Finely crafted investments

 
Last Published NAV, 65.87 p as at 21/07/2016
Share price (bid), 62.50 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 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.

For questions regarding your shareholding or dividend payments, please contact Share Registrars on 01252 821390 or by email at enquiries@shareregistrars.uk.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 vct-enquiries@amatiglobal.com.

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.

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.