rensburg sheppards inheritance tax planner presented by barry anysz divisional director aim division

Rensburg Sheppards Inheritance Tax Planner

presented byBarry Anysz Divisional DirectorAIM Division

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Rensburg Sheppards Investment Management

“It’s possible to take advantage of tax relief to save Inheritance Tax by investing in companies quoted on the London Stock Exchange’s junior market, the Alternative Investment Market (AIM)”

“That might well be so, but how does the potential 40% saving compare with the risks involved?”

The Proposition

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• Alternative Investment Market founded in 1996

• Positioned as the junior market to the Full List

• Intended to help fill the ‘equity gap’

• Lighter regulation tailored to Smaller Companies

• Jan 2010 LSE stats: 1,277 companies with 239 non-UK

• Often referred to as ‘Venture Capital with a Quote’

Background to AIM

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• Business Property Relief (BPR) applies to ‘unquoted companies’ which include AIM companies

• Qualifying AIM investments are exempt from Inheritance Tax via this Relief, provided that the stock has been held for 2 years and at the time of death

• Replacement provision allows for the reinvestment of the proceeds from one qualifying stock into another

• Qualifying stocks have to be UK trading companies

AIM and Business Property Relief

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Assuming Estate includes an equity portfolio of £600,000

AIM and IHT Planning The possible savings

* Excludes Independent Financial Advisor commission

With RSITP

£ Without RSITP

£

Value of Equity portfolio 500,000 600,000

Value of AIM portfolio 100,000 -

Less IHT @40% (200,000) (240,000)

Initial costs* (2,000) -

Net portfolio value on death 398,000 360,000

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• Launched in January 2002 capitalising on extensive experience of AIM and tax based products

• The team comprises:

• Barry Anysz - set up VC/AIM division in 1988

• André Winter - joined 1998, previously E&Y and 3i

• Nigel Hilton – 25 years market dealing experience

• End Q4 2009: £55m managed for over 500 clients

• Also manage Rensburg AIM VCT with NTA of £20m

Rensburg Sheppards IHT Planner (RSITP)

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• Our stock selection criteria focus on:

• BPR qualifying status with PwC advising

• Experienced management teams

• Companies with distinctive capabilities

• Proven financial track record, including dividends

• Sound Balance Sheet with low finance risk

• Liquidity in the shares

• Overall, a long term ‘Buy and Hold’ strategy

RSITP Investment Policy

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May Gurney plc

• Construction services company with long term highways maintenance and infrastructure contracts

• Floated on AIM in 2006

• 2009 revenues of £470m and a pre-tax profit of £5.2m

• Market cap £137m ( 8 April 2010)

RSITP Stocks

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RWS Holdings plc

• A leading global supplier of intellectual property support services centred on patent translations

• Floated on AIM in 2003

• 2009 revenues of £55m and a pre-tax profit of £14.5m

• Market cap of £160 million (8 April 2010)

RSITP Stocks

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• Direct contact with senior management

• Meetings or conference calls after results

• Initial and periodic update site visits

• Regular contact with stock analysts

• Daily monitoring of stock news-flow

• Networking with other institutional shareholders

• Annual check of Business Property Relief

RSITP Investment Process Active Management

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* Returns shown do not include Business Property Relief

Q4 2009 Report Performance

Benchmark / Period -5 yrs -12m Q4 09

IHT Planner clients* +17.9% +34.5% +6.7%

FTSE All Share (total return) +36.8% +30.1% +5.5%

FTSE Aim All Share -31.2% +68.1% +1.6%

FTSE Small Cap (total return) -2.2% +57.7% -7.7%

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Key List Trading Results EPS Tracker

IHT Planner Key List Trading Results (source: Fund Manager)

0

5

10

15

20

25

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

EPS up

EPS dow n

Source: Rensburg Sheppards Investment Management Ltd

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Model index underlying P/E and proxy EPS

X%IH TALL/X%IHTALL(PE)

2002 2003 2004 2005 2006 2007 2008 2009

0

50

100

150

200

250

300

0

5

10

15

20

24

PROXY EPS (R .H.SCALE)

ALL IHT STOCKS KEY LIST INDEX - PER(R.H.SCALE)

ALL IHT STOCKS KEY LIST INDEX Sourc e: Thoms on D atas tream

P roxy E P S

Ke y Lis t Index

P E

Source: Rensburg Sheppards Investment Management Ltd

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Returning to the initial Proposition

• Should only be seen as a part of overall IHT planning

• It also needs to be viewed as a long term investment

Key Risks

Higher risk investment

Individual stock volatility

Two year wait for BPR

Key Attractions

Potential 40% IHT saving

Retain control over funds

‘Smaller companies effect’

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• An AIM portfolio can be an integral part of IHT Planning

• IHT sheltering in 2 years and retained control of assets

• Provides exposure to ambitious smaller quoted companies which have already established growth credentials

• Need to look at overall portfolio return as there will be marked individual stock volatility, up and down

• Commercial proposition with 40 % BPR ‘margin of safety’

Summary and Conclusions

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Registered OfficeQuayside House Canal Wharf

Leeds LS11 5PU

Telephone +44 (0)113 245 4488

Facsimile +44 (0)113 245 4488

Email [email protected]

Web www.rensburgsheppards.co.uk

Group OfficesBelfast Cheltenham Edinburgh Farnham Glasgow

Leeds Liverpool London Manchester Reigate

SheffieldMember firm of the London Stock Exchange. Member of Euronext.liffe. Authorised and regulated by the Financial Services Authority.

Rensburg Sheppards Investment Management Limited is registered in England. Registered No. 2122340.

DisclaimerThe rules of our Regulator requires us to make clear to any reader that the illustrative suggestions, as to stock selection and strategy, which are contained within this document are not intended as, and must not be relied upon as being, recommendations or advice given by Rensburg Sheppards Investment Management Limited. The investment comments are provided solely for the purposes of demonstrating the manner in which Rensburg Sheppards Investment Management Limited would be likely to approach such matters on behalf of a new client. Specific proposals would be created in each case, which would take account of both the investment objectives and the financial circumstances of the client.

rensburg sheppards inheritance tax planner presented by barry anysz divisional director aim division

Documents

rensburg aim vct

value of aim portfolio100

extensive experience

years market

advantage of tax relief

rsitp stocks

stock selection criteria

unquoted companies