Close Brothers Dev Vct Share Discussion Threads

[timbo003] 19/11/2004 18:28

A0002577

Thanks for that

Both me and the missus are PAYE, so we have never used an accountant, however, we seem to to be spending more and more weekends (in the summer!) sorting out our tax returns, as we have quite a lot of investment income and capital gains to declare, perhaps its about time we got some professional help.

Having said that, I think for this tax year everything is reasonably under control, although we do need to see the outcome of the IT windups and Royal Doulton takeover before commiting any substantial investment into EIS. Meanwhile, we'll keep plugging away at the VCTs to maximise our income tax rebate.

[a0002577] 19/11/2004 10:42

Timbo - I work in the technology sector - and know the industry quite well. Some people come for advice on what to do with their business - sometimes I invest - but only if the company is set up as an EIS.

Getting into the angel network is more difficult than you think - usually the best first step is to talk to your accountant. If you have larger sums to invest, then there are boutiques in London that will help - but I am not prepared to give names on a public board

[timbo003] 18/11/2004 18:13

Thanks for the feedback folks

JacknNife

Alas, I'm not in that league (out by a factor of around 5 on my income, or a factor of around 2 if I take the missus's income into account), so I don't think that sort of private banking is an option for me and/or the missus.

A0002577

Is this sort of business angel stuff that you are in to? If so, any clues on where I should start looking to do some research

I confess I'm not that keen on the prospect on investing in EIS companies, at least not most of those who are featured on the Allenbridge web site. They are all obviously illiquid, and many seem to be too blue sky for my liking. However, for this tax year, circumstances are likely to force me into EIS, as I have already made nice capital gains (£13K) and I'm likely to make quite a bit more (£10-30K) through various investment trusts winding up and a likely takeover coming to fruition (Royal Doulton). I do not own anything which I can sell at a substantial loss to offset the gains, hence the need to find some EIS opportunities. I like the idea of an asset backed business, possibly with a bit of gearing and with a business plan which gives me a realistic exit strategy. Hence my attraction towards Capital Pubs and Nu Nu (Child Nurseries) both of which are EIS offerrings (available through British taxpayers.co.uk, so I'll get a nice commission rebate)

[a0002577] 17/11/2004 22:58

Timbo - I prefer EIS schemes myself - BUT these are not open to the general public : its just that I invest in other companies and try to make sure that they are structured as EIS's

[timbo003] 17/11/2004 19:11

A0002577

I've still got plenty to go on the "free" tax allowance (providing my employer keeps paying me well up until the end of the tax year).

I'm curious, if you don't do new issue VCTs, where else can you use up your "free" tax allowance? AVC pension contributions, EIS companies, film partnerships and deliberately making a loss on agricultural ventures are the only ones I have come across (for skivving off 40% income tax).

Am I missing something?

On a related topic, I see that CBD bounced back today, (the MM must have got round to reading yesterdays RNS concerning increased NAV), I don't hold, but I remain interested.

Also, Northern 3 (NTN) reported today



I'm a recent new subscriber, these are doing quite well to date for a relative newcomer, they just keep dishing out the tax free divis, long may it continue.

[a0002577] 17/11/2004 08:49

timbo003 this looks like the only one I shall invest in this year. Trouble is I have virtually used up all my 'free' tax for this year so cannot put in as much as I would like - pity they are closing the issue before the end of the tax year.

[timbo003] 16/11/2004 18:06

Hi A0002577

Yes, I have just re-read the prospectus for Ventus. If they do deliver what they say they will deliver, they are a veritable bargain given the tax break. You could well be right about the "EIS stuff" and I'm itching to get into early stage alternative energy companies, so getting into Ventus may well lead to some additional EIS investment opportunities in this area.

Perhaps I ought to double up on this one and do £10K, I will certainly keep an eye on how the offer proceeds and how quickly they approach their funding target.

On a related subject, I see Baronsmead 2 reported today, a nice steady as she goes performance with another respectable divi, quite reassuring as I've just subscribed to their new issue "C" shares

[a0002577] 16/11/2004 10:01

The Ventus VCT looks to be VERY INTERESTING. I shall probably invest in this one ! Like the concept and there is scope for some EIS stuff around it as well

[timbo003] 15/11/2004 17:38

I see that CBD are once again trading at a hefty discount after todays announcement concerning the increased NAV, you would have thought that the MM might have nudged his quote up a tad, but it was not to be I'm afraid.

Back on the subject of VCT new issues, I will probably do £5K in Pennine AIM VCT5



This is not because I like AIM VCTs particularly, but I do like the idea of a 30% divi (in the form or a 30% share buyback at the NAV after 3 years).

Also, Ventus look interesting.



They are into onshore, wind energy projects, their prospectus talks about an 8% divi, after 3 years. If they could deliver, that would be very nice, I'll probably do another £5K in these.

Then there's Close Income and Growth which will account for another £5K and then I will need to co a couple of EIS investments to make certain Gordon doesn't share in any of my gains this year, so that's probably another £10K-15K shared between Capital Pubs 2 and Nu Nu plc.

[timbo003] 29/10/2004 19:41

Oh well, me and the missis have just done another £5K each in new subscriptions, this time in Baronsmead 2 "C" shares, so I'm now up to £15K this year and the missis is up to £25K, so, that means Gordon is going to have to tax ordinary tax payers an extra £16K next year due to our tax avoidance measures.....and we haven't finished our tax avoidance yet.

We will do at least another £40K in VCTs and probably another £40K in EIS subsriptions (we have a fair bit of capital gains to defer courtesy of Waterford Wedgewood taking over Royal Doulton).

Many apologies to all you tax payers who are going to have to foot the bill due to me and the missis opting out of tax this year, but someone has to pay for all Gordon's follies.

Why don't you just vote him out at the next election

LOL

[timbo003] 02/10/2004 20:19

ram and A00

Agree with your reservations concerniong the new AIM VCTs, I will however continue to make new subscriptions and bags the generous tax benefit for generalist funds, in particular, the offerings from Close, Northern and Baronsmead, they all have a reasonable track record.

As far as new VCT investments are concerned, I'm a bit snookered at the mo', I have very little I can sell without realising a capital gain and I'm already well over the CGT limit for this tax year, so, I will have to buy out of income. The trouble is, I will have to trump up circa £5K for some serious (once in a lifetime) dental work in the next few months (get rid of mercury amalgam and lots of expensive crowns) , so I don't think I will be buying any VCTs for a couple of months. Even when I'm done with the dental bill, I will probably be diverting new funds into EIS companies in order to get my CGT bill down to zero for this tax year.

[a0002577] 01/10/2004 14:57

Keep your eyes on CVC (close Brothers VCT) someone sold today at 107 and someone bought at 113. The 113 is very close to NAV : certainly it may well be worth buying if it drops more. Personally I would fill my boots if it dropped below 100 to buy and would consider marginally above that.

[a0002577] 30/9/2004 13:46

rambutan2 I couldn't agree more : When every newspaper and every financial "services" guy says they are a good idea, then it is generally not at all a good idea to jump in. And never let the tax tail wag the dog. You are even more right on the AIM ones : there has always been a dearth of good issues on AIM that qualify (why list if you can make more money without listing I always ask myself)

I shall be keeping an eye on the new issues - waiting my time to buy at less than 60% of the asking price for the new shares. And my guess is that most of these issues will reach that price within three years - except for the Close Bros issue and the Enterprise top up - and even with those I shall be able to buy them at a lower price with established holdings :

I have done very well out of 'second hand' VCT shares - and will continue to look for opportunity. Maturing portfolio, sensible dividend policy etc and then dive in : can't spot any opportunities at the moment but I can afford to wait

[rambutan2] 30/9/2004 12:44

aooo, ive never liked the vcts for all the above-mentioned points. now, to add to those, i think that all the new money flooding into vcts following the tax changes is a recipe for disaster. too much (inflexible) money chasing too few decent opps - im talking about the aim orientated trusts. imho.

[a0002577] 30/9/2004 12:29

Hi Timbo003 - this is from the Motley Fool and may be of interest to you

By Cliff D'Arcy (TMFCliff)
September 30, 2004


So far this year, I've written about Venture Capital Trusts (VCTs) in March, May and August.

Having mentioned this subject four times in six months, you'd think that I'd have put my money where my mouth by actually investing in a VCT. However, investing in VCTs is fraught with danger, and an area where the old investment saying "Do your own research" becomes terrifically important!

If you've never heard of VCTs, you learn more by following the above links. In brief, VCTs are quoted investment companies (similar to investment trusts), which invest in small companies, including those on two stock markets: the Alternative Investment Market and OFEX.

In order to encourage us to invest in these risky sectors, the taxman gives VCT buyers 40% tax relief. In effect, a 60p VCT investment is 'grossed up' to £1, which means a 67% return on day one. Furthermore, neither VCT dividends nor capital gains are taxed. You need to hold VCT shares for three years to qualify for these tax concessions.

VCTs sound pretty interesting, don't they? However, don't be lured into investing in VCTs purely for the tax relief, otherwise you could end up nursing some serious losses. Here's why:

Colossally high charges

As with most collective investment funds, VCTs have initial (upfront) and annual management charges. Then again, these are fantastically high – more than any other mainstream investment that springs to mind. Here's how much of your money can disappear in charges:


// Table left out

(The true charges over three years will be slightly less than those I've quoted above, because all three years' annual fees don't get taken on day one, but I trust you get the picture).

One way to reduce the initial charge is to buy a VCT through a discount broker such as Bestinvest, which offers rebates of 1% to 2.5%, or Cavendish Online, which rebates all commissions it receives, usually 3%. Nevertheless, a high-charging VCT can swallow almost half of your tax relief over three years – ouch!

Whopping discounts

As with investment trusts, shares in VCTs trade at a discount to their underlying value. In technical terms, the share price is almost always lower than the 'net asset value'. In some cases, the share price can be less than half the NAV, thanks to a discount of 50%+. This could mean that the NAV could be, say, 50p, but you can only get 25p for your shares. Eek!

Low liquidity

Another problem is that shares in many VCTs are highly illiquid, which means that it can be difficult to buy or sell a reasonable number at a time. For example, with some VCTs, several brokers will only trade 500 shares at a time. If the share price is, say, 60p, that means selling in batches of £300. Also VCTs spreads – the difference between the (higher) buying price and the (lower) selling price can be huge, which can gobble a serious chunk of your capital.

Poor performance

The small-company sector hasn't done too well since the dotcom bust began in 2000. This means that some VCTs have performed appallingly. Some have lost almost four-fifths of their capital, with this 80% loss wiping out all the investors' 40% tax relief, plus another 40% for good measure. Yikes!

So, when it comes to investing in VCTs, you need to be aware of the risks. I may well decide that the sensible thing to do is not to invest in VCTs at all.

More about VCTs: TrustNet | Tax Shelter Report.

[a0002577] 29/9/2004 09:15

well done timbo003. Not sure about the continuing placing of money into VCTs - they are very illiquid but provided you have enough liquid outside then its probably OK. BSV have done me very well this year (bought in the market) 40% up on buy price plus and 11% dividend - the other Smaller Cos trusts also jumped this morning - good luck

[timbo003] 28/9/2004 18:12

Two of my VCT portfolio came out with significant announcements today:

Northern 2 VCT



Interim results, NAV now 96p and a lovely 7.3p divi (tax free) due on December 3rd (mostly capital, but part revenue), I've got 4000 of these, so that's a £300 (nearly) divi cheque and the investment only effectively cost me £1600 after tax breaks

Northern 3 VCT



Divi announcement and update on NAV (98p), a lovely 2.8p divi (tax free) due on Nov 26th (all capital). I've got 4855 of these (I've only just bought them), so that's another £130 (nearly) divi cheque and the investment only cost me £3000 after tax breaks.

I must say, I'm tempted to subscribe to a few more Northern 3, now the offer has been extended, but I also like the look of Close Income and Growth and Baronsmead 2,

Decisions, decisions! I'll probably end up subscribing to all three before the end of the tax year

[timbo003] 30/8/2004 18:17

For the record, there was a big multi-page pull out on VCTs in this weeks IC (sponsored by Eclipse), all the artilces are available on line (for subscribers):



Just search "venture capital"

[timbo003] 24/8/2004 19:16

Well done Unicorn, that is a fantastic payout, now please repeat the process (over the next couple of years) for the series 2 shares, please!

[a0002577] 24/8/2004 13:47

At the top end of expectations (mine anyway) Still doesn't beat Close VCT with a steady 8 (and rising) dividend per year. Will be interesting to see what happens to price when it goes ex div

[timbo003] 22/8/2004 18:52

Alas, I only have Unicorn series 2 (3K) and none of the original Unicorn shares, so I wont be getting any of the special divis :-(

On a related topic, I'm beginnning to struggle getting to my target £40K into new issue VCTs this tax year. The trouble is, I will have to sell other investments (which I do not really wish to sell) most of which will attract CGT (I'm aready over my CGT limit for this year) in order to raise funds for investments in VCTs.

So far I've invested £10K in new issues, £30K to go (I could do with a medium sized lottery win!)

[a0002577] 22/8/2004 13:18

rambutan2 thanks for pointing it out. I usually try to notice these myself but somehow (too busy? didn't notice it. The announcement states they have, recently made £3 million gains by selling non qualifying investments as part of the ORD share fund.

The next announcement reads

"Following this purchase there are now 34,769,234 Ordinary Shares of 1 pence and
15,763,314 Series 2 Ordinary Shares in issue.

So 3 million spread over 34 million shares is somewhat less than 10 pence a share. They go on to say they want make capital distributions. Hmmm... May be they are going to spread it over a few years too. NAV is only a little bit above price so not (for me anyway) a buy. If you are a holder then you should get some nice tax free cash back.

[a0002577] 22/8/2004 13:03

timbo003 That is an amazing find : well done and many thanks for passing it on.

They even give you rebates on pensions and other funds as well