RATHBONES INHERITANCE TAX PORTFOLIO SERVICE Sample Suitability Letter

							RATHBONES INHERITANCE TAX PORTFOLIO SERVICE
Sample Suitability Letter Paragraphs


These statements can be inserted into your “suitability letters” to your clients. They highlight some of
the specific features of the Rathbones IHT Portfolio Service and are intended to support the broader,
generic reasons you may give for recommending an Inheritance Tax Portfolio. The statements are not
intended to be definitive and will need to be tailored to individual circumstances. Please note that
Downing Corporate Finance Limited (“Downing”) does not guarantee that these statements comply
with the requirements for suitability letters. You must ensure you are satisfied that your suitability
letters comply with the FSA’s rules and your own Compliance Department Guidelines.



Generic description

The Rathbones IHT Portfolio Service has been established to build diversified portfolios of small UK
companies for private individuals, with a minimum investment level of £30,000. The investments,
which will be selected by Rathbones’ Venture Capital Trust team, should be exempt from IHT liability
after two years. The overriding objective will be capital growth, with an emphasis on capital
preservation.


Objectives

•   IHT free after two years – to invest in a portfolio of IHT Qualifying Companies, which should
    provide full relief from inheritance tax after two years.
•   Ownership & control – to ensure that the Investor retains full ownership of the investments
    and can withdraw funds from the Portfolio at any time, subject to liquidity.
•   Minimise risk – emphasis will be placed on capital preservation, so companies will be selected
    on the basis of factors such as strength of balance sheet and profitability. Start-up and technology
    companies will generally be avoided.


Taxation – Inheritance tax benefits

Business Property Relief was introduced in the 1976 Finance Act and amended in subsequent years.
Most recently, the November 1995 Budget amended the provisions making it significantly more
attractive to private investors who are concerned about potential inheritance tax liabilities. Under the
amended rules any qualifying investments held for two years or more at the date of death will benefit
from 100% business property relief i.e. their value will effectively be disregarded for inheritance tax
purposes.


Risk Profile

There is an above average risk as the Rathbones IHT Portfolio Service primarily invests in smaller
companies (not ‘blue-chip’ companies), which are quoted on AIM. However, the risk profile should be
weighed up alongside the tax advantages. Risk is also spread through a portfolio of holdings; once
fully invested the portfolio will comprise around 10 stocks in a spread of sectors. The portfolio is also
managed by a team who specialise in investing in AIM quoted companies.
Why Rathbones IHT Portfolio Service?

•   IHT relief after two years
•   Exposure to AIM quoted stocks: While potentially more risky than stocks listed on the main
    market, AIM stocks are typically young entrepreneurial companies with the potential for greater
    returns.
•   Experience: Rathbones, which was established in 1742, now employs over 750 individuals. The
    team managing the IHT portfolios also manage the Pennine AIM VCTs. Rathbones manage more
    AIM VCTs than any other Manager.
•   Active Management: The IHT Portfolio will be actively managed; investments will be purchased
    and sold based on investment considerations, whilst endeavouring to maintain IHT reliefs, where
    possible.
•   Track Record: The IHT Portfolio Service is managed by the same team that is responsible for the
    six Pennine AIM VCTs, the Ethical AIM VCT, and the AIM Distribution Trust, which have raised
    over £100 million. Investors should note that the past performance of the Manager is not a guide
    to the future performance of the IHT Portfolio Service.


About Rathbones

This discretionary investment management service is provided by Rathbone Investment Management
Limited, which is authorised and regulated by the Financial Services Authority. Rathbone Investment
Management has £9.5 billion of clients’ funds under management (as at 30 April 2006).

Rathbones, which was established in 1742, now employs over 750 individuals and has several offices
in the United Kingdom and abroad. Rathbones is a leading provider of discretionary fund management
and wealth management services, offering investment management services for private individuals,
trustees, charities, pension funds and for the professional advisers of these clients. Rathbones
provides tax, trust, financial planning and services through Rathbone Trust Company Limited. Shares
in Rathbone Brothers Plc have been traded on the London Stock Exchange since 1992 and its market
capitalisation is over £450 million (as at 26 June 2006).