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VCT board changes fee plans after investor resistance

VCT board changes fee plans after investor resistance

A negative reaction from shareholders has prompted the board of the £76m Albion Venture Capital Trust (VCT) to alter its previous plans to significantly increase the performance fee for the trust.

In a stock market announcement released today (February 6) the board of the Albion VCT wrote that its initial proposals to increase the performance fee from 8 per cent of returns above a certain level to 20 per cent of profits above the level.

The level of performance at which the fee would kick in was any return over the prevailing retail price index inflation rate plus 2 per cent.

The January Retail Price Index level of inflation was 2.2 per cent. This means under the proposals voted on in August, Albion would have received 20 per cent of all returns earned over 4.2 per cent, while also receiving the usual management fee. 

The proposal was put to shareholders in the trust at its AGM in August 2019 when it was approved by 70 per cent of shareholders.

The board of the trust then embarked on a consultation with those who voted against it, as is required by the UK corporate governance code. 

It found there was no unanimous reason for the opposition but concerns included the fee was too high, the threshold after which it kicks in too low, and that performance incentive schemes were inappropriate for VCTs as a whole.

The board stated that following a review, which had found the performance incentive scheme was fair and effective, it nevertheless decided to renegotiate the fee to 15 per cent instead of 20 per cent.

The announcement read: “Taking into account the views expressed by some shareholders at the AGM and in our subsequent consultation, the board has re-negotiated with the manager to reduce the hurdle from 20 per cent to 15 per cent which will be deemed to have taken effect from 1 April 2019.

"All other terms, as detailed out in the circular sent to shareholders on 1 July 2019, will remain the same."

It added: "The board would like to thank those shareholders who provided feedback on this matter and would like to emphasise that the board is committed to act in the best interests of shareholders, in line with the UK Corporate Governance Code.”

Albion has been approached for comment.

david.thorpe@ft.com