Inheritance Tax Relief Portfolio Service

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1 Inheritance Tax Relief Portfolio Service

2 Become part of the HERITAGE of Williams DE BROë Williams de Broë combines the very best traditions of private client portfolio management with contemporary investment techniques, in a modern and friendly environment. Whether purchasing shares or collective funds, managing self invested pension arrangements or working with trustees, we recognise that no two clients' situations are the same. Our aim is to provide the most comprehensive service to all.

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5 Williams de Broë With a heritage dating back to 1869, Williams de Broë is one of the UK s leading firms of investment managers and has successfully established a business that has been built on the following core values: Personal Service we have a personal service driven culture and our ethos is to maintain investment managers dedicated to our individual client s needs and who are trained to deliver a truly personal service Sound Investment Process we maintain a significant resource in our investment process and have a strong focus to achieve investment excellence through disciplined asset allocation and portfolio diversification True Independence we select best of breed investments, which are appropriate for our clients, without the conflict of interest that can exist within other firms that also provide financial planning advice Professional Partnerships we also develop close relationships with professional intermediary partners and where appropriate, deliver investment solutions to their clients Today, Williams de Broë operates from offices in London, Birmingham, Bournemouth, Exeter, Bath & Guildford and to ensure that we are able to focus our attention on the management of client portfolios, we delegate all settlement and administration functions to Pershing Limited, one of the UK s leading providers of back office stock exchange services. 2

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7 Inheritance Tax relief Portfolio Service The Inheritance Tax Relief Portfolio Service is recommended by professional advisers and is a discretionary portfolio management service. It provides investors with the potential to obtain 100% relief from Inheritance Tax (IHT) and to also achieve capital growth. It is a means by which individuals can remove assets from their taxable estate and thereby reduce their potential IHT liability. Investors retain both ultimate control and beneficial ownership of the portfolio. Therefore, if circumstances were to change, the investor has access to the portfolio. The Inheritance Tax Relief Portfolio Service utilises the tax advantages of companies qualifying for Business Property Relief (BPR). By investing in qualifying shares in companies listed on the London Stock Exchange Alternative Investment Market (AIM) investors receive the following tax advantages: 100% relief from IHT when shares are held for two years or more Accelerated Taper Relief reduces the Capital Gains Tax rate of a higher rate taxpayer to 20% after one year and 10% after two years An investment in the Inheritance Tax Relief Portfolio Service does not involve any medicals, trusts or gifts by the investor and is non-contentious in its use of existing legislation. Who may benefit from an investment in the Inheritance Tax Relief Portfolio Service? Investors with a potentially large IHT liability Investors who wish to retain control over and have access to their assets Investors looking for a short IHT mitigation qualification period. Instead of the normal exempt transfer qualification period of seven years, this is reduced to two years using Business Property Relief Investors looking for further diversification of their investments utilising companies listed on AIM Investors whose financial situation allows for high risk assets to be included in their overall investment portfolio Trustees in certain circumstances What about Replacement Property? If a shareholding that qualifies for Business Property Relief is sold and replaced by another qualifying stock, it is not necessary to hold the replacement property for another two year qualifying period. This allows qualifying business property investments to be sold and reinvested without the investor losing the benefit of continued Business Property Relief. Qualifying business property must be replaced within three years of disposal to retain the relief. It is also not necessary for the first shareholding to be held for a full two years as it is the combined ownership period of all relevant qualifying business property that counts towards the two year qualification. Flexibility Where a client also has a small element of capital gain they wish to defer, it is possible to structure a portfolio to incorporate a number of Enterprise Investment Scheme (EIS) qualifying shares to provide the most tax-efficient solution for clients. See the EIS Portfolio Service brochure for further details. 4

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9 The advice process Williams de Broë does not provide financial and tax planning advice and the suitability of the Inheritance Tax Relief Portfolio Service will be determined and agreed by you and your professional adviser. The role of the investment managers at Williams de Broë is to select appropriate BPR qualifying companies and manage them on a discretionary basis. Therefore, client portfolios will not be tailored to individual circumstances other than to meet specified withdrawal requirements and investment restrictions. There may also be different constituent holdings in each portfolio depending on the timing and receipt of client monies. THE INVESTMENT PROCESS Alternative Investment Market AIM is now firmly established as the world's leading market for growing companies. Since its launch, over 2,600 companies have chosen to join AIM. AIM is now over 11 years old and 40bn has been raised by AIM companies. Starting with 10 companies and a combined market capitalisation of 82.2m, AIM is now home to in excess of 1,600 companies with a total valuation of over 90bn. Analysis The investment managers undertake extensive fundamental analysis for internal use on each stock purchased for client portfolios. Particular importance is placed on meeting management face-to-face and attending analysts presentations when companies report their financial performance. Research is drawn from a wide range of institutions operating in the AIM arena. Investment Strategies Investments are made in companies listed on AIM, which the investment managers believe are likely to provide capital growth and are mainly in established, profitable and dividend-paying companies. Only companies that have been independently verified as qualifying for BPR are considered for investment. Diversifying investments in terms of business type is a key element of the investment strategy. Each single investment will not represent more than 10% of the funds invested unless there has been a specific agreement with the investor or their professional adviser. As an example, a portfolio of 100,000 will typically invest in 20 to 25 companies. Portfolios can be adjusted to suit investment preferences and can be overweight/underweight or exclude particular investment sectors. 6

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11 INVESTMENT HEDGE OPTION Background For more cautious clients, we are able to hedge portfolios utilising a put option to reduce the downside risk. The performance of the Williams de Broë IHT Relief Portfolios is highly correlated to the FTSE-250 Index despite the underlying investments being listed on the Alternative Investment Market (AIM). This is due in part to the fact that the portfolios are not significantly invested in the Oil & Gas and Basic Materials sectors, which together represent around 40% of the AIM Index. For more risk averse investors seeking Inheritance Tax relief utilising Business Property Relief (BPR) qualifying AIM-traded companies, the use of this hedge may be of interest. Investment Hedge To structure this investment protection, we will buy one year fully tradable put options on the FTSE-250 Index, which will cost between 2.5% and 2.95% of the portfolio value. We aim to provide downside protection of between 85% and 90%. Thus, the value of the put option increases should the Index decline by more than 10-15%. Buying a put option against the index provides protection from a pre-defined level against a fall in that index, whilst still allowing for participation in the profits that a rise in the share price of the constituent AIM traded companies in the portfolio should provide. Although the option will not qualify for Business Property Relief (BPR), full exposure to the potentially qualifying stocks held within the portfolio is retained. The level of hedging protection achieved does depend on market conditions but we will seek to provide as much protection as possible at the time, up to a maximum of 90% of the initial Index level. Further details of correlation and examples of the hedge option are available on request. Administration For clients who wish to utilise the hedge investment strategy, we will invest new portfolios once a month and purchase the investment option at the same time. Please sign the acceptance form on page 4 of the separate application form. 8

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13 OUR INVESTMENT MANAGERS IN BIRMINGHAM investment director - Mark R Northover FSI Mark began his career in 1987 at Greenwell Montagu Stockbrokers, a subsidiary of the HSBC Group and one of the UK's largest research and investment houses. Mark joined Brewin Dolphin Securities in 1995 and in 1997 was responsible for the launch and management of their reinvestment relief portfolio service. In 2001 he then launched the IHT relief portfolio service and subsequently was appointed investment director of specialist investment portfolios at Brewin Dolphin Securities in investment Manager - SIMON R LONG BA (HONS) Econ MSI Simon graduated with an honours degree in Economics from the University of Nottingham before joining Brewin Dolphin Securities in Simon has worked with Mark exclusively on EIS and BPR qualifying investments since 2004 and primarily undertakes company analysis. Simon joined Williams de Broë in Mark joined Williams de Broë in 2005 as director with responsibility for the fundamental analysis and management of the EIS and Inheritance Tax Relief Portfolios, specialising in AIM listed companies. 10

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15 administration Settlement and administration functions are provided by Pershing Securities Ltd, one of the UK's leading providers of back office stock exchange services. Shareholdings are registered in a nominee account and dividends are collected automatically and reinvested within the individual portfolio. On request, surplus income can be paid directly to clients. Contract notes and background information on investments are issued at the time transactions are undertaken. Valuations and reports are produced in April and October each year. A financial year-end package is also produced which provides a complete record of all transactions undertaken, dividends received and a full CGT report. Copies of all documentation can be sent to the investor's professional adviser, if required. An on-line valuation service is available on request. In addition, due to the investor retaining control of their assets, capital withdrawals are available. These can be taken either annually or on an ad hoc basis. 12

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17 PERSHING LIMITED The last few years have seen huge changes to the way stock exchange transactions are settled. Many firms, both large and small, have persevered with the notion that they can cope with this process internally. At Williams de Broë, we have always believed that our expertise lies in portfolio management and that clients' clearing and settlement requirements are best served by dedicated experts in that field. We have, therefore, chosen Pershing Limited, a leading service provider. Since 1939, Pershing LLC has excelled in providing execution, clearing, settlement, custody and technology solutions to financial organisations across the globe. Pershing Limited was established in the UK in 1987 and now clears a significant proportion of all London Stock Exchange trades, providing a full service model to well over 100 institutional and retail firms. Pershing s highly experienced senior management team is complemented by the expertise of their operations and IT professionals who ensure that systems remain at the leading edge of technology. As a subsidiary of The Bank of New York Company Inc., Pershing Limited has access to unequalled industry expertise, expanded financial resources and asserts a strong presence on the world s major exchanges. Unlimited Investor Protection A further benefit of our relationship is the extra layer of security provided by arranging unlimited protection on the value of the investments in a client account over and above the 48,000 provided for by the United Kingdom Financial Services Compensation Scheme (FSCS). In the unlikely event of the liquidation of Pershing Limited, if any securities and/or cash are missing from an FSCS protected client account, Pershing's insurer will provide payment up to the total net equity of the account in excess of 48,000, which is the maximum protection available from the FSCS. For those without an FSCS protected client account full cover is provided. Pershing Limited is a member of the London Stock Exchange. Authorised and regulated by the Financial Services Authority. 14

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19 SCHEDULE OF CHARGES Business Property Relief Taxation Advice This is provided by Mills and Reeve Solicitors, Colmore Row, Birmingham, B3 2AB. Minimum Investment The minimum initial investment is 30,000. Additional investments of 5,000 or more can be made at any time. Initial Williams de Broë makes no initial charge for establishing an account, however, a deduction may be made in respect of any initial charge agreed with your professional adviser and this could be up to 3% of the value of the investment made. Williams de Broë will deduct this charge from your account and pay it, on your behalf, to your professional adviser. This will be paid in full on receipt of cash and on completion of any transfer of assets. Williams de Broë does however, reserve the right to charge per security for the transfer in of existing assets. Annual This charge could be up to 1.5% + VAT. From this, Williams de Broë will retain 0.75% + VAT and, in addition, may pay up to 0.75% + VAT (as agreed on page 9 of the application pack) on your behalf to your professional adviser for their charges. The total fee is calculated quarterly (pro-rata) based on the value of the portfolio, including cash, as at January 5th, April 5th, July 5th, October 5th and will be deducted from your account shortly afterwards. Transaction Commission 30 plus First 7, % Thereafter - 0.5% VAT is not currently payable on transaction commission. Other Charges Voting and attending meetings Receipt of annual report and accounts Transfer of assets 'in specie' to another manager or into own name Transfer of account in cash to another manager or closing an account Probate Valuation Payment by CHAPS Overseas depot and safe custody Certificated transactions VAT per security VAT per security - 25 per security normal dealing charges - Fee on application VAT VAT VAT Risk warnings The Inheritance Tax Relief Portfolio Service should be seen as a high risk, long-term investment and is only suitable for investors with financial security independent of the investment made. The value of shares purchased within the Inheritance Tax Relief Portfolio Service can go down as well as up. Investors in the Inheritance Tax Relief Portfolio Service may not get back the full amount invested. Investments made in AIM companies may be difficult to sell. The tax reliefs available may change at any time. Williams de Broë does not guarantee that all investments made will qualify, or continue to qualify, for the tax reliefs. Williams de Broë does not guarantee the timescale for fully investing portfolios or that portfolios will be fully invested at all times in the future. Investment Hedge Option There may be periods when the portfolio is unhedged. However, we will only acquire the initial investments once the option is in place. The level of the correlation between the portfolio and the FTSE-250 Index will fluctuate and therefore, it is possible that the underlying portfolio may fall in value whilst the FTSE-250 Index rises. In this instance the value of the portfolio will fall and the hedge will not work. However it is possible that the portfolio may rise in value whilst the FTSE-250 falls, providing appreciation in both the underlying portfolio and the option. Any profit arising from the option is subject to capital gains tax. However, given the profit has arisen due to the FTSE-250 falling, there may be losses on the underlying investment holdings which could be offset to reduce any tax liability. Williams de Broë Limited Disclaimer This publication has been prepared by Williams de Broë Limited. The information and opinions contained herein are based upon sources believed by Williams de Broë Limited to be reliable and no guarantees, representations or warranties are made as to its accuracy, completeness or suitability for any purpose. Any opinion or estimate expressed in this publication is our current opinion as of the date of this publication and is subject to change without notice. The value of investments and the income from them can go down as well as up and the capital values will therefore fluctuate. Changes in rates of exchange may have an adverse effect on the value, price or income of investments denominated in currencies other than Sterling. Past performance and the level basis of taxation may change, which could, in turn, affect investment advice. Williams de Broë Limited, which is authorised and regulated by the Financial Services Authority and a member of the London Stock Exchange, is a wholly owned subsidiary of the Evolution Group plc. 16 WDB-IHT 06/07

20 INVESTING FOR YOU since 1869

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22 Austin Friars House, 2-6 Austin Friars, London, EC2N 2HD Tel: (020) Fax: (020) (Registered Office) One Colmore Row, Birmingham, B3 2BJ Tel: (0121) Fax: (0121) Clifton, St. Peter s Road, Bournemouth, BH1 2LT Tel: (01202) Fax: (01202) Dix s Field, Exeter, EX1 1QA Tel: (01392) Fax: (01392) Gay Street, Bath, BA1 2PD Tel: (01225) Fax: (01225) Epsom Road, Guildford, GU1 3LA Tel: (01483) Fax: info@wdebroe.com Williams de Broë Limited Registered in England Company Number: Member of the Evolution Group plc A member of the London Stock Exchange Authorised and regulated by the Financial Services Authority