Amati VCT 2
Amati VCT 2 incorporates shareholders from the three Singer & Friedlander AIM VCTs, and from Invesco Perpetual AiM VCT. Prior to changing its name on 9th November 2011, Amati VCT 2 was called ViCTory VCT. The name change followed a merger by scheme of reconstruction between ViCTory VCT and the former Amati VCT 2, which was originally called Invesco Perpetual AiM VCT. Because this merger was aimed to mark an effective re-launch of the company, there was also a reconstruction of the share capital of the company shortly following the completion of the scheme which rebased the NAV per share from around 42.06p to 99.8p per share. The details of the merger and the share reconstruction are as follows:
Original Invesco Perpetual AiM VCT holders, who then held shares in the former Amati VCT 2 plc, received 0.621926751 shares in ViCTory VCT for each share they held previously, with the resultant holding being round down to the nearest whole share. Thus if you held 10,000 shares in Invesco Perpetual AiM VCT, you would then been issued with 6,219 shares in ViCTory VCT.
ViCTory VCT then changed its name to Amati VCT 2 plc, and in the reconstruction of the share capital each shareholder received 0.4220842 ordinary shares for each share held previously with holdings rounded down to the nearest whole share, such that the NAV per share rose from 42.06p to 99.8p. Thus if you held 10,000 shares in ViCTory VCT you would have held 4,220 shares after this. If you had started with 10,000 Invesco Perpetual AiM VCT shares, and then had 6,219 ViCTory shares, you would have held 2,624 shares in Amati VCT 2 after this reconstruction.
As a result of the share reconstruction all share certificates have been re-issued. In all cases these are in the name of Amati VCT 2 plc. Share certificates in the name of Singer & Friedlander AIM 3 VCT and Invesco Perpetual AiM VCT are no longer valid, and should be destroyed.
For questions regarding your shareholding or dividend payments, please contact Share Registrars on 01252 821390 or by email at email@example.com. For questions relating to applications for new shares or any other matters, please contact Amati Global Investors on 0131 503 9115 or by email at firstname.lastname@example.org.
So that original shareholders in Singer & Friedlander AIM VCTs and those in Invesco Perpetual AiM VCT can trace where holdings have come from a brief outline of each is given below.
What are VCTs?
Venture Capital Trusts (VCTs) were introduced by the Government in 1995 and were designed to encourage investment in early-stage companies by offering attractive tax benefits in return for the additional risks involved. The legislation has changed over the years, but at present the main tax reliefs available are as follows: income tax relief of 30% on subscriptions for new shares up to a value of £200,000 in each tax year, providing that the investment is held for five years; tax free dividends; and a capital gains exemption on disposal. VCTs are broadly similar to investment trusts and are listed on the Main Market of the London Stock Exchange, with independent Directors whose responsibility is to protect the interests of the shareholders in the VCT.
Overview of the tax reliefs available 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 in each tax year, which can be set against any income tax liability that is due, whether at the lower, basic, higher or additional tax rate.
- If subscription shares are sold or otherwise disposed of within five years the income tax relief will be lost, although this does not apply to transfers between spouses or in respect of deceased estates.
- Dividends paid by VCTs are tax free, subject to an investment limit of £200,000 per year. This applies to dividends in respect of subscription shares as well as shares bought in the secondary market. Amati VCT normally pays its final dividend in August (interim in December). Amati VCT 2 normally pays its final dividend in July (interim in November). Both VCTs have a target annual dividend yield of 5%-6% of the year-end net asset value. Under the current tax legislation these dividends are free of any tax liability, subject to the investment limit of £200,000 in any tax year.
- Shares in VCTs are exempt from Capital Gains Tax when they are sold, subject to the permitted maximum of £200,000 in any tax year. This applies to subscription shares as well as shares bought in the secondary market.
- As an illustration of the effect of the tax reliefs available, and assuming that you are able to claim 30% income tax relief on your investment and that you paid the full 3% offer costs, a 5% dividend yield equates to a 6.9% yield on net investment, and a 6% dividend yield equates to an 8.3% yield on net investment.
The summary above is for illustrative purposes only and any potential tax benefits to investors will vary according to individual circumstances. Income tax relief can only be claimed against income tax due to be paid in the same tax year as the share subscription. Prospective investors are strongly advised to seek independent advice as to their tax position and as to the suitability of any VCT investment before proceeding. For detailed information provided by HMRC on VCT tax reliefs please click here.
Overview of the conditions for 'Qualifying Holdings'
VCT funds receive special tax benefits because of their role in supporting the UK economy, but they must meet a number of conditions, many of which are similar to those for Investment Trusts. The main test 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 'qualifying holdings', that is shares or securities in companies which meet the conditions of the VCT scheme.
The rules governing qualifying holdings are complex and have been subject to many changes over the years. Funds raised through share issues during different periods are be subject to slightly different rules governing qualifying holdings. In this context it is worth noting that older VCTs, including the Amati VCTs, may benefit from being able to maintain pools of money which were raised under older sets of rules, and which allow them to continue to make new qualifying investments under those older rules, where it is advantageous to do so.
The main conditions that companies must meet in order to issue shares that form part of a VCT's qualifying holdings are as follows:
- The investee company must be unquoted, which for the purposes of the legislation includes companies whose shares are traded on the Alternative Investment Market (AIM).
- It must be carrying out a qualifying trade, which for the purposes of the legislation excludes the following: dealing in land; financial activities; leasing assets; farming or forestry; hotels; shipbuilding; producing coal and steel; generating electricity.
- 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 qualifying holding must be in ordinary shares of the investee company, and at least 70% of qualifying holdings in aggregate must be in ordinary shares.
- The investee company must also satisfy all of the conditions set out below as well.
For more detailed information provided by the HMRC on the conditions for VCT qualifying holdings please click here.
Overview of new conditions relating to EU State Aid Risk Finance
As from April 2014 VCTs may lose their tax-advantaged status if they invest in new shares in a company which has raised more than £5m from state aided sources over the twelve months prior to and including the date of investment. During the summer budget of July 2015 new conditions were announced, which became effective from Royal Assent in November 2015, with the stated intention of ensuring that state aided funding becomes more targeted as well as fully compliant with EU rules. These conditions in effect impose stricter limits on the nature and extent of investments which may be made by VCTs, and can be broadly summarised as follows:
- In addition to the existing annual investment limit of £5m, no investment may be made by a VCT in a company that causes that company to receive more than £12m (£20m if the company is deemed to be a Knowledge Intensive Company) of state aid investment (including from VCTs) over the company's lifetime. A subsequent acquisition by the investee company of another company that has previously received State Aid Risk Finance can cause the lifetime limit to be exceeded.
- No investment may be made by a VCT in a company whose first commercial sale was more than 7 years prior to the date of investment, except where previous State Aid Risk Finance was received by the company within 7 years (10 years in each case for a Knowledge Intensive Company) OR where both a turnover test is satisfied and the company is entering a new market or commercialising a new product.
- No funds received from an investment into a company can be used to acquire another existing business or trade.
Two important exemptions have been introduced into the legislation to allow VCTs to manage their liquidity effectively through certain types of non-qualifying investments. Investments in UCITS funds and in shares purchased on a Regulated Market (for example the Main Market of the London Stock Exchange) are both exempt from the new restrictions placed on investments made by VCTs. This means that the Amati VCTs can broadly maintain their strategy of investing in the TB Amati UK Smaller Companies Fund (which is a UCITS fund), and of investing in certain individual stocks listed on the Main Market of the London Stock Exchange. Non-qualifying investments in AIM traded shares will, however, be subject to all of the new restrictions, as AIM is not, for the purposes of the legislation, a Regulated Market.
Please note that what we have provided above is not an exhaustive summary and should not be relied upon when considering an investment in Amati VCT. For further details please refer to the policy paper published by HMRC, which can be found here.
In early 2016 HMRC is expected to provide more detailed guidance on the application of the new rules, at which time we will update this area of the website with any information of relevance to the Amati VCTs.
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.
Background on ViCTory VCT
ViCTory was previously known as Singer & Friedlander AIM 3 VCT plc ('S&F 3') having been renamed in June 2009. On 22 February 2006 S&F 3 completed a merger with Singer & Friedlander AIM 2 VCT plc ('S&F 2') and Singer & Friedlander AIM VCT ('S&F 1'). S&F 1 shareholders received 0.419882 S&F 3 shares for each S&F 1 share held, and S&F 2 shareholders received 0.737883 S&F 3 shares for each S&F 2 share held. Thus if you held 10,000 shares in S&F1 you would then have held 4,198 shares in ViCTory. If you held 10,000 shares in S&F2 you would then have held 7,378 shares in ViCTory. In each case you would have held a share certificate for S&F3, which would have remained valid for ViCTory shares.
S&F 1 launched in the tax year 1998/99. It paid dividends of 2.6p on 16 Feb 2000, and 29.8p on 3 July 2000, giving a total of 32.4p prior to its merger into S&F 3. Since the merger a further 6.5p of dividends have been paid.
S&F 2 launched in the tax year 2000/01. It paid dividends of 1.3p on 19 September 2001, 0.6p on 27 September 2002, 0.35p on 17 September 2003, 0.5p on 1 September 2004, 0.5p on 14 June 2005, and 2p on 1 February 2006, giving a total of 5.25p prior to its merger into S&F 3. Since the merger a further 6.5p of dividends have been paid.
S&F 3 also launched in the tax year 2000/01. It paid dividends of 3.25p prior to the merger with S&F 1 and S&F 2, and has paid dividends of 6.5p since.
Between 31 March 2005 and 11 May 2005 S&F 3 issued 402,023 C shares at 100p each. These shares were converted into ordinary shares on 18th November 2005 with shareholders receiving 1.1368 ordinary shares for each C share held.
On 22 March 2010 the Board of ViCTory announced the appointment of Amati Global Investors as fund manager. Following a significant amount of portfolio restructuring, and a re-alignment of the investment policy closer to that of Amati VCT, a proposal to merge with Amati VCT 2 via a scheme of reconstruction was put to shareholders in October 2011 and was well supported.
Background on the former Amati VCT 2 plc (originally Invesco Perpetual AiM VCT plc)
The Company floated on 30 July 2004 as Invesco Perpetual AiM VCT plc. Its initial offer, in which investors subscribed for shares at 100p, lasted until June 2005, raising around £25m. The starting NAV was 95p. It raised further funds amounting to around £21m in a new share offer between February and April 2006, at a range of prices from 111.40p up to 117.02p. The Company initially operated a Dividend Re-investment Scheme, under which shares were allocated only once on 21 February 2006 in respect of the 3.5p dividend payable on 18 January 2006. Subsequently it was decided by the Board that the VCT rule changes meant it was no longer in the interests of the company to operate the scheme and it was closed. The Company maintained a share buyback policy until August 2007, but subsequently decided that the changes in the VCT legislation were such that this was no longer in the Company's long term interest. During 2007 the Board also adopted a policy of paying dividends amounting to 5p per share each year as a means of returning capital to shareholders.
On 11th February 2011 the Board of Invesco Perpetual AiM VCT plc announced the formal appointment of Amati Global Investors as the new fund manager. The name was changed at the EGM on 17th February 2011 to "Amati VCT 2 plc" ("the Company"). Following a significant amount of portfolio restructuring, the proposal to merge with ViCTory VCT via a scheme of arrangement was put to shareholders in October 2011 and was well supported.
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.