Amati VCT 2 plc ('Amati VCT 2'), formerly known as ViCTory VCT PLC ('ViCTory VCT')
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 is 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 Share certificates in the name of Singer & Friedlander AIM 3 VCT and Invesco Perpetual AiM VCT are no longer valid, and should be destroyed. If you are in any doubt about how many shares you own, think you may have lost your share certficate, or wish to change the address registered with your shares, please contact City Partnerhship, the company secretary, on 0131 2437215.
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.
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.
A Brief Explanation of VCTs
Investors who subscribe for new shares in a VCT are currently entitled to income tax relief of 30% of the value of their investment, up to a maximum subscription of £200,000 in any one tax year. The relief can only be claimed against income tax actually paid, or due to be paid in the same tax year as the subscription, regardless of the rate at which the tax was paid. In order to retain the relief the investor must hold the shares for a 'Qualifying Period', which is currently five years. In addition, any dividends paid by the VCT are tax free, and disposals of the shares are also free of capital gains tax (and equally losses cannot be offset against other gains). VCTs, unlike investment trusts, are also allowed to pay dividends out of capital gains.
From 6th April 2004 to 5th April 2006 the relief given was 40% of the value of the initial investment, also offsettable against income tax, and the Qualifying Period was three years.
Prior to 6th April 2004 VCTs attracted two types of tax relief. 20% of the value of the investment was eligible for income tax relief, and 40% of the value of the investment was eligible for capital gains tax deferral relief. Where this deferral relief was claimed the deferred gain is brought back as a taxable gain if the shares are sold. The rules relating to this are complex and investors to whom this applies are advised to consult the HMRC website and their professional advisors.
In exchange for these tax concessions the VCT is required to fund young companies in the UK, which in turn should help to create jobs and commercialise some of the skills and intellectual property which the UK has been so good at creating. Specifically the rules VCTs must meet in this respect determine that they must invest 70% of new funds raised in 'Qualifying Holdings' before the third financial year end after the money was raised. The rules surrounding what constitutes a 'Qualifying Holding' have changed each year since 2006 and there is the potential here for much confusion amongst investors. We have set out below a summary of how the rules work, and how they have changed over the last few years. Because the ViCTory VCT raised its funds prior to April 2006 it is still able to operate under the original set of rules, which gives it considerably greater scope for making investment into companies mature enough to justify an AIM listing than it would have if it were starting from scratch today. The manager is keen to preserve this benefit for the investors.
Key features of the evolution of Qualifying Investment regulations from 2005-10*
In all cases qualifying investments have to take the form of buying new shares in a company (funding them directly, rather than buying shares from an existing owner). Companies must be conducting one of a number of qualifying trades, and must be genuine trading businesses, or must have an intention to acquire such a trading business. Most of the changes since 2006 have been driven by the need to secure EU State Aid approval for VCT schemes. Rules changes introduced have not been retrospective, so pools of money raised earlier continue to operate under the earlier sets of rules. We track each pool of money raised, and allocate each individual investment to a particular pool.
Funds raised pre-April 2006
Qualifying investments are subject to a gross asset test at the time of the investment. Prior to the investment the gross assets must not be greater than £15m, and not greater than £16m after the investment. At least 50% of a company's qualifying activities much be in the UK. At least 21% of total funds raised (being 30% of the minimum level of qualifying investments) have to be in ordinary shares.
Funds raised April 2006 - April 2007
Qualifying investments are subject to a gross asset test at the time of the investment. Prior to the investment the gross assets must not be greater than £7m, and not greater than £8m after the investment.
Funds raised April 2007 - April 2008
In addition to the qualifying trade and gross assets test, to be qualifying investments the companies must not have more than 50 employees and must not raise more than £2m from VCT, EIS or Corporate Venturing scheme funds in any twelve month period.
Funds raised April 2008 - April 2009
Coal production, steel production and ship building are excluded from the list of qualifying trades.
Further Rule Changes Due in the Finance Act of 2011
EU State Aid approval for VCTs was finally received by HM Treasury in April 2009, subject to four further changes.
1) Territorial rules were relaxed, such that companies are only required to have a 'permanent establishment' in the UK. This is a positive for AIM VCTs, as our investee companies often have an international dimension.
2) 'Enterprises in difficulty' are excluded from qualifying. Generally speaking if a company is quoted on AIM we expect it will not be treated as being 'in difficulty'.
3) 49% of total funds raised have to be in ordinary shares (up from 21%). We currently have around 12% of the total portfolio in convertible bonds (non-equity instruments), which is unusually high for an AIM VCT. This rule change is potentially more of an issue for other types of VCT.
4) VCTs are allowed to list on any 'European Union Regulated Market', but few are expected to move their listing outside of London.
It is highly likely that these changes will be put into effect this year. In addition there continues to be debate over how the VCT legislation can best ensure that qualifying investments are targeted on genuine small enterprises which will serve to stimulate the UK economy.
* This is only intended as a brief summary of only the most pertinent features of complex legislation. Amati accepts no liability in respect of this summary. Those wishing to know more should refer to the HMRC website at http://www.hmrc.gov.uk, which has an excellent search function.