30% of shareholders opposed the increase in fees at the AAVC AGM. This is a remarkable result and sends a strong signal to the directors that they need to better engage with their shareholders.
I think the % voting against would have been higher if:
- we had started our campaign earlier
- we had received the shareholder register earlier
- we had been able to get in touch with all shareholders prior to the AGM
- the directors had not sent out a letter to all shareholders on 15 August, making negative comments on our potential communication to shareholders, pleading for shareholders to vote for the directors’ proposals.
Fast on the back of Ventus, where one of the directors of Ventus 2 was removed from office, the Albion result further demonstrates that shareholders working together, with the support of ShareSoc, can influence voting outcomes and hence, hopefully, director behaviour.
Over 75 shareholders attended the AGM, compared to the expected 46 who had said they were coming, so the sandwiches, pork pies and scotch eggs laid on were not quite enough, but there was plenty of Chablis and St Emilion to go round. It was good to see so many attendees and the questions clearly indicated the great concern in the room. I expect Tim Grattan will write a full report in due course. Also good news was the 15% voting turnout, much higher than in recent years.
I spoke (cordially) to Richard Glover, the Chairman after the meeting and he agreed that better shareholder engagement is necessary. I have written to him suggesting that meetings with shareholders and a shareholder committee like that we have proposed at RBS or as operated by Marks and Spencer will help.
The directors wanted 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 recommended shareholders vote against this proposal and other resolutions at the AGM on 21 August 20129. 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, the UK Individual Shareholders Society, is very concerned by these proposed changes.
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 38 largest shareholders.
AAVC raised £8m of new money in 2018/19, but did not mention plans to review the performance fee. The annual report did not mention the review of the performance fee. After the annual report was published, which contained details of the AGM, another circular calling a GM was printed and sent to all shareholders costing £9,000. This may be a small sum, but seems an unnecessary waste of shareholders money. If the proposal was not ready to be explained in the annual report then it could have been delayed until the next year’s AGM (2020). Better still, the Board should have agreed the terms before it raised new money.
Please join and support our Albion Campaign. https://www.sharesoc.org/campaigns/albion-vct-campaign/
DISCLOSURE: The author holds shares in AAVC
Cliff Weight, Director, ShareSoc