Northern 2 VCT AGM Report – Far From Perfect

I attended the Annual General Meeting of Northern 2 VCT (NTV) today (10/8/2022). This is a Venture Capital Trust with a decent long-term performance but last year the total return was only 0.8% after a very good prior year.

I made some negative comments two years ago about how the AGM at this company was run – I called it “totally undemocratic”, and that didn’t really change this year. This was a “hybrid” AGM in that there were a few shareholders in attendance in person but I attended via Zoom. That did allow me to ask questions but not to vote on-line which had to be done in advance.

I’ll give some very brief notes on the meeting:

There was a presentation by Peter Dines from the fund manager (now Mercia). He said net assets fell last year partly due to the fall in the share price of Music Magpie. This was put down to a reduction in the forecast margin. But note they made a large gain on that stock when it listed on AIM in an IPO. However from reading a popular blog, there seems to be some doubt about the quality of this business which more likely contributed to the 75% fall in the share price. Mr Dines covered new investments which are mainly in the software/electronic sector and also covered the exits.

The Chairman, David Gavells, then covered the pre-submitted questions. I actually specifically asked for a justification of the reappointment of F.Neale who has been on the board since 1999 and can therefore no longer be considered to be independent. This is a breach of the UK Corporate Governance Code. Mr Gavells did not answer my specific question at this point but did waffle on about board succession.

There were a few other questions pre-submitted and from those physically present, but none of great consequence.

As my pre-submitted question was not specifically answered I put it in again via the Zoom Q&A function. Mr Gavells claimed he did not waffle but just reiterated that there will be continuing changes to the board but there was no specific commitment to replace Mr Neale.  However he did get 439,000 votes against his reappointment on the proxy figures.

All the resolutions were passed on a show of hands vote of those physically present – no on-line votes permitted. This is very unsatisfactory. If a hybrid AGM is run then votes should be taken on a poll as few people are likely to be physically present.

Altogether not a particularly useful meeting with no discussion of the overall issues faced by VCTs and I suggest more thought should have been given to how a hybrid AGM is run. It is also very easy for Chairmen to duck answering specific questions in such a format.

Roger Lawson (Twitter:  )

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Northern 2 VCT AGM – A Totally Undemocratic Affair

I attended the Northern 2 VCT Annual General Meeting yesterday via Zoom. This was a most disappointing event.

There were three directors physically present and Tim Levett gave an overview of the company’s new investments and the top ten holdings. But when it came to the formal business they took a show of hands vote which is totally meaningless when only the directors were permitted to be present.

They did show the proxy counts, so they may have won a poll vote anyway but that is not the point. It should have been a poll vote.

The Chairman did suggest they would answer questions submitted prior to the event, but they did not specifically respond to the comments I submitted in advance. These were:

A – There are too many directors on the board who have served for more for more than 9 years. Too long! [in fact there are three out of five with more than 9 years which is contrary to the UK Corporate Governance Code unless reasons are given.  They did refer to the AIC Code but I do not accept that this should be used and it is simply not good enough for other directors to simply say they consider them independent. Is length of service a problem? I certainly think so. One only has to consider the recent case of Wirecard where the 75-year-old Mr Matthias had been Chairman for more than a decade until recently. Would such a massive fraud have taken place if the board had been regularly revived? In investment trusts it is particularly problematic as the directors can build very close and inappropriate relationships with the fund managers].

B – There is no clear statement of total return for the year in the Annual Report, and percentage change over the prior year). [There was no reference to this at all by the directors, but on my calculation it was -3.9% last year. That’s actually better than some other VCTs. Many VCTs had to mark down the valuations of some of their early stage businesses, but as the results were only to the end of March, there may be worse news to come].

Despite the use of Zoom, there was no interaction with the audience whatsoever with no opportunity to ask supplementary questions. I have no idea even how many shareholders attended.

A quite disappointing event and not how to run an AGM even bearing in mind the current restrictions.  

Roger Lawson (Twitter:  )

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