Long suffering shareholders will note that the AGM of this underperforming VCT will be held in London on 11 June. But we’re in for a treat this year – there are not just one, but five meetings in store for us, and there is plenty for shareholders to consider. New performance fees, high general fees for a portfolio mostly in runoff, voting to entrench the manager further, and selective proxy gathering at your expense. There’s something here for everyone – except shareholders.
The first of these meetings is the AGM, to be held at 10am. Among the resolutions here are the typical ones, to receive the accounts and to re-elect the Directors one by one. To round it off, there are two special resolutions – to allot equity securities without pre-emption, and to make market repurchases of shares. But don’t get your hopes up, they’re currently restricted from doing so by the low share price and lack of available funds.
At 10:10, there is a separate meeting of the H class, to approve a special resolution allowing market repurchases. This is followed at 10:15 by the warmup act of the Class I shares, for a similar resolution.
At 10:20, things start to get interesting. There is a General Meeting of all shareholders (followed by a similar meeting at 10:50 of just the I class), to approve the Deed of Variation of the Investment Management agreement. They’ve allowed half an hour for what appears to be a simple resolution, but which in fact covers a lot of ground – in fact, it’s an omnibus of four changes to the IM agreement. Two of these are more administrative, approving a trivial share subscription by a Director, and approving a fee for the Investment Manager for the recent small H share issue.
The other items within this Deed are more significant. The first of these is the making of the investment management agreements coterminous for the two (remaining) classes. Syncing up any potential termination of the IM agreement sounds innocuous, but what it means is that the manager can only be terminated from the big, well-past-the-expected-exit-date class of shares, at the same time as a similar vote from the small, evergreen class of shares. Effectively, it’s a clever way of making sure the IM agreement becomes very difficult for the runoff I class to terminate. Quite handy, when you consider that the Board allowed a raising of the fee cap from 3% of assets to 3.75% of assets.
And finally, we come to the main part of the show, the reintroduction of the Performance Fee. Readers may recall that in the face of dismal underperformance, the performance fee plan was waived in August 2016. At the time, they said they would look to reintroduce a new plan in due course, and here we are. I won’t spend any time on the merits of rewarding what has, to date, been failure, nor on the mechanics of the plan. That’s for another day. It should be noted that the Circular states
If the Resolutions are not passed by the Independent Shareholders, the Deed of Variation will not become effective and the terms of the existing Investment Management Agreement will remain in force.
I beg your pardon? The plan of 2016 was waived, or in the words of the RNS, removed. If the new plan isn’t implemented, there should be no plan, not a reversion to the old plan.
At any rate, the Board is pulling out all the stops to make sure these resolutions are passed. They have taken the very unusual step of hiring a proxy solicitation firm called Boudicca. Boudicca is writing to and telephoning shareholders to reflect the recommendation of the Independent Directors to vote in favour, and to gather votes. In an indication of where the priorities lie, Boudicca is soliciting votes for the meetings approving the variation in the Investment Agreement, but not for the AGM itself. So the shareholders are paying for a proxy firm to solicit votes in favour of entrenching the manager, perpetuating the high fees (and recently raised fee cap), and reintroducing a rebased performance fee.
I shall be voting against.