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Pembroke VCT

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
barchid
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Pembroke VCT

#326726

Postby barchid » July 17th, 2020, 12:06 am

Pembroke are today proposing a change in their articles of association which will merge the original ordinary shares with the larger and more recently issued B shares giving the combined vct a size of over £100mill.
They are also modifying their hurdle before the 20% cut comes in, which on first read appears to be marginally favourable to existing shareholders interests.
A different vct in that it is very much high end consumer facing, which in the pre covid world seemed to add a little diversity to ones vct portfolio but is probably less than ideal in the present climate.

scotia
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Re: Pembroke VCT

#326731

Postby scotia » July 17th, 2020, 2:19 am

barchid wrote:Pembroke are today proposing a change in their articles of association which will merge the original ordinary shares with the larger and more recently issued B shares giving the combined vct a size of over £100mill.
They are also modifying their hurdle before the 20% cut comes in, which on first read appears to be marginally favourable to existing shareholders interests.
A different vct in that it is very much high end consumer facing, which in the pre covid world seemed to add a little diversity to ones vct portfolio but is probably less than ideal in the present climate.

The RNS stated that there would be general meeting on 14th August to obtain shareholders' approval. The detail of the proposals is contained in a circular, on the Pembroke site, but when I tried logging in to read the detail, I got a Not Secure warning - NET::ERR_CERT_DATE_INVALID
So I didn't proceed - I'll wait till its fixed

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Re: Pembroke VCT

#326740

Postby barchid » July 17th, 2020, 7:09 am

Scotia
I used the link on the rns to the national storage mechanism to access them

scotia
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Re: Pembroke VCT

#326864

Postby scotia » July 17th, 2020, 2:13 pm

barchid wrote:Scotia
I used the link on the rns to the national storage mechanism to access them

The Pembroke Site still has the same problem of an out of date certificate - so I followed your advice and downloaded the circular from the national storage mechanism.
I'm an investor in Pembroke B - so I assume I'll also get a copy by mail or email.
Its not obvious why the merger is advantageous to shareholders. There seems to be an unquantified savings in administrative expenses, however the cap on directors fees will increase from £100000 to £150000. And as is usual in these cases, it is extremely difficult to compute the results of the amended management incentive arrangements.

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Re: Pembroke VCT

#326880

Postby barchid » July 17th, 2020, 4:30 pm

Scotia
Are they not slightly raising their hurdle in that it can only be triggered after realized gains exceed realized losses, or did I miss something there ?
I know some vct's do not realise all of their losses so as to gain an advantage with HMRC, but tax is not really my forte !

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Re: Pembroke VCT

#326889

Postby scotia » July 17th, 2020, 6:05 pm

barchid wrote:Scotia
Are they not slightly raising their hurdle in that it can only be triggered after realized gains exceed realized losses, or did I miss something there ?
I know some vct's do not realise all of their losses so as to gain an advantage with HMRC, but tax is not really my forte !

As is usual, no statement on incentive payments is easy to comprehend. The first paragraph seems blindingly obvious, and I trust (but I may be wrong) that it has always been in place - no incentive payment is due unless all cumulative gains are larger than cumulative losses. Then the second paragraph introduces a new 3p per year hurdle - as compared to a 3% hurdle (B share) and 8% (ordinary share). Assuming this relates to NAV (its not clear), then the current (18th March) NAV of the B share is 111p and the latest NAV I have for the ordinary share (30th September) is 130.77p. So it looks like 3p is a lower hurdle .
But as usual, obfuscation reigns when incentive payments are described, and I may have entirely misunderstood their intentions. :D

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Re: Pembroke VCT

#326929

Postby barchid » July 17th, 2020, 8:22 pm

Scotia
But normally you are "first fast & accurate" on these matters hence my initial posting.
What you say make sense especially regarding a consumer oriented vct in a post (we hope) covid timeframe, grabbit & run !

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Re: Pembroke VCT

#327510

Postby SpinDoctor » July 20th, 2020, 2:56 pm

Yes the major change is the shift for the ordinary shares from a hurdle of 8% to 3p. I had always considered that hurdle an anomaly amongst the current norm, and only a matter of time before it was reduced. I am not too bothered about the change, caveat so long as Oakley deliver good performance.

More generally, the Pembroke VCT remains interesting. Results are imminent One would expect the valuation of this consumer-focused VCT to have taken a significant hit, but Oakley are capable dealmakers and there are several chunky holdings (eg Five Guys) that could surprise in either direction, so who knows.

Note the discount for the ordinaries of 25%, vs 5% for the Bs. A persistent differential. Odd. The share merger and hopefully better liquidity should see the ordinary discount reduce.

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Re: Pembroke VCT

#327702

Postby Kidman » July 21st, 2020, 1:56 pm

My copy of the proposals came in the post today and in general I fully support them.

Merging the two shareholder classes is something I have suggested in the past. Originally the ordinaries were meant to return capital and slowly die out but it hasn't happened before they can be sold without losing relief so it is simpler to save administrative costs. The 'B' class was always meant to be 'evergreen'.

Generally I am against any raising of limits on directors' fees but I note that passing that resolution is a condition of the re-organisation which I support and in any case we still have the annual remuneration resolutions.

scotia
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Re: Pembroke VCT

#327876

Postby scotia » July 22nd, 2020, 10:14 am

Kidman wrote:My copy of the proposals came in the post today and in general I fully support them.

Yes - my copy of the proposals has also arrived by post, but my spouse still awaits her copy. We are both Pembroke B shareholders.
To summarise - merge the two share classes, increase the Directors fees, and reduce the performance fee hurdle, with the excuse that this will "further enhance alignment between Shareholders, the Manager and the Company, helping to ensure the focus remains on the optimal outcome for Shareholders". A cynic might suggest that an increase in the performance fee hurdle might increase their focus on the optimal outcome for Shareholders.
But back to more relevant considerations - what have been the effects of the Covid-19 outbreak on their investments? I await their report with considerable interest, since the quoted Pembroke share prices have remained virtually static throughout this period of significant disruption - unlike other VCTs.

scotia
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Re: Pembroke VCT

#327900

Postby scotia » July 22nd, 2020, 11:06 am

In the half-hour since I last wrote, my wife's copy of the circular has arrived by post, along with further mail for each of us from Pembroke. This additional mail item seems to be a stronger justification of the changes they propose. Its not clear why they did not include it with their circular.
Anyway - it does usefully state "We expect the March 2020 audited year-end results to be released on Friday 24th July when they will be available on the website http://www.pembrokevct.com". And their web site now does appear to be operating correctly. It would also be nice to hear at least some preliminary comments on what has happened since the financial year-end - but I don't know if this will be present.

scotia
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Re: Pembroke VCT

#328541

Postby scotia » July 24th, 2020, 11:24 pm

The the full year results to 31st March have been released as promised today. The NAV plus Dividends of Pembroke VCT fell by 20.6p, whereas it grew by 1.39p for Pembroke B VCT. As a Pembroke B investor, I am pleasantly surprised. With its mix of high end life style investments, I feared worse.
However there is no indication as to how the VCTs have fared since the end of March.

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Re: Pembroke VCT

#328811

Postby barchid » July 26th, 2020, 3:41 pm

Scotia
Agree with you fully re wonder how things have gone since end March & I was also expecting a much severer hit to nav than we have apparently suffered. I note that the hospiality/gym area of the portfolio have held up better than I expected (notwithstanding/Chuks/Chilango etc) yet the higher priced designer section have been hit more than I expected, guess it will even out a bit/be more visible on the interim numbers in 6 months.
The cynic in me is wondering if the manager is also fearing a further markdown hence doing the hurdle, remuneration amendments whilst the going is relatively good, but their performance in the few years I have been a holder has been encouraging & I bought them deliberately because they are different to most other vct's, so I have got what I paid for.
I just didn't anticipate this mess we now all find ourselves in.

scotia
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Re: Pembroke VCT

#328929

Postby scotia » July 27th, 2020, 11:30 am

barchid wrote:I bought them deliberately because they are different to most other vct's, so I have got what I paid for.

Agreed - that was also my reason.


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