Finely crafted investments

 
Last Published NAV, 71.08 p as at 16/10/2014
Share price (bid), 68.50 p (delayed)

Amati VCT

Amati VCT was launched in 2005 as the First State AIM VCT by Dr Paul Jourdan, whilst at First State Investment Management (UK) Limited. This VCT moved with Dr Jourdan to Noble Fund Managers in 2007, where Douglas Lawson became co-manager in 2008 and the name changed to Noble AIM VCT plc. On 17th October 2008 Noble AIM VCT plc acquired Noble Income and Growth VCT PLC via a scheme of arrangement. For each share in Noble Income and Growth VCT shareholders received 0.646 shares in Noble AIM VCT. Following the management team taking over Noble Fund Managers in 2010 the VCT changed its name to Amati VCT at its AGM on 2 July 2010. David Stevenson joined as a Fund Manager of Amati VCT in February 2012.

(Noble Income and Growth VCT PLC was launched in March 2002 as T&G AIM VCT PLC, which also issued "C" shares on 8 October 2003. The Company changed its name to Noble Income and Growth VCT PLC on 22 June 2005, and the "C" shares were converted to ordinary shares on 21 December 2005 with a conversion ratio of 1.136 ordinary shares per "C" share.)

What are VCTs?

Venture Capital Trusts (VCTs) were introduced by the Government in legislation dating back to 1995 offering investors a series of attractive tax benefits in return for taking the additional risks involved in investing in earlier-stage businesses. The legislation has evolved over time. Currently the principal tax reliefs to investors are: income tax relief to the value of 30% of your investment, subject to a limit of £200,000 per tax year; and the ability of VCTs to pay tax free dividends. VCTs are investment companies listed in their own right on the main market of the London Stock Exchange with independent directors whose objective is to protect the interests of the VCT investors.

Overview of how the tax reliefs work for VCT investors:

  • Income tax relief can be claimed to the value of 30% of your investment subject to a VCT investment limit of £200,000 per tax year. This can be used to the extent that you have an income tax liability, or have paid income tax during the tax year in which the investment is made.
  • The income tax relief will be lost if the shares bought are disposed of within five years of purchase. Deceased estates are, however, able to sell VCT shares during this period without losing the income tax relief granted.
  • Amati VCT normally pays its final dividend in July (interim in December), Amati VCT 2 in June (interim in October). These dividends are free of further tax liability under the current legislation up to the investment limit of £200,000 per tax year.
  • To illustrate the potential value to investors: assuming that you are able to claim 30% income tax relief on your investment, and that you paid the full 5% offer costs, a 5% dividend equates to a 6.8% yield on net investment, and a 6% dividend equates to an 8.1% yield on net investment.
  • To achieve an 8.1% after tax yield from ordinary company dividends would require a yield of 10.9% for 40% tax payers

Investors are advised to seek independent advice on their tax affairs. For detailed information provided by HMRC on VCT tax reliefs please click here.

In order to maintain their tax status VCTs must meet a number of conditions. Many of these are similar to those for Investment Trusts. The test which is unique to VCTs is that within three years of raising funds, and at all times thereafter, a VCT must ensure that 70% of its investments (by value recorded at cost, or last price paid per share) are held in qualifying investments.

The rules for what constitutes qualifying investments are complex, and have been subject to many changes over the years. It is important to note that older VCTs, including the Amati VCTs, benefit from being able to maintain pools of money raised under older sets of rules, which allow them to continue to make new qualifying investments based on these older rules, where it is advantageous to do so.

The key criteria as they currently stand for qualifying investments by VCTs are as follows:

  • The investee company must be unquoted (but AIM stocks and those quoted on other exchanges which are not Recognised Exchanges are unquoted for the purposes of this test).
  • It must be carrying out a qualifying trade. Examples of excluded trades include: dealing in land; financial activities; leasing assets; farming or forestry; hotels; shipbuilding; producing coal or steel; generating electricity which attracts a Feed-in-Tariff.
  • Its gross assets must not exceed £15m prior to the investment, and £16m afterwards.
  • It must be independent.
  • It must control all its subsidiary companies, and own more than 50% of each of them.
  • At least 10% of each investment must be in ordinary shares, and at least 70% of qualifying investments must be in ordinary shares.

For more detailed information please here.

Why an Amati VCT?

  • We believe that AIM provides VCT investors with access to some of the UK's most outstanding growth companies, and that these are well represented in the Amati VCT portfolios.
  • Amati brings together a highly experienced team of fund managers whose sole focus is on UK smaller companies.
  • AIM based VCTs typically have a more diversified portfolio than other types of VCT, likely to be invested in larger more established companies, with transparent market pricing and reasonable liquidity.
  • Amati VCTs take advantage of a VCT's ability to structure some investments as convertible loans, which serves to reduce overall volatility and increase income.

Testimonials

From our investors:

"Amati Global Investors is one of the best fund management houses for the relevance and depth of information on their website and for regular investor communication" an Amati VCT & Amati VCT 2 Investor based in Hertfordshire.

"I currently own a wide range of VCTs, including both Amati 1 and Amati 2. I view VCTs as providing a useful supplement to a pension. They yield generous tax free dividends with some prospect of capital appreciation, especially when the initial tax rebate is taken into account. This contrasts starkly with the poor rates and 100% capital loss associated with purchased annuities" an Amati VCT & Amati VCT 2 Investor based in Glasgow.

"When I reached the "three score years and ten" I decided that I should focus my investments on Investment Trusts and after four years was attracted to Amati as a VCT with a good record of both dividends capital value in March 2013. Attendance at a presentation in November 2013 made me think of extending my holding, which is in progress. The presentation was impressive and the analysts made a convincing case for their investments, as well as some excellent case studies from some of the major holdings. I remain sure that my modest holdings are in good hands" an Amati VCT Investor based in York.

"I remember as a child watching an eminent businessman on TV called Victor Kiam who bought and sold electrical companies specifically in the shaving industry, his catch phrase was 'I liked the company so much I bought it'. That's exactly how I feel about Amati, I am now the proud owner of well in excess of half a million Amati VCT shares. After having owned a vast array of various other VCT companies over the last 10 years, some of which are now virtually worthless, I have found only a handful of VCT companies that have stood the test of time and remained steadfast and sure during the market turmoils. In my opinion there is only one company that stands head and shoulders above the rest and that's Amati Global managed by the ubiquitous Dr Paul Jourdan who in my experience genuinely cares and puts his shareholders before himself. I look forward to investing further funds in the future as I am so impressed with the mouth-watering dividends payable every 6 months - keep up the good work". Dr Sanghera, an Amati VCT investor.