Finely Crafted Investments. Amati AIM IHT Portfolio Service DDQ

Transcription

1 Finely Crafted Investments Amati AIM IHT Portfolio Service DDQ

2 31 August 2017 Fund Information AMATI AIM IHT PORTFOLIO SERVICE DDQ R I S K WARNING Investment in smaller companies can be higher risk than investment in well-established blue chip companies. Portfolios investing significantly in smaller companies can be subject to more volatility due to the limited marketability of the underlying asset. Amati, in its capacity as discretionary investment manager, will select stocks which it expects to qualify for BPR, but it cannot guarantee 100% of the portfolio will be exempt from IHT after 2 years, nor that the qualification rules as set out by HMRC will not change in future in a way that affects the status of individual holdings. Any investment in equities is subject to risk, and smaller companies can involve more risk than larger companies. Illiquidity means that buying and selling portfolio holdings may take time, and in a worst case scenario companies could be delisted from AIM making them very difficult to deal in. This investment product places your capital at risk and you may not get back the full amount invested. Tax treatment may be subject to change and depends on the individual circumstances of each investor. The availability of tax reliefs also depends on the investee companies maintaining their qualifying status. Neither past performance nor forecasts are reliable indicators of future results and should not be relied upon. Unquoted or smaller company shares listed on AIM are likely to have higher volatility and liquidity risks than other types of shares quoted on the London Stock Exchange Official List. This content is not intended to constitute investment, tax or legal advice. Investors should consult their professional financial adviser to determine the suitability of this investment before they proceed.

3 Amati AIM IHT Portfolio Service DDQ Page 1 F U N D I N F O R M AT I O N Amati AIM IHT Portfolio Service Discretionary Investment Manager Amati Global Investors Limited Custody & Administration BPR Adviser Website Benchmark Index James Brearley & Sons Ltd Philip Hare & Associates LLP Numis Alternative Markets Total Return Index Investment Type Investment Objective Sector Exit Strategy Portfolio Type ISAble? Portfolio Growth Diversified Portfolio Clients can exit the investment by giving three months notice Standardised portfolio of stocks, not bespoke to any client Yes - no extra charge Pooled Investment? No - shares held on client s account M A I N F E A T U R E S OF B U S I N E S S P R O P E R T Y R E L I E F ( B P R ) For fully qualifying investments, 100% IHT exemption on share transfers following the shareholder s death Shares must have been held for at least two years, and must be inherited as shares, so it is advisable to check that the client s will makes this clear The relief can be restricted where the company owns excepted assets not used for the purposes of the trade Shareholdings must be in companies whose businesses are not wholly, or mainly, that of dealing in securities; land and buildings; or the making and holding of investments

4 Page 2 31 August 2017 F U N D M A N AG E M E N T T E A M Fund Managers Dr Paul Jourdan, Douglas Lawson & David Stevenson Length of tenure on fund 29 August 2014 Location of Manager & Team 18 Charlotte Square, Edinburgh EH2 4DF F EES & C H A RG E S Minimum Investment 50,000 Minimum Top-Up Investment Investment Management Fee Administration and Custody Charges Initial Charges Adviser Charges None Annual 1% plus VAT on portfolio value, paid monthly in arrears, deducted from client account (includes all dealing fees). Annual 0.3% on portfolio value, subject to a 120 minimum and 3,000 maximum, paid quarterly in arrears. Annual 35 nominee fee. HMRC-approved probate valuations 25. None As agreed between the client and financial adviser K EY DATA As at 31 August 2017 AUM 4.6m Number of Stocks 36 Market Capitalisation Range 97m - 2.8bn Weighted Average Market Capitalisation 591m Weighted Average Profit Before Tax 13.7m Weighted Average Forward P/E 24.9x Estimated Dividend Yield 1.6% Total AUM in UK Smaller Companies 181.1m

5 Amati AIM IHT Portfolio Service DDQ Page 3 W H A T R E S O U R C E S A R E A V A I L A B L E TO T H E M A N A G E R? Over many Amati has developed its own browser-based research system: Amati Connex. Notes of every phone conversation and m e e t i n g w e h a v e w i t h companies, brokers and advisers are logged in this system alongside research. The result is that we have all information and analysis on the universe of companies that we follow logged in one system, from where it can be retrieved expediently. The major third party systems we use include Fidessa for real time market data; FactSet for company analysis, screening and research; and StatPro for portfolio attribution and risk analysis. Robinson Hare provides advisory services to Amati on the BPR status of prospective holdings, and issues an annual monitoring report on the BPR status of the portfolio. It also advises on material transactions undertaken by portfolio companies, to determine whether a corporate event would prejudice the continuing BPR status of the holding. H OW A R E I N V E S T M E N T S I D E N T I F I E D? The management of the fund is team based, and the research and portfolio management functions are combined. This approach allows broader coverage of markets and stocks and enables the team to develop an in-depth knowledge of a prospective investee company prior to initiating a position in the stock. Although there is inevitably some crossover, due to the collaborative nature of the process, individual fund managers assume broad responsibility for originating deals and performing the initial due diligence across the following industry sectors: Paul Jourdan: Oil & Gas; Basic Materials; Financials; Health Care. Douglas Lawson: Ser- Consumer Goods; Consumer vices; Telecoms; Technology. David Stevenson: Construction; Industrials; Support Services; Real Estate; Utilities. We have extensive experience of investing in UK quoted smaller companies. Our investment process is first and foremost driven by company research, involving a bottom up, stock picking approach. Ideas are generated internally through our own

6 Page 4 31 August 2017 H OW A R E I N V E S T M E N T S I D E N T I F I E D? ( C O N T.) research and also introduced to us by our sell-side contacts. We value input from the sell-side, maintaining a variety of broker and analyst relationships and accumulating the knowledge of their individual strengths and weaknesses. If possible, most offers of management contact are accepted, in order to effectively monitor companies and sectors. We average more than 80 company meetings, conference calls and analyst discussions per month (around 7 per manager per week). We selectively undertake site visits. Following contact, the fund managers will carry out their own research using external information such as prospectuses, annual reports, broker research notes and 3rd party industry sources, plus internally generated analytical tools and models. Documentation relating to the research process is recorded on Amati s proprietary Connex research database, and available for peer review. We focus on high quality, mature, structural growth stocks at the higher end of the AIM liquidity spectrum which fit into the following categories: Owner-Managed Family Significant founder stake Prudent management Attractive growth Long term family ownership aligned with professional management Established brand Covered and growing dividend Established Technology Profitable Cash generative Clear and unique selling proposition Strong barriers to entry Income and Special Situations Attractive yield Well covered dividend Defensive qualities Non-cyclical We seek to avoid companies with the following characteristics: Aggressive accounting flattering revenues, profits and finances G r o w t h b y u n n e c e s s a r y acquisition, distorting costs with no underlying EPS enhancement C o n s i s t e n t l y r e p o r t i n g exceptional and restructuring costs Poor profit/cash conversion Competitive threats from larger c o m p a n i e s w i t h g r e a t e r operating scale or from new technologies Repeated cash calls Significant liabilities debt, lease, deferred considerations, pensions Lumpy, irregular income Fashion stocks

7 Amati AIM IHT Portfolio Service DDQ Page 5 H OW A R E I N V E S T M E N T S I D E N T I F I E D? ( C O N T.) A variety of valuation measures are used, including Market Cap and Enterprise Value based ratios, and these are compared across the peer groups and in relation to growth profiles. For better followed companies we will use brokers forecasts and models as our starting point, and as a means of analysing the expectations in the market. Broker research, produced by reputable analysts, is normally referred to as part of the research process, acting as a channel for information and opinion, but is never the sole determining factor of our investment decision. We always like to form our own views on c o m p a n y m a n a g e m e n t a n d business quality, and will use our own industry connections to sense check an investment case. H OW IS T H E P O R T F O L I O C O N S T R U C T E D? At present we have a single Model Portfolio of BPR-qualifying AIM stocks, which provides the template for the discretionary management of portfolios held by clients of wealth managers and other intermediaries. The stocks chosen for the Model Portfolio are those that to the best of our knowledge are likely to qualify for BPR; as such they could potentially provide up to 100% inheritance tax relief after a holding period of two years (subject to the final determination of HMRC). Client portfolios can also be held in an ISA wrapper, thus additionally providing freedom from income tax and capital gains tax. For client portfolios not held in an ISA wrapper, CGT computations are available on request. The Amati AIM IHT Portfolio Service targets a diversified portfolio of between holdings in well-financed and profitable companies, each with 2-5% weightings. Dividends received from portfolio companies are reinvested and portfolio turnover is very low, and we avoid short term trading calls. While we aim to beat the benchmark (Numis Alternative Markets TR) over the medium to long term, we are b e n c h m a r k a g n o s t i c i n t h e management of the portfolio, where t h e o v e r a r c h i n g i n v e s t m e n t philosophy is one which foregrounds income and wealth preservation as much as capital growth. All due diligence carried out by individual managers is subject to peer review, before a final buy or sell investment decision is made. Consequently portfolio construction reflects a consensus, team-based view. We use our own systems to model category and sector exposures, real time stock weightings, top twenty investments, liquidity exposure and market cap distribution. Our aim is that the portfolio as a whole is well-diversified.

8 Page 6 31 August 2017 W H A T P R O M P T S T H E M A N A G E R TO S E L L? There are a number of factors influencing sell discipline within the investment process. Portfolio holdings are under constant re-appraisal in the light of market dynamics and we will adjust position sizes to maintain appropriate weightings, although we would rarely allow a holding to exceed 5% of the fund. Although the presumption is always in favour of a medium to long term holding period, fundamental issues with a portfolio company, including signs of poor corporate governance or where the original investment premise no longer applies, would prompt an outright sale. Another key selling influence is competition for portfolio space within a normal range of holdings. Existing positions will be substituted when they offer a poorer risk-reward ratio than new ideas, thereby maintaining strong conviction views within the portfolio. A deteriorating sector or macro o u t l o o k w i l l a l s o b e a n environmental factor determining when to sell or reduce holdings.

9 Amati AIM IHT Portfolio Service DDQ Page 7 C U M U L AT I V E P E R F O R M A N C E As at 31 August mth 3 mths 6 mths 1 yr 2 yrs Since Launch# AIM IHT* INDEX** *Amati AIM IHT Model Portfolio, dividends reinvested, net of AMC (manual adjustment for Sep 14 Feb 15), platform fees and trading costs, excluding advisory charges; **Numis Alternative Markets Total Return Index; #29 August 2014 Sources: Amati Global Investors and Numis Securities Past performance is not a reliable indicator to future performance. P E R F O R M A N C E GRAPH Source: Amati Global Investors as at 31 August Amati AIM IHT Portfolio Service* Numis Alternative Markets Total Return Index** *Amati AIM IHT Model Portfolio, dividends reinvested, net of AMC (manual adjustment for Sep 14 Feb 15), platform fees and trading costs, excluding advisory charges **Numis Alternative Markets Total Return Index Sources: Amati Global Investors and Numis Securities Past performance is not a reliable indicator to future performance.

10 Page 8 31 August 2017 A M AT I ORG A N I S AT I O N A L STR U C T U R E C O R P O R AT E G OV E R N A N C E W E A R E T I E R 1 S I G N A T O R I E S TO T H E U K S T E WA R D S H I P C ODE

11 Amati AIM IHT Portfolio Service DDQ Page 9 F U N D M A N AG E M E N T T E A M How long has the incumbent manager been responsible for the fund? B I O G R A P H I E S Paul Jourdan is a n a w a r d - winning fund manager, with a strong track record in small cap investment. He co-founded Amati Global Investors following the management buyout of Noble Fund Managers from Noble Group in 2010, having joined Noble in 2007 as Head of Equities. His fund management career began in 1998 with Stewart Ivory, which was taken over by First State in 2000 at which time Paul became manager of Douglas Lawson co-f o u n d e d Amati with Paul Jourdan. Prior to this he worked in corporate finance and private equity, initially focusing o n m i d d l e m a r k e t U K private equity and listed company M&A at British Linen Advisers, and latterly as an investment manager in David Stevenson joined Amati in In 2005 he was a cofounding partner of investment b o u t i q u e C a r t e s i a n Capital, which m a n a g e d a range of retail and institutional UK equity funds in long only and long/short strategies. Prior to that he was Assistant Director at SVM, where he also managed equity products including the UK Since August 2014 what is now TB Amati UK Smaller Companies Fund. In early 2005 he launched what is now Amati VCT plc and he also manages Amati VCT 2 after the investment management contract moved to Amati Global Investors in In September 2014 Amati launched the Amati AIM IHT Portfolio Service, which Paul comanages with Douglas Lawson and David Stevenson. Prior to 1998 Paul worked as a professional violinist, including a four year period with the City of Birmingham Symphony Orchestra. He is CEO of Amati and a Director of Sistema Scotland. the private equity team at Noble. Douglas has co-managed the TB Amati UK Smaller Companies Fund and Amati VCT since 2009, Amati VCT 2 since 2010 and the Amati AIM IHT Portfolio Service since Douglas started his career at Ernst & Young in London, where he qualified as a Chartered Accountant in He is a Director of Amati. Opportunities small/midcap fund which was ranked top decile for the 5 year period from inception to David started his career at KPMG where he qualified as a Chartered Accountant. He latterly specialised in corporate finance, before moving into private equity with Dunedin Fund Managers. David has co-managed the TB Amati UK Smaller Companies Fund and the Amati VCTs since 2012, and the Amati AIM IHT Portfolio Service since 2014.

12 Page August 2017 O T H E R F U N D S T H E M A N A G E M E N T A R E R E S P O N S I B L E F O R As at 31 August 2017 Amati VCT Amati VCT 2 TB Amati UK Smaller Companies Fund 57.3m 54.0m 75.5m Does the manager have a personal interest in the fund? Yes I N D U S T RY A WA R D S C O N T A C T D E T A I L S AT A M A T I G L O B A L I N V E S T O R S L TD Name: Rachel Le Derf Contact Number: Contact Further information on the IHT Service rachel.lederf@amatiglobal.com amatiglobal.com/aiht.php