities at a competitive cost” to quote from their Annual Report. They use WTW to select and manage a portfolio of independent fund managers.
The Chairman, Gregor Stewart, made the following comments. They outperformed their benchmark in the first half of the year but underperformed in the second half. This was due to the market being focussed on a few large US technology stocks in which they are underweight. But the dividend was increased last year with a total increase of 32.5%. NAV Total return was 18.6%. The discount to NAV has widened but that is true of most investment trusts as people lost confidence in the stock market and its prospects.
When it came to the Q&A session, one shareholder questioned the increase in the dividend which was done by paying out capital profits. The Chairman’s response was that there were differing views on this issue and they had consulted shareholders who generally thought the yield needed to come up a bit. Longer term their expectation is that dividends will be covered by income. Comment: Capital growth retained within the trust is tax free while if it is paid out as income you get taxed on the dividends. So I would personally prefer they not do this. But I can understand why some people would prefer increased dividends and companies in which they are invested are tending to pay lower dividends (the very high dividend payers are often mature businesses in sectors to be avoided). There is also the problem that Alliance may look less attractive to investors if they pay a headline lower yield than other similar trusts. In summary this is not a straightforward issue and will certainly not affect my decision to hold this trust.
This was only held as a physical event yesterday although there was a recording made which I watched this morning (it’s available from their web site). There were only a few shareholders in physical attendance. Why could they not hold a hybrid meeting? They could surely afford to set one up using Lumi or other platforms.
The meeting was chaired by Gerald Corbett who is retiring this year. CEO David Sleath gave a presentation and I note here some of what he said: Adjusted eps was up 14.6%, adjusted NAV was up 39.7% and dividends were up 10%. The board believes there is a lot more growth to come due to favourable market dynamics. There is a record demand for space resulting in an unheard of vacancy rate of 3.5%.
They even reacquired some offices in Slough sold in 2016 to redevelop into industrial units. The board is confident in the outlook for the business and there is the potential to double rental income.
The Q&A was relatively brief and hampered by not everyone using a microphone so that was another organisational failure.
I commented previously on the voting for this event in March and in particular the remuneration Report and Policy (see https://roliscon.blog/2022/03/20/its-the-agm-season-but-voting-not-easy/ ). But the actual voting as reported showed only 2.4% of shareholders voting against the Remuneration Report and 1.1% against the Remuneration Policy. This is exasperating. Irrespective of the fact that the company is doing very well and I have no complaints about the directors, the performance is due to market conditions and the remuneration is excessive.
NatWest Group AGM
The NatWest AGM is being held on the 28th April as a physical meeting in Edinburgh although there was a virtual event to enable shareholders (of which I am not one) to ask questions yesterday. Why cannot they hold a proper hybrid meeting?
Remuneration is an issue at this company also. ShareSoc have published some voting recommendations and other comments written by Cliff Weight – see here: https://www.sharesoc.org/vci/nwg-natwest-group-information-and-vote-guidance-2022/ although I understand you need to be a member to read them.
One thing Cliff said was this: “I question what was the need and rationale for the CEO to be given a 19% pay rise only 1 year into a new job – has she over delivered to such a degree that the Board think they were underpaying her?”. It’s clearly another case of excessive and unjustified remuneration which is all too common in the banking sector. NatWest is still recovering from its near collapse and effective nationalisation by the Government in the financial crisis of 2008 which it is no doubt trying to forget by changing its name from the Royal Bank of Scotland.
There is obviously still a generic problem of excessive pay for executive directors in public companies which changes to corporate governance and regulations in the last few years have failed to tackle. With votes on remuneration dominated by institutional investors who have no interest in controlling pay as they swim in the same pond, and private shareholders typically disenfranchised by obstructive platforms more substantial reforms to tackle this issue are clearly required.
In the case of NatWest, even the Government must have been consulted upon and voted to support the remuneration as they still hold 48% of the shares!
One physical event that investors may be interested in is the return of the three-day Mello meeting in Chiswick on the 24th to 26thof May run by David Stredder. See https://melloevents.com/ .
There is nothing like meeting companies and fellow investors in person to gain real understanding of what is going on. But regretfully David I won’t be joining you. Have just been advised to have a fifth covid vaccination!
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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