Worldwide Healthcare Trust AGM – But No Proxy Voting Form

Today I attended the Annual General Meeting of Worldwide Healthcare Trust (WWH) in London. This is an investment trust focused on a portfolio of worldwide pharmaceutical and biotechnology companies. It has a very good long-term track record, consistently beating its benchmark and is the top performer of all UK investment trusts measured since formation.

The fund manager is OrbiMed where Sam Isalay was the managing partner until recently when he departed under a cloud of sexual harassment claims. He also resigned from the board of the Trust at the same time and was replaced by Sven Borho who did the manager’s presentation this year. Sam Isalay was present at the meeting and asked a question. He also got a vote of thanks for his past work, prompted by the Chairman.

There were about 100 shareholders present including quite a number of institutional investors apparently by the cut of their suits and age, which is unusual.

I will summarise Sven’s talk in brief although it was particularly interesting. He said the recipe for success was still very much in place. The team is still in place even after the change of leadership. The trust was up 2.8% last year against a benchmark decline of 2.5%. The share price discount narrowed and it is now trading at a premium (now 0.8% according to the AIC).

Year to date (since March year end) the NAV is up 15.8%. The consistent out-performance seems to be down to stock-picking with a focus on small/mid cap companies.

Sven also said that it was strong year of scientific progress and mentioned in particular gene therapy, gene silencing and CAR-T work. He also discussed the progress on a cure for alzheimer’s disease at some length where real progress is being made. There have been many past failures in cures for that disease with billions of dollars being spent but there are 5.7 million patients needing treatment in the USA which is more than all cancer patients combined. There are several companies in clinical trials with phase 3 results due by 2020.

I might need a cure because this morning I had a “senior moment” and shut the garage door while my wife was backing her car out. Fortunately no damage done or I would not have heard the last of it.

Apparently the drug approval rate has increased substantially due to a change in management at the FDA who has changed the regulations to make it easier and cheaper to get approval for new drugs.

After about an hour of Sven’s presentation, which was rather long, we moved onto the formal business of the meeting.

One shareholder asked how much had the company borrowed? He also said he asked the same question last year and was still waiting for an answer. The simple answer he got was they are 117% invested, but as they use derivatives the full answer was more complex and I did not understand what was said – there is more clarity in the Annual Report. The shareholder was clearly not satisfied because he voted against the Chairman when it came to the vote.

I questioned what the impact would be of the announcement in the Annual Report that they would no longer be issuing proxy voting forms with their invites to the AGM. The Chairman referred me to the Company Secretary who could not give an answer. So I made it clear I objected to this change as it would be likely to discourage voting. As I said, I had already raised this issue with their Registrar’s Link Asset Services in an exchange of correspondence (see my previous blog post on this topic here: https://roliscon.blog/2018/07/23/voting-at-general-meetings-link-asset-services-and-centralnic/ ). Why did the Chairman not ask the audience at this meeting what they preferred? He declined to do so.

He also suggested there was not time to spend on this issue at which point I said he would have plenty of time if he had not set the start time of the AGM at 12.00 noon. This is a practice I have seen at other trust AGMs where after presentations there is little time left for questions before lunch is served. I think this is very bad practice.

Note if you don’t receive a paper proxy voting form in future, go here for one you can use at any General Meeting: https://www.roliscon.com/proxy-voting.html . If you think this is a retrograde step which will reduce voting by private shareholders from the already low level, please do complain about it to the Chairmen of companies and to Link Asset Services.

I did not have time to raise the issue of the Chairman having served on the board since 2007. This is contrary to the UK Corporate Governance Code, so that’s another reason why I will be voting against him next year. He got 6.6% against him on the proxy vote counts at this meeting.

Other than the issues mentioned above, this was a very informative meeting and well worth attending. As readers may be aware, I have suddenly taken an interest in the gene therapy area and this trust is one way into it. The manager, OrbiMed, also manage the Biotech Growth Trust which is more focused and somewhat smaller. It also trades at a significant discount at present but has underperformed its benchmark of late.

Postscript: there is an interesting article on the departure of Sam Isalay here on Citywire: http://citywire.co.uk/investment-trust-insider/news/fund-manager-accused-of-harassment-hits-out-over-exit/a1157479?

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Voting at General Meetings, Link Asset Services and CentralNic

CentralNic (CNIC) have announced that the proxy voting forms they sent out to shareholders on the register for their forthcoming General Meeting were invalid as it omitted a signature block. So they have sent them out again. As a shareholder in the company, I spotted the error and simply wrote by name and date on the bottom of the form and signed it. That should suffice.

It is a little known fact that you don’t actually need to use the proxy form issued by the company or their registrar so long as your instructions are clear. Which prompts me to talk about the conversation I have been having with Link Asset Services (formerly Capita) about proxy voting.

I complained to them when I received a notice of an AGM by post but no paper proxy voting form. They said I needed to specifically request a paper proxy form or use their on-line portal. The latter is tedious to use and not nearly as simple when you just want to cast votes as the system used by Equiniti. It transpired that on Link’s interpretation of the Companies Act they no longer need to send out proxy voting forms as only the notice of the meeting is legally required. This appears to be correct. This is what I said in a letter to their Operations Director after the exchange of several letters:

“I will continue to submit my proxy votes by post whether you supply a form to do so or not. Where you have not supplied one, I will use my own – I attach a copy of what I will be using. If you have any objections to receiving my proxy votes in that way, please let me know. I do not see how you can legally object as it meets the requirements of the Companies Act.

I note your comments about the low percentage of shareholders who submit proxy votes, and the even lower percentage who do so in physical form [6% and 3.8% reportedly]. The latter may simply be because you and companies are now obstructing those who do not wish to vote on-line by not issuing paper proxy forms!

Overall the low percentage of shareholders voting suggests to me that registrars and companies are not doing enough to both encourage voting and making it easy for shareholders to do so. This is a major concern because shareholder voting is a key part of ensuring good corporate governance in listed companies. The Government recognized this only recently by ensuring there are binding votes on remuneration for example, but obviously if shareholders do not vote then governance is undermined.

It is of course unfortunate that there is a financial incentive for both you and companies to deter shareholder votes as they undoubtedly cost money to process, particularly if they are submitted on paper. But that is not a good justification for adopting the recent changes that Link Asset Services has adopted.

In your letter you rightly point out that registrars are not regulated by the Financial Conduct Authority. I will be writing to them to encourage them to take on such regulation as it seems totally inappropriate to me that this area of financial markets and corporate governance is not regulated. The FCA should lay down regulations about what Registrars can and cannot do so that voting is maximized regardless of financial considerations.”

I also noted that the Link Asset Services on-line portal does not meet the requirements of the Companies Act for an “electronic address”.

I am writing to both the FCA and the BEIS department asking them to start regulating registrars so as to clarify their responsibilities under the Companies Act and so that voting is encouraged. If necessary the Companies Act should be amended to ensure voting is maximised.

So that anyone can use the generic proxy voting form I have devised I have made it available on my web site here: http://www.roliscon.com/proxy-voting.html

There is also a version you can use where you wish to instruct your stockbroker to vote your shares that are held in a nominee account. Most will do so although there may be a charge and remember that for ISA accounts they have a legal obligation to do so under the ISA regulations.

Please let me know if you have any comments on the use of these forms. If there is sufficient usage they can be made more digitally enabled in future.

Private shareholders do need to vote to make sure that your voice is heard. So please use the forms I have supplied to ensure your votes are recorded for all General Meetings.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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