I mentioned in a previous blog post that covered Northern Venture Trust that “VCTs are a perpetual problem in relation to excessive management fees, poor corporate governance, and general behaviour prejudicial to the interests of shareholders”.
Now we have an AGM for Baronsmead VCT (BVT) in prospect on the 16th February. As a holder I will be expressing the following concerns to the Chairman:
- In the last year the board has appointed two new directors, Michael Probin and Fiona Miller Smith. Michael Probin undoubtedly knows a lot about the VCT sector because for many years he was the Investor Relations Manager at Livingbridge. But they were the investment manager for the Baronsmead VCTs until Livingbridge sold its investment management business to Gresham House so Michael Probin can hardly be considered to be “independent”. Even Fiona Miller Smith’s appointment is questionable because the Annual Report says she worked for Murray Johnson Private Equity in the past. Now Murray Johnson used to manage VCTs but their track record was atrocious, they lost the management contracts as a result and Murray VCTs subsequently changed their names. I will therefore be voting against the appointment of both Michael Probin and Fiona Miller Smith.
- Another concern is that the AGM is to be a physical only meeting not a hybrid one. So people like me who are particularly vulnerable to Covid infection are very unlikely to attend. Bearing in mind the average age of VCT shareholders, this is certainly going to deter many shareholders from attending. It is quite unreasonable not to provide an electronic attendance option for investors while the Covid epidemic is still prevalent.
- Lastly, the Chairman of the company, Peter Lawrence, was first appointed a director of one of the Baronsmead VCTs in November 1999 and has been so ever since, i.e. that’s over 22 years’ service. That is an excessive length of time and is contrary to the principles embodied in the UK Corporate Governance Code. He cannot be considered independent. This length of service is even contrary to the “Tenure Policy” of the company stated at the top of page 51 of the Annual Report. I will therefore yet again be voting against his reappointment as I have done in prior years for a number of reasons.
In summary, although the company like many VCTs reported a good financial performance last year (total return up 25.8%) this does not offset the questionable corporate governance. It also means that the company paid out a performance fee of £1.9 million thus increasing the overall expenses of the company to 3.0% of closing net assets. An excessive figure in my view when performance fees are simply unnecessary in VCTs.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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