I attended the Annual General Meeting of Baronsmead Venture Trust this week (on 14/2/2017). It was not particularly well attended perhaps because of the early start time of 10.00 am. The Chairman, Peter Lawrence rebuffed the criticism of one shareholder and after I suggested a straw poll of investors present to see if they would prefer a later time, which showed many would, suggested they move it to 10.15 pm. That did not impress many present. The poll of course did not even include those who decided not to attend the meeting as it was too early.
ShareSoc has published a document on “How to Run a General Meeting” which is on our web site, and this is what it says on page 5: “Likewise timing should be set for 11.00 onwards because travelling in the rush hours of London or other locations is not ideal and as many private shareholders are retired it can ensure they can use cheap train fares. This is particularly important for shareholders who will have some distance to travel. If companies do not wish the expense of providing lunch, then set the time for 2.00 pm.”
The Chairman and speakers also read from a script which he apologised for and said it was because of regulatory concerns. He certainly made some off the cuff remarks in the past but the new approach made his presentation very boring. Let us hope this does not become the norm unless he gets a better speech writer and rehearses it in advance.
I will do a fuller write up of the meeting for ShareSoc’s Full Members as soon as possible but there were some interesting points that arose of particular note. One was the lack of new investments in unquoted companies, so the VCT now has more investments in AIM companies than private equity. As one shareholder said, bearing in mind that in the past more returns were obtained from the latter than the former, this might be of concern. But it seems that AIM investments are becoming less risky and giving better returns of late.
The new VCT rules and the risks of breaking those rules were discussed at length. A breach of the rules now means one can lose VCT status which would be disastrous for investors, i.e. one mistake in one investment could trigger it. As a result VCT managers are now asking for “advance assurance” on new investments which they can get from HMRC. But this takes a long time as HMRC do not have enough resources and it will be easy to let deals slip away as a result (indeed it seems Baronsmead lost two because the investees changed their minds recently). This could be a serious handicap for VCTs in future and is one of the reasons, apart from trying to understand the new rules, for the lack of new investments. It is surely an example of HMRC losing the plot and making such investments more difficult than they need be for no good reason.
A lot of investors in the three VCTs managed by NVM Private Equity will have been disappointed (including this writer) by the opening and closing of the recent fund raising for a “top-up” offer on the same day. This was an offer for only £4.3 million because of the need to avoid a prospectus, but even so investors who responded immediately the offer was open and sent off their cheques only to find that they had missed the boat because of the “first come, first served” process followed will not be happy. This possibly meant that those who physically delivered their applications the same day (to Newcastle), or whose forms simply got emptied out of the post-bag first, got their applications met in full, when everyone else missed out.
There are surely better ways to do this – for example by taking a ballot, or reducing applications pro-rata, as other VCTs have done in these circumstances.
It would seem that there is some enthusiasm for the shares in the better performing VCTs such as Northern and Baronsmead because of the high tax-free dividends they have been paying of late. Whether these are sustainable under the new rules which require more investments in early stage companies is not clear, although their existing portfolios will be the drivers of fund performance and dividends in the short term.
Anyway if you wish to learn more about the Northern VCTs or ask questions about the above, Tim Levett of NVM is presenting at the ShareSoc event in Altrincham on the 21st February – see https://www.sharesoc.org/altrinchamseminar.html
Foresight 4 VCT
Following their AGM in September where the directors only narrowly managed to get re-elected, a commitment was made to recruit new directors. The company has now announced the appointment of Michael Gray. Shareholders would have preferred any new director to be knowledgeable about VCTs (which are not conventional companies and are subject to complex regulations), experienced in investment in early stage companies which is what VCTs do, and be clearly independent, i.e. independent of the manager of the fund.
Mr Gray does not obviously have the relevant knowledge or experience according to his background supplied by Foresight and he also seems to have business links to Foresight – for example he is a non-executive director of Triton Investment Management and Foresight has invested in Triton Solar 13 Fund. When there were other candidates interviewed for the position who had more relevant experience, this is surely disappointing.
As there are some critical strategic decisions coming up at this company (e.g. the prospective merger), it is not a positive move and might well be challenged by shareholders at future general meetings.