Investment Policy

Edge Performance VCT plc (“Edge Performance VCT” or the “Company”) offers the opportunity to invest in the entertainment and media industry in a broad range of companies (thereby diversifying risk), and seeks to allow investors to take advantage of VCT tax reliefs while combining the features listed below.

I Share Fund

Edge Performance VCT is seeking to achieve: high targeted returns, downside risk protection and liquidity.

The Company will balance VCT-qualifying investments with a high level of capital protection with other VCT-qualifying investments where the potential for significantly higher returns justifies a lower level of capital protection; the intention is that the investor’s risk is thereby minimised, underpinning the return to the investor of up to 70p per Share (i.e. the investor’s net cost of investment, assuming 30% income tax relief).

H Share Fund

Edge Performance VCT is seeking to achieve: growth, an annual yield for investors, risk reduction and liquidity.

The Company is targeting building to a consistent tax-free annual dividend yield for investors. To align the interests of Edge Investments (the “Investment Manager”) with this objective, the Investment Manager’s performance fee is payable only if cumulative dividends are at least 7p per H Share per year on average (i.e. a yield of at least 10% of the investor’s net cost of investment) and the net asset value per H Share grows. In the early years of the H Share Fund, the Company is seeking to pay out annual dividends of 3.5p per H Share per year (a 5% yield), while the anticipated returns from VCT-qualifying investments start to grow.

The Company will invest at least 70% of the H Share Fund in VCT-qualifying investments, using risk reduction strategies wherever available; the intention is that the majority of any gain made from realisation of VCT-qualifying investments will be distributed to H shareholders, to maintain and improve the H shareholders’ yield, with the remaining proceeds of realisation being reinvested in further VCT-qualifying investments, in order to drive compound growth for the H shareholders.

Asset allocation

Each of the Share Funds will initially be invested in a range of fixed income securities, cash and cash equivalent assets, offering a high degree of capital preservation.  Up to 30% of each Share Fund will remain in such investments, while the balance will be realised to fund the making of VCT-qualifying investments.

In instances where more than one of the Company’s Share Funds invests in a given portfolio business, the Company will, where practicable, arrange or rearrange the structure of the investment, so that each of the participating Share Funds holds, pro rata to the amount invested by it, the same investment instruments. This approach is intended to ensure that, where the value of a portfolio business changes, that change is reflected, proportionately, to the same extent across all of the participating Share Funds, where appropriate.

In relation to the H Share Fund, the Company will seek to make VCT-qualifying investments which the Company believes are capable of generating an appropriate level of growth or return.

In relation to the I Share Fund, the Company will balance investments with a high level of capital protection, ideally with contractual revenues or capital guarantees from financially sound counter-parties, with other investments where lower capital protection offers significantly higher potential returns. Through the use of this blended investment strategy:

  • the intention is that the shareholder’s risk is thereby minimised, underpinning the return to the shareholder of up to 70p per Share (i.e. the shareholder’s net cost of investment, assuming 30% income tax relief); and
  • the targeted tax-free return is 130p per 70p invested (assuming tax relief at 30%, equivalent to a return of 160p per 100p invested).

VCT-qualifying investments will normally be made up of ordinary shares or other eligible shares (as defined under VCT rules) in the investee company, together with, wherever practicable, loan stock or other loan finance and/or preference shares.

Risk mitigation

Wherever possible, the portfolio investments will be made through loan finance as far as is permitted under VCT rules, which should provide additional capital protection.

Borrowings

It is not intended that the Company will incur borrowings to fund its operations, although the Company may, under its articles of association, borrow in aggregate an amount up to 50% of its ‘Adjusted Capital and Reserves’ (as defined in the Company’s articles of association, being the aggregate of the Company’s paid up share capital and the amount standing to the credit of the consolidated capital and revenue reserves of the Company, after adjustments, including for tax and distributions, and such other adjustments as the Company’s auditor may consider appropriate).

VCT status and maximum exposures

The Company must be approved by HM Revenue and Customs in order to retain its venture capital trust status. The conditions which must be satisfied to retain such status include the restriction on the maximum exposure of the Company that not more than 15% by value of the Company’s investments can be held in a single company or group (other than a VCT). The Company will not exceed this level even in the event of an increase in the limit imposed by VCT rules.

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