Rensburg AIM VCT

Latest update:

The merger with Unicorn AIM VCT was approved by shareholders at a General Meeting on the 27th November 2015. See note at bottom of page.

This campaign is therefore closed.

Latest news is at the foot of this page

This was the first company campaign that ShareSoc launched (in October 2011). The following note was sent to shareholders on the share register of the company together with a covering letter summarising the issues.

Background information on Rensburg AIM VCT Plc and the Shareholder Action Group

Rensburg AIM VCT Plc was formed under the name BWD AIM VCT in June 1999 and issued shares at 100p. After a few months of good performance, BWD AIM raised a further subscription of shares in March/April 2000 at 149p. It changed its name to Rensburg AIM VCT in July 2004 when the manager changed name and was merged with Rensburg VCT in December 2005.

Many of the original subscribers to BWD AIM VCT are probably still shareholders as many will have claimed capital gains roll-over tax relief. That relief, which rolls back as a liability if the shares are sold, effectively locks them in because if the shares were sold today the cash received might not even cover their tax liability.

The performance of the fund over the last ten years has been disappointing. For example, independent VCT specialists Allenbridge reported at the date of writing this note that the total return since formation has been –1.0% per annum (total return includes net asset value plus all dividends paid). So shareholders have lost money consistently and over many years from their investment in this company.

The total return figure actually flatters the investment return that you would see if you sold your shares – although the last reported net asset value is 44.0p per share (as at the 4th Oct), the “bid” price for the shares in the market is currently 35p, so you need to wipe off another 20% to reflect that.

Let us look at what the company said in its mini-prospectus in March 2000. It said VCTs “are attractive to investors who want equity type returns in a tax efficient environment” and “subscribers to the Offer will benefit from buying into an established and successful portfolio purchased with the proceeds from the Original Offer”. Neither statement turned out to be correct of course. Capital returns have been negative and not offset by good income returns.

Matters have not improved much in recent years either. These are the figures for overall profits of the company since 2003:

Figures in brackets are of course losses. Hardly a consistent performance with an overall loss in that period and a rather disastrous performance in 2009 from which it is still recovering.

How does Rensburg AIM VCT compare to other VCTs, particularly AIM VCTs? According to Allenbridge the best performing VCTs that were formed in 2001 or earlier are achieving returns of over 5% per annum (for example, Albion, ProVen, Baronsmead, British Smaller Companies and Northern VCTs – these are all “normal “ VCTs that primarily invest in private equity rather than AIM listed companies). There are three AIM VCTs still in similar form since then and they all show negative returns, although Rensburg is not the worst.

So our conclusion is that AIM VCTs are questionable investments. Indeed they suffer from the nature of their investment strategy. They can only buy “new” shares in companies and hence they tend to buy new AIM listings (or subsequent subscriptions), when the companies are doing well and are being promoted. If the business does not go as planned they cannot easily exit, but they also have no control over management (unlike in private equity VCTs where “shareholder agreements” and the size of their holdings enables them to exert substantial influence – for example to engineer management changes if required).

There are several examples of where the directors of AIM VCTs have come to the same conclusion. For example, Bluehone AIM VCT 2 (now called Maven Income & Growth 5 after a change of manager) changed its investment policy so as to be much more broadly based – in other words it is no longer an “AIM” VCT. They argued that they would achieve better returns, particularly as regards income.

Likewise Downing Distribution VCT 2 (formed from a merger of Pennine AIM VCT and Pennine Downing AIM VCT2) adopted a “wider investment policy” and reduced its dependence on AIM investments in 2010.

The ShareSoc Chairman personally wrote to the Chairman of Rensburg AIM VCT, Mr William Cran, earlier that year suggesting that the investment policy be changed, criticising the high expenses of running the VCT and other aspects of the company. He got a reply which in essence rebuffed any suggestion of change and suggesting that after tax reliefs he would have had a positive overall return – this is factually incorrect.

So the agenda for this campaign was quite simple:

1. Persuade the directors to adopt a new investment strategy with less emphasis on AIM shares.
2. Require the directors to examine the costs of running this VCT and to review the investment manager (which is probably necessary anyway if the strategy is changed).
3. If the directors are not willing to consider the above, then push for  a change of directors.

Further news on this campaign was issued in this newsletter: News1. It included additional information on the company, comments on the latest financial results, and a rebuttal of some of the points made by Mr Cran in his letter to shareholders.

A meeting took place between shareholders Roger Lawson and Andrew Kenny, and two of the directors of the VCT (Peter Smart and prospective Chairman Richard Battersby) on the 15th December 2011. The latter agreed that the allegation that a change of investment policy would lead to a change in dividend policy was the result of a misunderstanding of the objectives of this campaign. The meeting was not particularly productive with no obvious sign that the directors would seriously ponder any substantive changes, although they did agree to consider the points we raised further. A letter was subsequently sent by Mr Lawson to Mr Battersby spelling out the points we had made and analysing the past performance of the company and other AIM VCTs which is present here: Battersby_Letter  

On the 20th January 2012 we issued this newsletter which comments on the Interim Management Statement and other news: News3

Some comments on the Year End results are given in this newsletter issued on the 1st June 2012: News4 . In summary a disappointing year, with the company being selective in choosing its past performance statistics. But at least the appalling expensive management incentive fee arrangements are being scrapped. 

Some voting recommendations for the AGM were issued in this note: News5. We recommended voting against the re-election of all the directors. Note that the new Investment Management Agreement reducd the costs of running this company very substantially. That was one very positive outcome of our campaign. In addition the company started to return cash to shareholders both via buy-backs (enabling shareholders to exit if they want to) and via dividends, when they were not before the campaign was commenced – another very positive outcome. But the investment policy remained unchanged and hence our campaign continued.

A report on the AGM on the 26th July is present in this document: News7. There were substantial numbers of votes against the directors (between 26.5% and 28.5% against) but the low turnout (only 12%) subsequently enabled the company to claim in a letter to shareholders that the percentage of all shareholders supporting ShareSoc was much lower. As usual the company has picked the statistic that favours their case without giving the full facts to shareholders. 

A brief report on the interim results is in this document: News8

A note on the Interim Management Statement issued on the 17th January 2013 is contained in this document: News9.

Some comments on the Annual Results and AGM Voting Recommendations were given in this note on the 22nd June 2013: News10. It explains how the performance of this company had improved enormously since the start of this campaign. A report on the subsequent AGM is present on the AGM Report page.

Company Proposes to Wind Up
3/3/2015: Rensburg AIM VCT has announced a proposal to wind up the company. This might create major tax liabilities for some investors. See this blog post for more information: Rensburg Wind-Up

Letter from Maven
18/5/2015: Shareholders on the register received a letter from Maven Capital Partners suggesting an alternative to a wind-up of the company –effectively a proposal for Maven to take over management of the fund. A copy of the letter is present here: Maven-Rensburg-AIM-VCT-Letter. ShareSoc issued this note to shareholders giving some explanation of the issues: Rensburg-VCT-Wind-up2

FT Article
7/6/2015: There was an interesting article in the FTMoney edition on the 6th June. Here is a blog post that summarises the key points and makes some comments on it: Rensburg-blog

Another Letter from Maven
15/6/2015: Shareholders received another letter from Maven. It is present here: Maven-Letter-2

Letter from ShareSoc
16/6/2015: This letter was sent out to shareholders on the register by ShareSoc to give some general advice on the proposed wind-up and alternatives: Rensburg-Mailer-June2015

About face by board
18/6/2015: Before the above letter could be dispatched to all shareholders, the board of the company announced that the wind-up has been put on hold. See this blog post for more information: About-face.  

AGM Date and Voting Recommendations
25/6/2015: The Annual General Meeting was scheduled for 22nd July. This note gave some voting recommendations: News11 . 

Maven Voting Suggestions
10/7/2015: Bill Nixon of Maven Capital Partners wrote to all shareholders about the AGM including some voting recommendations to remove two of the directors. See: Maven-Letter-3

Tender Offer and Merger with Unicorn AIM VCT
18/07/2015. The company has announced that they have agreed a merger with Unicorn AIM VCT – see this note for more details: News12A

AGM Postponed
21/07/2015. The company has announced that the Annual General Meeting has been postponed until the 25th August. See this note for comments: News13

New Voting Recommendations
04/08/2015. New voting recommendations for the postponed AGM on the 25th August are given in this note: News14 . Please make sure you vote.

Further Letter from Maven
12/08/2015. Bill Nixon of Maven Partners has sent another letter to shareholders – a copy is here: Maven-Letter-4 . What he has to say is all very pertinent to the outstanding issues at this company.

Report on AGM
26/08/2015. The Annual General Meeting took place on the 25th and all resolutions were passed so it seems likely the Unicorn merger will proceed. A brief report on the events at the Meeting are in this document: 2015 AGM Report

General Meeting to Approve Merger – Voting Recommendations
1/11/2015. This note was issued concerning the proposed merger with Unicorn AIM VCT including voting recommendations for the General Meeting on the 27th November: News16

Reiteration of Voting Recommendations
19/11/2015. Following another letter sent by Maven Capital Partners to shareholders, this note was issued: News17

Merger with Unicorn Agreed
28/11/2015. This note describes what happened at the General Meeting to approve the merger of Rensburg AIM VCT with Unicorn AIM VCT: News18

Latest News. Further news on this campaign will be posted here if any arises. But the merger agreement approved by shareholders as reported in the note above probably concludes the campaign on this company after four years. It is a good example of both the effort required to make shareholders voices heard and the length of time it can take. But shareholder activism can be very successful as demonstrated here.

Please contact us if you have any questions about this campaign