Important Information About Risks
The nature of investment in VCTs
VCTs are a particular type of investment company. They were established by the UK Government with the intention of encouraging investment in smaller, or "venture", UK companies. Investment in VCTs is high-risk and for the long-term. Prospective investors should refer to the detailed risk warnings in the relevant prospectus but key risks are set out below.
Past performance and risk of loss of capital
The past performance of the VCTs is not a guide to their future performance. The value of a VCT depends on the performance of the underlying assets. The value of the investment and dividend stream from the Baronsmead VCTs can rise and fall. Shareholders may get back less than originally invested, even taking the tax reliefs into account. There can be no guarantee that investment objectives of any of the VCTs will be achieved.
Risks inherent in investing in small companies
Investment in smaller companies which are unquoted, or traded on AIM or ISDX Markets, by its nature, involves a higher degree of risk than investment in larger companies, including those traded on the main market. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. In addition, the market for shares in smaller companies is often less liquid than that for shares in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such shares.
Investments held by the Baronsmead VCTs may be difficult to realise. The fact that a share is traded on AIM or PLUS-Markets does not guarantee its liquidity. The spread between the buying and selling price of such shares may be wide and thus the price used for valuation may not be achievable. Any change of governmental, economic, fiscal, monetary or political policy could materially affect, directly or indirectly, the operation of the VCTs and/or their ability to achieve or maintain VCT status.
Long-term investment and liquidity risks
An investment in a VCT is for the long term. VCT shares are not likely to be easy to sell at full value. Trading in VCT shares is not particularly active, so shares tend to be valued at a discount to their net asset value. In other words, if you seek to sell, you may be offered a price which is less than the full value of the underlying assets. Mechanisms for the buy-back of shares are explained in the annual reports for the funds, but you should have no expectation that there will be any buy-back or other opportunity to redeem your interest.
The information on this web site is based on existing legislation, including taxation legislation. The tax reliefs described are those currently available. The tax rules or their interpretation in relation to an investment in the Baronsmead VCTs and/or rates of tax may change during the life of the Baronsmead VCTs and any such changes can be retrospective. Changes in legislation concerning VCTs in general, and qualifying holdings and qualifying trades in particular, may limit the number of new qualifying investment opportunities and/or reduce the level of returns that would otherwise have been achievable. The value of tax reliefs depends on the personal circumstances of the holders of the share in the Baronsmead VCTs, who should consult their own tax advisers before making any investment.
While it is the intention of the Directors of the Baronsmead VCTs that they will be managed so as to continue to qualify as VCTs, there can be no guarantee that the Baronsmead VCTs will maintain VCT status. If a company that has been granted approval as a VCT subsequently fails to comply with the conditions for approval, approval as a VCT may be withdrawn. In these circumstances, relief from income tax on the initial investment is repayable unless loss of approval occurs more than five years after the issue of the relevant VCT shares. In addition, relief ceases to be available on any dividend paid in respect of profits or gains in any accounting period ending when VCT status has been lost and any gains on the VCT shares up to the date from which loss of VCT status is treated as taking effect will be exempt, but gains thereafter will be taxable.
Charges and performance fees
Charges and performance fees for VCTs may be higher than Unit Trusts and Open Ended Investment companies.
The role of the Manager
Prospective investors should take their own investment and tax advice before investing in VCTs, based on their own circumstances. The clients of Livingbridge VC LLP are the Baronsmead VCTs. Livingbridge VC LLP will not advise any prospective investor on the merits of investing in the VCTs or on their tax position , and nothing on this website constitutes such advice. Nobody associated with Livingbridge is entitled to lead you to believe otherwise.
For further information on VCTs please access the following links:
· Current legislation – The Inland Revenue: http://www.hmrc.gov.uk/businesses/tmaventure-capital-trusts.shtml
· The financial regulator of VCT managers – Financial Services Authority: http://www.fsa.gov.uk
· The VCT industry trade association – The AIC: http://www.theaic.co.uk
· An IFA: http://www.unbiased.co.uk
· A Stockbroker – http://www.apcims.co.uk