Shareholders have shown their displeasure at Smithson (SSON ) investment trust’s attempt not to hold a continuation vote this year with significant minorities voting against the re-election of directors and for winding down the £2.1bn listed fund.

At Smithson’s annual general meeting yesterday, over 19% voted against the re-election of chair Diana Dyer Bartlett. The former investment banker, who also sits on the boards of Mid Wynd International (MWY ) and Schroders British Opportunities (SBO ), incurred investors’ displeasure in February by announcing that a continuation vote would not be held at the AGM.

This was controversial because under the trust’s policies a vote should have been triggered by its shares narrowly trading by an average one-year discount of more than 10% below asset value.

In response to criticism, including from Capital Gearing (CGT ) fund manager Peter Spiller, Bartlett changed her mind a week later.

The 19% vote against the chair is an improvement on last year when over 24% of the shares were voted against Bartlett’s re-election in protest at the board’s diversity policy. The company said this reflected the view of one large shareholder. 

At the Royal Society of Medicine in London yesterday, the continuation vote easily passed in the company’s favour but with holders of 9.6% of the shares showing their dissent by voting against the continuation of a trust that has struggled in the growth sell-off of the past two years.

Lord St John of Bletso, who chairs the trust’s audit committee, also saw opposition to his re-election from over 10% of shareholders, the largest of which are wealth managers Brewin Dolphin and Rathbones as well as discount hunter and activist City of London Investment Management.

At the well-attended meeting, Spiller said he was pleased with the ‘dramatic improvement in corporate governance’ over the last six weeks, with the board increasing the number of share buybacks, which has seen the discount come in to 10%.

Expressing his gratitude to Dyer Bartlett for saying the increase was not timed with the meeting, Spiller (pictured) sought reassurance that at 10%, the programme was only part of the way there.

He noted that the shares were still well under par, meaning those investors that bought shares at a 2% premium two ago now face a 12% loss relative to the performance of the assets. ‘This seems to me wholly unacceptable,’ he said.

On the contrary, the board had proved that it could control events and the discount, he added.

Dyer Bartlett said the board would continue buybacks for the foreseeable future. These are funded by the few dividends the global mid-cap trust receives, as well as from selling shares in holdings.

She said that at 10%, Smithson’s discount remained narrower than the investment company sector average of 15%.

In response to one shareholder question, she pointed out that fund manager Fundsmith was aligned to shareholders by being paid a percentage of Smithson’s market value. That meant it received 10% less than it would had the management fee been linked to the trust’s asset value.

Investors praised the trust’s performance under Fundsmith’s Simon Barnard and Will Morgan, with 62% growth in net asset value from its record launch in October 2018 up to 31 March this year. That beat the MSCI SMID index’s 57% return, although shareholders’ actual return was below the benchmark at 43%.

Over three years, however, sharehoders have suffered a 21% loss, principally caused by a 35% slump in 2022.