In February 2010 the respective boards of the two Unicorn AIM VCTs recommended the merger of the two companies and the adoption of Revised Management Arrangements (“RMA”) which determine the fees paid to the fund manager. The proposals were very similar to the Artemis situation.

The RMA provide for a basic annual fee and a mechanism for the calculation of a Performance Fee. Under any circumstances under which a Performance Fee would be payable under the RMA, such fee would be greater than that payable under the corresponding existing arrangements, measurably so for VCT I S3 and VCT II shareholders and potentially substantially so for VCT I Ordinary and S2 shareholders. The RMA also increase the term of the manager’s contract from one year to three years. Dr Paul Castle and Ian Read, the founder members of the Artemis committee, believe that the Unicorn RMA are not in the best interests of shareholders and recommended that shareholders should vote against Resolution 4 at the EGM of VCT I last February.  In the event the RMA resolution was defeated on a show of hands but carried on a poll.

Since the EGM the Unicorn VCT Shareholder Action Group committee has been in dialogue with the chairman of the company with a view to modifying the RMA to better align the manager's remuneration with shareholders' interests.  Following these discussions the chairman wrote to shareholders, without reference to the committee, to advise of amended revised management arrangements ("ARMA").  The committee's calculations show that the ARMA could still result in substantial fees payable to the manager that would not have been payable under the original arrangements.  The committee expects to continue its dialogue with the chairman of the company to achieve further modifications to the RMA/ARMA. 

Please see Unicorn RMA_explanatory_notes_for an introductory overview - February 2010.

Please see Unicorn Revised Management Arrangements for detailed analysis - February 2010.

Please see Unicorn Alternative Revised Management Arrangements for the Committee's proposals - March 2010.

Please see Unicorn ARMA for further detailed analysis - April 2010.

The Committee met with the chairman and the senior independent director of the Company on 27 May 2010. The Company reinforced its view that it was essential to provide a realistic incentive to the manager to perform well relative to the current position, whereas the Committee stressed that it was not acceptable to pay performance related fees (which could aggregate millions of pounds) to the manager that would not have been payable under the original remuneration arrangements.  The Committee requested that the board re-consider its position in the light of the discussions.  In the interim the Committee would meet with the manager.  If resolution is not forthcoming by the end of June 2010 then the Committee will proceed to the next stage of the campaign.

The Committee met with Chris Hutchinson of Unicorn Asset Management Limited, the Manager of the Company's assets, on 24 June 2010.  The Manager explained the circumstances under which the RMA came into being as part of the two Unicorn VCTs' merger process, it having submitted a proposal to the Company for consideration.  The Manager stated that there was no intention to mislead shareholders and expressed the view that the RMA/ARMA were appropriate and that it was not aware of any ground-swell of shareholder unrest.  The Committee re-stated its arguments, noting that the vast majority of shareholders were not aware of the economic effects of the RMA/ARMA and insisting that it was totally unacceptable for 92% of shareholders to be worse off under the ARMA than under the Manager's original remuneration arrangements, with more than 50% of that number substantially worse off.  The Manager's suggestion that it could waive any incentive payment that it considered would be viewed as excessive was not well received by the Committee.  Nor was the Committee impressed by the Manager's argument that the Company could moderate dividend payments in order to regulate any consequent incentive payment to the Manager, on the grounds that any retention of funds by the Company for this purpose would not be in shareholders' best interests.  The Committee suggested that preserving its reputation and the retention of its £1 million annual management fee ought to be more than sufficient incentive for the Manager than an additional totally inappropriate incentive fee.  The meeting concluded with each party maintaining its respective position.  The Committee will now resume dialogue with the Company in a final attempt to persuade it to accept the Committee's arguments, failing which it will proceed to the next stage of the campaign.