Albion Venture (AAVC) 2018/19 results

[londoninvestor]

I got a very similar mail from Will Fraser-Allen, and the most revealing sentence was pretty much at the start:

We have been asked by the Board of Albion Venture Capital Trust Plc (‘AVCT’) to respond to you, as Investment Manager, on its behalf.

This, to me, establishes in a single sentence that the Board is not performing to my expectations as a shareholder.

Part of the investment proposition of ITs and VCTs is to have a properly independent board - not a rubber stamp for the manager.

What options are open to us here?

- We can (of course!) vote down the fee proposal
- We can vote against the reelection of the directors who are up for reelection
- We can vote against the authority to issue new shares, if we feel the VCT should not be expanding until a healthy relationship has been restored

Are the other avenues which enable us to censure the Board as a whole?

[BusyBumbleBee]

I got a very similar mail from Will Fraser-Allen, and the most revealing sentence was pretty much at the start:

We have been asked by the Board of Albion Venture Capital Trust Plc (‘AVCT’) to respond to you, as Investment Manager, on its behalf.

{-- WHY is there a company Secretary paid for by the investors ???????? --}

This, to me, establishes in a single sentence that the Board is not performing to my expectations as a shareholder.{-- AGREED --}

Part of the investment proposition of ITs and VCTs is to have a properly independent board - not a rubber stamp for the manager.{-- Absolutely AGREED --}

What options are open to us here?

- We can (of course!) vote down the fee proposal {-- YES --}
- We can vote against the reelection of the directors who are up for reelection{-- YES --}

- We can vote against the authority to issue new shares, if we feel the VCT should not be expanding until a healthy relationship has been restored {-- YES, YES YES: why give the manager more fees anyway --}

Are the other avenues which enable us to censure the Board as a whole? {-- Yes write to the company secretary and say you are very unhappy that the board seem to be in the pocket of the manager - and why isn't he/it doing its job --- and hopefully they will find out that there is no F in Job --}

And go to the AGM as well

[shootingstar]

Looks like a mostly blanket response was sent to investors who have complained. Mine is below. It Almost seems like they are trying to avoid my "treating customers fairly" issue by pointing out that AVCT is not regulated by the FCA even though as far as I can see the trust raised money in the UK earlier this year and Albion Capital Group is FCA regulated

Regarding what can be done. Does anyone with experience in these matters see any benefit of a) writing to non independent directors.. if there are any b) complaining to the financial ombudsman service c) pushing the FCA on these matters

"At this stage, I should clarify that although Albion Capital Group LLP is FCA regulated, it provides regulated management services to AVCT. Albion Capital does not advise investors in AVCT, therefore you are not a regulatory customer of Albion Capital Group LLP for the purposes of the FCA’s treating customers fairly regime or otherwise.

The Board is sorry to hear that you have concerns regarding the proposed changes to the Company’s Management Agreement, including the proposed New Performance Incentive. Your concerns are duly noted by the Board. The details of the proposed changes and the rationale for those changes are detailed in a circular, dated 1 July 2019, addressed to all AVCT shareholders. The Board, advised by AVCT’s sponsor, believes the proposed changes are in the best interests of AVCT and its shareholders as a whole. A resolution approving the proposals will be put to AVCT shareholders at a General Meeting on 21 August 2019 and the changes proposed will only proceed if supported by a majority of independent shareholders. The General Meeting will also afford attending shareholders the opportunity to ask questions of the Board and Investment Manager.

Please note that the AVCT is not, nor is it required to be, regulated by the FCA. Where a prospectus has been issued for a top-up offer it has been approved by the FCA in accordance with the relevant prospectus rules and regulations."

[barchid]

Shootingstar
This is what I got, pretty much, and I note he also describes AAVC as AVCT as he did to me !
Does he, as managing partner, not know the nemonics of the companies which give him his income?
Makes you think, doesn't it ?
I did retun an email to him yesterday pm asking if we were talking about the same company but have yet to receive a reply.
Considering the flippancy of his reply to my original email it seems odd to me that they took so long to arrive, which also makes one wonder.
I have to agree with BBB & others that my previous high respect for them as a company has been decimated.
Are you going to the AGM ?

[BusyBumbleBee]

ShootingStar published this extract from an email received.

Please note that the AVCT is not, nor is it required to be, regulated by the FCA. Where a prospectus has been issued for a top-up offer it has been approved by the FCA in accordance with the relevant prospectus rules and regulations."

Having looked this up I found this

"The PRA [Prudential Regulation Authority] is responsible for the 'prudential regulation' and supervision of banks, building societies, credit unions, insurers and major investment firms. The FCA also regulates the prudential standards of firms not covered by the PRA."

well, on further investigation I find that the term "major investment firm" does not agree with our definition and effectively there is no oversight of VCTs - apart of course for the listing terms and it is going to take a better man than me to find anything there!

So we have to rely on the independence of the directors. It seems to me that that this is where we must focus any attempts to change the very cosy relationship which seems to develop between the board of non executive directors and the investment manager "whose name is often on the tin"

[barchid]

I see from the interim management statement rns today from AEEV that "your board is currently reviewing the management arrangements with Albion Capital......with a view to provide further benefits to shareholders".
Hard to see how an increase in fees is a benefit but perhaps this board is actually trying to do their job?
I have to admit that I am a cynic on these matters so I doubt it but how can we actually contact the non exec constituent of the AAVC board?
Furthermore, would it be a good idea if we all contacted the same director for maximum effect?

[BusyBumbleBee]

In theory, barchid, they are all independent non-exec directors - kind regards BBB

[londoninvestor]

Furthermore, would it be a good idea if we all contacted the same director for maximum effect?

Should it be Richard Glover as the chair?

[barchid]

London
I guess so but there is no email contact published for him that I can see, so addressed to him & posted to Albion's offices or is there a better way ?
I have to admit that the more this unfolds the more I am becoming annoyed with the company's attitude, there has been zero effort to address the issues of our contention from my viewpoint.

[BusyBumbleBee]

It gets worse ...

I had always thought you could get to the directors through the Company Secretary who would be independent but this is from the Annual Report of AAVC

Operational arrangements
The Company has delegated the investment management of
the portfolio to Albion Capital Group LLP, which is authorised and
regulated by the Financial Conduct Authority. Albion Capital
Group LLP also provides company secretarial and other
accounting and administrative support to the Company

This is all very well and may be cosy and comfortable and perhaps reduce costs marginally, BUT it does not help shareholders one jot as they have to go through the manager to get to the board.

Maybe we have to lobby for a change in the rules on VCTs which are essentially 'consumer' products even though they are listed on the Premium Segment of the London Stock Exchange and are held in small quantities by small shareholders with no institutions to keep an eye on corporate governance. Perhaps some rule changes along these lines would help

1. There must be a Company Secretary who is clearly independent of the Manager and is the conduit between Shareholders and the Chairman/Board.
2. Either the PDA or the FCA or the London Stock Exchange (perhaps by making it the responsibility of the Sponsor) must take on some responsibility for the governance and ensure there is a proper balance between the Manager/Board view and that of shareholders.
3. The board and manager should be prohibited from using their access to shareholder details to lobby shareholders to accept their view of life other than via properly constructed RNS statements and expressly forbidden from using shareholder funds to employ"Proxy consultants".
4. Acknowledge that these companies are unlikely to reach the thresholds to, for example, call an EGM and make some changes to these thresholds for VCTs (could for example be a percentage of the votes cast at the last AGM)
5. Reach out to all shareholders not just those on the register
6. Clearly differentiate between Board messages and those of the management group in all correspondence and contact - including web-sites In particular the board must take total responsibility for its own web-site and not allow the manager any input whatsoever.
7. Publish the full management contract and give details of how they have reviewed this in the light of changing legislation and accounting practice.

Just some thoughts : suggestions as to how to get these changes and what more are required would be welcome - and it might be agood idea to open up a separate thread

[UncleEbenezer]

Basically fair points, but apply just as much to other listed companies, not just VCTs. Your points have the feel of the kind of things that distinguish FTSE listed companies from the wilds of AIM. I wonder if the LSE would be someone to lobby over its general rules/code of practice for listed companies?

My #1 bugbear here is to make it a requirement that shareholder meetings support attendance online. This Albion story highlights another issue: that of slipping out information by stealth - as in a meeting and resolution that is smuggled on the back of the AGM but is invisible to a shareholder reading the AGM announcement, agenda, or record.

[scotia]

My #1 bugbear here is to make it a requirement that shareholder meetings support attendance online.

I couldn't agree more! In this day of high bandwidth connections, why is there any need to pollute the planet by travelling to AGMs from all over the country?

[UncleEbenezer]

My #1 bugbear here is to make it a requirement that shareholder meetings support attendance online.

I couldn't agree more! In this day of high bandwidth connections, why is there any need to pollute the planet by travelling to AGMs from all over the country?

Hehe. I expect you might just be amused by my little sketch on the subject.

[londoninvestor]

London
I guess so but there is no email contact published for him that I can see, so addressed to him & posted to Albion's offices or is there a better way ?

I'll go for the snail mail approach. Rare for me these days, but then putting pen literally to paper to sign your name does have a certain cathartic appeal.

I have to admit that the more this unfolds the more I am becoming annoyed with the company's attitude, there has been zero effort to address the issues of our contention from my viewpoint.

Yes indeed!

[londoninvestor]

Basically fair points, but apply just as much to other listed companies, not just VCTs.

They do in principle, but BBB makes a good argument that VCTs are fairly unique in that their shareholders are pretty much all individuals, not institutions, and this makes it harder for views other than the management's to be heard.

I would be happy with the regulator not taking a prescriptive approach to what boards and managements can't do as long as shareholder democracy works properly. At the moment it's skewed towards the management.

For example, AAVC's new fee plan needs to be voted on - and I sincerely hope it will lose - but the Board gets to put its view in advance to all shareholders, whereas we who oppose it can't do that. I don't think we even have a way of getting floor time in a debate at the AGM, other than to hijack the Q&A session for it.

(And as you so rightly say, while you can vote by proxy, you can't speak or ask questions at the AGM unless you physically attend in London, in working hours on a weekday.)

[UncleEbenezer]

Basically fair points, but apply just as much to other listed companies, not just VCTs.

They do in principle, but BBB makes a good argument that VCTs are fairly unique in that their shareholders are pretty much all individuals, not institutions, and this makes it harder for views other than the management's to be heard.

VCTs are indeed unusual. But it seems to me, VCTs have a considerable track record of shareholder activism and rebellion. Ventus happening right now. Foresight 4 a few years back. Hazel not so long ago. The Oxford Tech VCTs. The Core VCTs. Just to name a few that have featured on Foolish boards. Perhaps because people investing our own money have more skin in the game than a fund manager?

I would be happy with the regulator not taking a prescriptive approach to what boards and managements can't do as long as shareholder democracy works properly. At the moment it's skewed towards the management.

For example, AAVC's new fee plan needs to be voted on - and I sincerely hope it will lose - but the Board gets to put its view in advance to all shareholders, whereas we who oppose it can't do that. I don't think we even have a way of getting floor time in a debate at the AGM, other than to hijack the Q&A session for it.

Indeed. But management took the trouble to smuggle it by stealth, suggesting that they may have anticipated shareholder resistance despite the benign conditions (no background of discontent).

(And as you so rightly say, while you can vote by proxy, you can't speak or ask questions at the AGM unless you physically attend in London, in working hours on a weekday.)

I have voted by proxy against this one.

For Ventus I've gone one better and appointed a fellow Fool who is attending in person as my proxy. That's a first for me, but then so is the management's behaviour in lobbying me!

[BusyBumbleBee]

VCTs are indeed unusual. But it seems to me, VCTs have a considerable track record of shareholder activism and rebellion. Ventus happening right now. Foresight 4 a few years back. Hazel not so long ago. The Oxford Tech VCTs. The Core VCTs. Just to name a few that have featured on Foolish boards. Perhaps because people investing our own money have more skin in the game than a fund manager?

So true but - and it is a big BUT I can only remember one success in defeating (actually the board withdrew the resolution before the voting took place) a resolution and that was in July 2016. That was a special resolution which only required 25% to defeat.

[barchid]

Gents
My apologies about being an AAVC bore but Cliff Weight of Sharesoc, with Tim Grattan, a Sharesoc VCT group member met with Will Fraser-Allen & Patrick Reeve (Albion Chairman) on July 30 over this matter troubling us, according to his latest VCT blog on their website.
He said they had a good meeting but they did not agree and the Sharesoc members are being urged to ;
Firstly vote against the directors re election, resolutions 3&4 as they have failed to negotiate a better deal fot the shareholders,
Secondly to vote against the resolutions 7&8 to allow AAVC to raise extra capital as this will cost them £100K p.a. for every £5mill they may raise in a top up offer if resolution fails.
Patrick Reeve did apparently express regrets that Albion did not discuss this with shareholders earlier.
There are many more points made much more eloquently than I can manage so I do suggest you read it on their website.
On a separate issue, having had no response from Fraser-Allen to my reply to his PR spin to my email as to why he described AAVC as AVCT I asked Sarah Fitton if we were in fact talking about the same companies and she has replied "yes", so it would appear that Albions managing partner is not comfortable in wasting his time with shareholders queries. How to lose a great reputation in one easy lesson !

[BusyBumbleBee]

On a separate issue, having had no response from Fraser-Allen to my reply to his PR spin to my email as to why he described AAVC as AVCT ,,,

Good evening, barchid: Putting on my best Sherlock Holmes hat and getting out my curly pipe, I have come to the conclusion that Fraser Allen is so wrapped up in Albion matters that he is using the abbreviation AVCT to mean Albion Venture Capital Trust - he is not using the epic at all and possibly doesn't even know what you are talking about.

Keep up the good work - with kind regards - BBB

[londoninvestor]

Gents
My apologies about being an AAVC bore but Cliff Weight of Sharesoc, with Tim Grattan, a Sharesoc VCT group member met with Will Fraser-Allen & Patrick Reeve (Albion Chairman) on July 30 over this matter troubling us, according to his latest VCT blog on their website.

Good article, thanks. Here's a link for convenience:
https://www.sharesoc.org/blog/vcts/albi ... -number-2/

ShareSoc VCT investor group member Tim Grattan and Cliff Weight met with Albion Capital Group Chairman Patrick Reeve and Albion Managing Partner Will Fraser-Allen, at their request.

Again, where are the board in this? I'd even be more comfortable if they came out and defended the plan. Instead they just hide behind Albion, which defeats the point of an independent board.