Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report

LetterfromtheChairmanoftheCompany
DowningPlannedExitVCT2plc
10LowerGrosvenorPlace
LondonSW1W0EN
10January2013
DearInvestor
SubscriptionstoVCTscurrentlyattractincometaxreliefattherateof30%.Thismeansthatforevery£1investedthe
netcosttoInvestorsshouldbe70p.SetoutbelowisatableillustratingthehypotheticalreturnstoInvestorsatfive
differentlevelsofShareholderProceeds,paidoutduringtheperiodapproximatelysixyearsfrominvestment.
IllustrativereturnsbasedonanOfferPriceof£1perGShare
ShareholderProceeds 80p 90p 100p 110p 120p
Less:netcostofinvestment
(70p) (70p) (70p) (70p) (70p)
(assuming30%incometaxrelief)
Taxfreecashprofit 10p 20p 30p 40p 50p
Taxfreeprofit
+14% +29% +43% +57% +71%
(asa%ofnetcostofinvestment)
NetReturn(taxfree) 1 2.9%p.a. 5.4%p.a. 7.6%p.a. 9.6%p.a. 11.5%p.a.
Grossequivalentreturn 2 to
40%taxpayers 4.8%p.a. 9.0%p.a. 12.7%p.a. 16.0%p.a. 19.2%p.a.
Thereturnssetoutaboveareforillustrativepurposesonlyandnoforecastorprojectionisimpliedorshouldbeinferred.
1
2
TheNetReturnistheinternalrateofreturnbasedonaninvestmentof100pdeemedtobemadeon5April2013,30pincometaxrelief
deemedtobereceivedsixmonthslateron5October2013andeither80p,90p,100p,110por120pofShareholderProceeds,comprising
dividends of 5p payable on 30 November 2013, 2.5p on 31 July 2014, 30 November 2014, and on the same dates each year until
30November2017,50%ofthebalanceoftheShareholderProceedson31December2018andtheremainingfundson31July2019.
ThegrossequivalentreturniscomparedtoasourceofincomethatissubjecttoincometaxatanInvestor'smarginaltaxrate.Ithasbeen
calculatedbydividingtheNetReturnby0.6for40%taxpayers.
ThekeypointsforInvestorsare:
1. Investmentstrategy–Itisintendedthatthefocuswillbeoninvesteecompaniesthat:(i)tradefromfreehold
premises(e.g.healthclubs,children’snurseries,etc).Thesetypesofbusinessesprovidealevelofprotection
compared to companies with no tangible assets; and (ii) operate intherenewable energysector (e.g.solar,
anaerobicdigestion,etc)andusuallybenefitfromUKGovernmentsubsidies.
2. Exit opportunities – The Directors intend to give Investors the opportunity to either exit or retain their
investmentsintheCompanyinapproximatelysixyears,subjecttoliquidityandmarketconditions.
3. Keytaxbenefits
30%incometaxrelief–isavailableontheamountsubscribedupto£200,000pertaxyear,providedtheG
Shares are held for at least five years. Tax reliefs are subject to change and their value depends on
individualcircumstances.
Taxfreedistributionsandcapitalgains.
4. AVCTforincome–TheBoardhasastatedobjectiveofpayingannualdividendsofatleast5pperGShare.
In order to invest pleaseread the Prospectus andthencomplete the Application Formset outattheend ofthis
document.IfInvestorshaveanyquestionsregardingthisinvestmenttheyshouldcontacttheirfinancialadviser.For
questions relating to an application, please telephone Downing on 02074167780. Investors should note that no
investmentadvicecanbegivenbyDowningandtheirattentionisdrawntotheriskfactorssetoutonpage1ofthis
document.
Yourssincerely
HughGillespie
Chairman
2