Albion Venture Capital Trust PLC and Ventus funds

The Albion Venture Capital AGM is on Wed 21 Aug. Cliff Weight, Mark Lauber, Tim Grattan and others will be attending and asking questions. I finally received the Albion Venture Capital register on 16 August 2019. However, Albion Venture Capital VCT Chair Richard Glover wrote to all 5,300 shareholders on 15 August. Many were sent emails but the copy of the register we were given did not have email addresses, so we were unable to email shareholders. In the time available were only able to post letters to the largest shareholders.

I think shareholder democracy has been curtailed by the directors of Albion Venture Capital.

We applied for the register on 3 August, but only received it on 16 August, too late to be of much practical use, other than to send a letter to the largest shareholders click here for what we wrote: Albion letter to shareholders_V2 Final 16 Aug 2019

This is another example of how the playing field is tilted against shareholders wishing to unseat directors or vote against resolutions. See https://www.sharesoc.org/blog/vcts/ventus-and-ventus-2-vcts-obstacles-to-a-level-playing-field-in-unseating-directors/for a detailed analysis.

Background

The directors want to change the performance fee from the current arrangement (1.9% management fee, plus 8% of returns over a hurdle rate of 5% per annum with a high-water mark) to 20% of returns above a hurdle of RPI +2%p.a., from a new starting point of NAV at 1 April 2019.

ShareSoc recommends shareholders vote against this proposal and other resolutions at the AGM on 21 August. 1.9% plus 20% is egregious, particularly when:

• it represents an increase from historically agreed arrangements and
• it is accompanied by the rebasing of the current high-water mark to current NAV (effectively a forgiveness of historical under-performance, in favour of the manager).

ShareSoc is very concerned by these proposed changes to the fees charged to Albion Venture Capital VCT (AAVC) by its investment manager Albion Capital. We have therefore launched a campaign, seeking shareholders to vote against resolutions 2, 3, 4, 7 and 8 at the Albion Venture Capital AGM  and the GM resolution on 21 August 2019. In addition, we seek to persuade the Albion Venture Capital directors to agree a better deal with the investment manager.

The AGM is on the 21 August. This is the best place to hold the directors to account. Shareholders, please attend the AGM and vote.

VENTUS update

We don’t believe that the boards at Albion, Ventus or Ventus 2 trusts are demonstrating sufficient independence, and as a consequence we are not satisfied that they are properly fulfilling their fiduciary responsibilities to their shareholders.

Existing Ventus 2 Director Paul Thomas was removed at the AGM on 8 August, but all the other directors were reappointed, by narrow majorities. The new proposed directors were not elected: by narrow majorities.

In Paul Thomas’ case it was very, very close with 9,558,621 shares voted to remove him, 9,512,196 for and 445,103 abstaining. Nick Curtis led a spirited campaign, supported by ShareSoc. Nick deserves our congratulations for his hard work and personal sacrifices made in this campaign. It is still very unclear how things will develop.

What is clear is that the directors authorised £38,000 of shareholders’ funds to be spent on a proxy solicitation campaign conducted by Boudicca. I suspect but cannot prove, without consulting a significant sample of individual shareholders, that their campaign influenced the result. (In the alternate case that it did not influence shareholders’ behaviour the £38,000 spent is still an unnecessary waste of shareholders funds!) I can understand some money being spent, but I felt that the amount was too high. Others have told me that spending any money in this way is unnecessary in a small company. This is a vexed question as clearly not all activists are motivated in shareholders’ interests, like us, and it is important that directors, acting on behalf of shareholders, can defend companies against activists working for their own agenda, not in the interests of shareholders.

ShareSoc is keen not to let this rest. We could campaign next year to vote against the current directors or call an EGM.

Shareholders have not been told if the planned management changes have been implemented. Silence suggests they have not, as it would be a material change to a significant management contract, which is known to be contentious and may/would have implications for the share price. No RNS has been made since the AGM results RNS, which did say this:

The Board notes that while resolutions 6, 7, 8 and 9 were passed, a significant number of shareholders opposed these resolutions.  The Board are disappointed with this outcome and will seek to reflect carefully on feedback from shareholders to understand more fully the reasons for the opposition to these resolutions.  

An update on the consultation process will be made in accordance with the UK Corporate Governance Code, within six months of the AGM. 

I still will not believe the performance fee is in perpetuity, until I have seen the contract and read it very carefully. I suspect the wording is capable of more than one interpretation. Or it is a restrictive practice and may be struck out on that basis. Whatever, it can be renegotiated to something more sensible.

One thing I am sure is that the activism has paid off – one of the directors has been voted off, the directors have given out more information and so increased transparency, and they have agreed to merge the different classes of shares.

It is also good news that ShareSoc working with others can influence VCTs in this way. It is a good warning shot to Albion and others.

Pleas join our VCT Investor Group and our Albion Campaign. Donations are welcome and help support our aims.

albion-vct-campaign

VCT INVESTORS GROUP

DISCLOSURE: The Author owns shares in Albion Venture Capital, Ventus and Ventus 2

Cliff Weight, Director, ShareSoc