Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report
Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report
Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report
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RiskFactors<br />
<br />
YourcapitalisatriskifyouinvestintheCompanyandyoumaylosesomeorallofyourinvestment.<br />
<br />
<strong>The</strong> Company's business, financial condition or results could be materially and adversely affected by any of the risks<br />
describedbelow,innoparticularorderofpriority.Insuchcases,themarketpriceoftheG<strong>Shares</strong>maydeclineasaresultof<br />
anyoftheserisksandInvestorsmayloseallorpartoftheirinvestment.Additionalrisksanduncertaintiesnotpresently<br />
knowntotheDirectors,orthattheDirectorscurrentlydeemimmaterial,mayalsohaveanadverseeffectontheCompany.<br />
<strong>The</strong>DirectorsconsiderthefollowingtobeallthematerialrisksforpotentialInvestorsintheCompany:<br />
<br />
AlthoughitisintendedthattheCompanywillbemanagedsoastocontinuequalifyingasa<strong>VCT</strong>,thereisnoguarantee<br />
thatsuchstatuswillbemaintained.FailuretodosocouldresultinadversetaxconsequencesforInvestors,including<br />
beingrequiredtorepaythe30%incometaxrelief.<br />
<strong>The</strong>levelsandbasesofreliefsfromtaxationmaychangeandcouldapplyretrospectively.<strong>The</strong>taxreliefsreferredtoin<br />
thisdocumentarethosecurrentlyavailableandtheirvaluedependsontheindividualcircumstancesofInvestors.<strong>The</strong><br />
Company'sobjectiveshavebeensetonthebasisthatallInvestorsobtain30%incometaxreliefontheirsubscriptions.<br />
<strong>The</strong>refore,thisinvestmentmaynotbesuitableforInvestorswhodonotqualifyforthefull30%incometaxrelief.<br />
IfanyoftheCompany'sinvestmentsdonotperformtoplan,thentherecouldbeashortfallordelayinreceiptofthe<br />
ShareholderProceedsandhenceareductioninthereturntoGShareholders.Inaddition,ifthereisachangein<strong>VCT</strong><br />
legislation, or the interpretation of existing <strong>VCT</strong> legislation, such that the payment of Shareholder Proceeds has an<br />
adverseeffectontheCompany's<strong>VCT</strong>statusorGShareholders'<strong>VCT</strong>status,thensuchpaymentsmaynotbemade.<br />
AlthoughtheG<strong>Shares</strong>willbeListed,itishighlyunlikelythataliquidmarketintheG<strong>Shares</strong>willdevelopastheinitial<br />
incometaxreliefisonlyavailabletothosesubscribingfornewsharesandtheremayneverbetwocompetitivemarket<br />
makers.Itmay,therefore,provedifficultforGShareholderstoselltheirG<strong>Shares</strong>.Inaddition,thereisnoguarantee<br />
thatthemarketpriceoftheG<strong>Shares</strong>willfullyreflecttheirunderlyingNetAssetValueortheabilitytobuyandsellat<br />
thatprice.Itshouldbenotedthatsharesheldin<strong>VCT</strong>susuallytradeatadiscounttothe<strong>VCT</strong>'snetassetvalue.<br />
<strong>The</strong>abilityoftheCompanytodisposeofinvestmentsafterfiveyearsmaybelimitedatthattimeintheeventofpoor<br />
prevailingeconomicconditionsand,inparticular,wherethereislimitedavailabilityoffinancetopotentialpurchasers.<br />
Insuchcircumstances,thepaymentofShareholderProceedscouldbedelayed.<br />
G Shareholders should be aware that the sale of G <strong>Shares</strong> within five years of their subscription will require the<br />
repaymentofsomeorallofthe30%incometaxreliefobtaineduponinvestment.Accordingly,aninvestmentinthe<br />
Companyisnotsuitableasashortormediumterminvestment.<br />
MostoftheCompany'sinvestmentsarelikelytobeincompanieswhosesecuritiesarenotpubliclytradedorfreely<br />
marketableandmay,therefore,bedifficulttorealise.<br />
Inordertocomplywith<strong>VCT</strong>legislation,theQualifyingCompanies,inwhichtheCompanywillinvestatleast70%ofits<br />
capitalwithinthreeyears,willgenerallybesmallcompaniesthathaveahigherriskprofilethanlargercompaniesand<br />
maynotproducethehopedforreturns.Accordingly,Investorscouldgetbacklessthanthefullamounttheyinvested.<br />
Additionally, the Qualifying Companies may also have limited trading record, and therefore, may not produce the<br />
anticipatedreturns.<br />
<strong>The</strong>re is no guarantee that the Company's objectives will be met or that suitable investment opportunities will be<br />
identified.<br />
<strong>The</strong>Company'sabilitytoobtainmaximumvaluefromitsinvestments(forexample,throughtheirsale)maybelimited<br />
bytherequirementsoftherelevant<strong>VCT</strong>legislationinordertomaintainthe<strong>VCT</strong>statusoftheCompany(suchasthe<br />
obligationtohaveatleast70%byvalueofeach<strong>VCT</strong>'sinvestmentsinQualifyingInvestments).<br />
<strong>The</strong> past performance of investments made by the <strong>Downing</strong> <strong>VCT</strong>s or Management should not be regarded as an<br />
indicationoftheperformanceofinvestmentstobemadebytheCompany.<br />
Changesinlegislationinrespectof<strong>VCT</strong>sandQualifyingInvestmentsingeneralandinparticular,qualifyingtrades,may<br />
restrictoradverselyaffecttheabilityoftheCompanytomeetitsobjectivesand/orreducethelevelofreturnswhich<br />
wouldotherwisehavebeenachievable.<br />
<strong>The</strong>valueofG<strong>Shares</strong>isdependentontheperformanceoftheCompany'sunderlyinginvestments.<strong>The</strong>valueofthe<br />
investmentsandthedividendstreamcanriseandfall.Inparticular,theBoard'sobjectiveofpayinganannualdividend<br />
ofatleast5pperGSharemaynotbeachievedandanydividendpaymentswillreducetheNetAssetsattributableto<br />
theG<strong>Shares</strong>.<br />
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