Via a regulatory filing, the investment trust fund managers claim Adamson’s chairmanship made management of the trust untenable. They did not mention Adamson is due to retire by January 2019. It denied the fallout is over fees.
Invesco resigned from the £120.1m bonds portfolio in April.
A month later it used its 16% stake in the investment trust to file a requisition to oust Adamson, as well as Richard Williams, chair of the management engagement committee. Gam Star Credit Opportunities was a co-requisitioner, but has since pulled its support.
In a circular published on Monday, the Enhanced Income board said the extraordinary general meeting would take place on 20 July in Jersey. It stated Invesco has rarely voted its shares at company general meetings and should take a similar approach at the Enhanced Income meeting so the “will of independent shareholders is not prejudiced”.
The Jersey-domiciled investment trust is also approaching the Financial Conduct Authority to request information surrounding the circumstances of the requisition.
Shareholder interests
Read and Causer (pictured) said the board is not acting in the interests of investors, noting the share price dropped 6% on the day the resignation was announced and some 10% to date.
The trust is currently trading at a -0.8% discount, according to the Association of Investment Companies.
Adamson previously told Portfolio Adviser it was Invesco that was acting against the best interests of shareholders by disrupting with the board’s process to find a new manager.
Invesco’s attempt to oust Williams would see the board lose its main fixed income expertise and the person responsible for selecting the next manager on the trust.
“The board is the only thing between the end investor and the rapacity of Invesco,” Adamson said last month.
Ultimatum
In the regulatory filing, Read and Causer said: “The manner in which the board engaged with Invesco in the fee negotiations was, in our opinion, overly aggressive, culminating in the issuance of a 48 hour ultimatum, served to us on the Monday of Easter week.”
“Subsequent to our agreement to the revised fee structure, there was then that had not previously been discussed.”
The pair said the board attempted to insert additional, material changes to the investment management agreement, but did not explain what these were. The board reduced the notice period from 12 months to three months.
“After considerable thought, we decided that this was not a board that we could or should continue to work with and, given that the shares traded at a premium, it was important to resign and make this disagreement public before further issuance took place.”
Fiduciary duty
The filing, which was labelled as an open letter to shareholders, is the fund managers’ first public statement.
Causer and Read said the board had a fiduciary duty to not waste shareholder money.
“Together with the significant drop in share price, the legal and professional costs incurred through the board’s current strategy will likely have consumed any possible reduction in fees the board is trying to achieve beyond what Invesco had already agreed to for several years.”
The pair still expressed a preference for performance fees, stating it made sense due to the complexity of managing leverage and targeting an above-market dividend yield.
Board bites back
The board of Enhanced Income also outlined its side of the story in its filing announcing the extraordinary general meeting.
“The board has behaved correctly,” it said. “It first attempted to renegotiate fees with Invesco and then, when that process was rejected by Invesco, initiated a competitive and fair process for a new investment manager when Invesco chose to resign.”
The board said it is being pressured by a very large asset manager.
“This is a cynical attempt to use concentrated voting power against retail investors who as platform registered owners or wealth management clients constitute the majority of the share register.”
