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I founded Vin-X with a team of investment and wine specialists as a result of my own experience of investing in wine. The potential of the market is significant, particularly when compared with stocks and shares, and yet for many this is not well understood. The analytical and economic treatment of fine wine
Liv-ex has made 12.5% over the last 24 years compound, that beats virtually everything including gold and oil. For me its a good investment.
Austin Healey, England, Leicester and British Lions rugby player, July 2012
as an investment class employed at Vin-X improves an investors ability to access wines with the potential to deliver strong returns. Vin-X has proven success in outperforming the market trend by at least 10 per cent in 2011. We keep all of our clients informed about the key news and events in the industry which may affect price, update on specific performance and ultimately assist with the final sale of their wine. I hope you find the information enclosed of interest and that you are also inspired to get involved in this rewarding investment class. Yours truly
www.vin-x.co.uk
100 [invested in 1952] could today be worth as much as 478,000 tax free
www.thisismoney.co.uk, June 2012
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Investors in fine wine see 10% annualized returns over the past 5 years compared to FTSEs 0.03%
Emma Wall, The Telegraph, March 2012
My Vin-X consultant has provided excellent professional support with my fine wine investments and his strong knowledge of the market has given me a lot of confidence as a relatively new investor in fine wine.
Mr Power, Ireland, April 2012
Performance The global fine wine market was valued in November 2011 by Liv-ex, the industry exchange, as having annual worth of US$4bn. In terms of the focus of that value, it is primarily on the top 25 chteaux in Bordeaux and the predominance of value sits with the five First Growths plus Super Seconds and premier Right Bank wines, which are thought to generate as much as 95% of the secondary market trading in fine wine. Fine wine consistently delivers annual double-digit returns and its historical performance over the medium to long term has been outstanding when compared with many traditional and alternative asset classes.
Brand The wine investment market comprises the finest Bordeaux wines, the key brands are the First Growths and a number of the Super Seconds. Such is the value of brand within this sector that much of the market dynamic may be influenced by one particular wine. For example Chteau Lafite-Rothschild led the wine markets bull run post February 2008 and achieved extraordinary prices during 2009 and 2010. Lafite saw its prices decline in 2011 affecting the total market value.
Supply and demand A further dynamic of the fine wine market is the finite amount of commodity available. This supply reduces further over time as wine is consumed. Contrast this with the varying influences of demand within the market. In some circumstances volume may have declined in recent years in the traditional markets of the US and Europe, however new entrants from the growth economies of China, Brazil, Russia and India have created significant demand with reported 40% of production in some key brands now being taken up by consumers in Asia.
Vintage appeal Generally, the finest wines from the most outstanding vintages have delivered the best returns to investors. There have been some outstanding vintages over time and recently 2009 and 2010 have been critically acclaimed as very significant.
The role of the critic Fundamentally the market expects the great brands to produce the best wines, but ultimately the final tick in the box is the independent critical view by a handful of industry experts from around the globe. Currently the most influential of these is Robert Parker Jnr.
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Wine investment monitored over time has outperformed FTSE, S&P, gilts and in certain periods even outstripped oil and gold.
6%
8%
10%
12%
14%
16%
RETUrN
Compound annual growth rate
GOLD FINE WINE SILVEr ArT EQUITIEs (FTSE 100)
Source: www.liv-ex.com 4th July 2012
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MArKET AVErAGE
30% 30% 25% 15% 10% 5% 0% -5% JAN - 05 OcT - 93 JAN - 99 JAN - 02 JAN - 96 APr - 04 APr - 98 OcT - 05 JAN - 08 JAN - 93 JAN - 11 JUL - 94 APr - 95 jUL - 97 APr - 07 jUL - 06 OcT - 11 OcT - 99 OcT - 02 OcT - 96 OcT - 08 JUN - 12 jUL - 00 APr - 01 jUL - 03 APr - 10 jUL - 09
LONG-TErM AVErAGE
Source: www.liv-ex.com July 2012
When is the right time to buy? The Liv-ex Investables Index tracks 200 wines from 24 top Bordeaux chteaux, with data going back as far as January 1988, and mirrors the performance of a typical wine investment portfolio. The chart above shows the five-year compound annual growth rate (CAGR) over the life of the Liv-ex Investables Index. Key points include: The long term average CAGR is 14.9% Over the last 24 years the CAGR has been 12.5% For 60% of the time returns have exceeded 10% For 75% of the time, returns have averaged more than 5% CAGR in July 2012 was circa 4% - the lowest it has been since 2006 The CAGR has only been negative once.
Historically, when investing at a time when the previous five years had returned a CAGR of less than 5%, the average compound return achieved in the following five years was 17.6%.
Vin-X performance Vin-X clients benefit from a market-leading, professional service adopting many of the practices and systems operated by a stockbroker. The team includes both investment and wine specialists and analytically appraises the market opportunities in line with economic, political and wine specific factors. The Vin-X wine selection strategy for clients has meant that the collective client portfolio beat the market average by 11% in 2011.
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History The Bordeaux Wine Official Classification of 1855 which guides on wine quality was established during the 1855 Exposition Universelle de Paris when Emperor Napolean III requested a classification system for Frances finest Bordeaux wines.
The First Growths The premier investment wines come from the five greatest wine producing chteaux in the world all located on the Left Bank of the River Gironde: Chteau Lafite-Rothschild Chteau Latour Chteau Margaux Chteau Mouton-Rothschild Chteau Haut-Brion
Parkers Magical 20 Tipped by critic Robert Parker Jnr. as the hottest wine investments for the future and some Vin-X favourites: 1. Ch. Cos dEstournel 2. Ch. Pontet-Canet 3. Ch. Pichon Lalande 4. Ch. Loville-Poyferr 5. Ch. Loville Las Cases 6. Ch. Palmer 7. Ch. Malescot St-Exupry 8. Ch. Pape-Clment 9. Ch. Haut-Bailly 10. Ch. Anglus 11. Ch. Trotanoy 12. Ch. La Conseillante 13. Ch. Pichon Baron 14. Ch. Lynch-Bages 15. Ch. Smith-Haut-Lafitte 16. Ch. La Fleur-Petrus 17. Ch. Clos Fourtet 18. Ch. Rauzan-Sgla 19. Ch. Brane-Cantenac 20. Ch. Le Gay
The Big 9 Along with the First Growths listed above the following four chteaux make up The Big 9, these represent the most valuable and frequently traded investment wines in the secondary market and are traditional investor favourites: Chteau Cheval Blanc Chteau Ausone Chteau Le Pin Chteau Petrus
For more information on these wines, please visit the Vin-X website at www.vin-x.co.uk or speak to a Vin-X consultant on 0203 384 2262.
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CLOCKWISE, fROM ABOVE: CHTEAU LA MIssION HAUT-BrION; CHTEAU MArGAUX; THE cELLArs Of CHTEAU LATOUR; CHTEAU PONTET-CANET.
Vin-Xs wine selection policy is geared to Parkers scoring system and most fine wines offered to clients have a score of 95 points or more.
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Value Added Tax and Duty Generally it is understood that, whilst stored in a Government Bond warehouse, wine does not incur VAT or Duty payments, these are chargeable once the wine is shipped out of Bond. VAT and Duty costs will be charged at the rates prevailing at the time of transfer from Bond.
Chattels exemption This exemption is based on value, i.e. where wine is sold for proceeds of less than 6,000, no taxable gain will arise. The policy objective behind the exemption is presumably to prevent a taxpayer having to make detailed calculations every time any small asset is disposed of. However, it may assist the wine investor in making small tax effective disposals to take advantage of the exemption. Where the profits made on wine investment sales do attract CGT, the investor will normally pay the current 28% rate on any gain after taking into account the CGT annual exemption of 10,600.
Income Tax A defining position in regards to attracting Income Tax is whether the investor is perceived to be trading in wine as an asset, i.e. acquiring wine with the intention to trade on and take profit. In this case one should refer to case law where it exists as well as having regard to what are referred to as the the badges of trade. An interesting interpretation in regards to the Income Tax treatment is the potential to view not just profit but also loss, which could potentially be tax deductible. If this stance was adopted, however, future investment would naturally be presumed to fall into the activity of trade and Income Tax would therefore be deemed to be applicable.
Inheritance Tax Upon death, Inheritance Tax (IHT) will sadly be charged on wine investments, however as with all IHT planning steps can be taken to manage this in a tax efficient manner with advice from your tax advisor.
Companies Companies have the potential to use retained earnings to invest in wine and enjoy the potential tax benefits, appropriate advice should be sought from a tax advisor.
Capital Gains Tax Investment in fine wine should normally be exempt from exposure to Capital Gains Tax (CGT) due to HMRCs treatment of Wasting Assets and Chattels.
Conclusion Wine enjoys favourable treatment compared to other tax efficient investments. One significant advantage is that it can be liquidated, one way or another, quickly and there are no penalties for early encashment.
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Wine selection strategy and managing your portfolio The Vin-X team includes analysts, financial experts and wine specialists, collectively they review economic, political and financial information alongside wine industry specific data such as individual brand performance, climatic effect and supply and demand dynamics to determine the most promising opportunities for our clients. Our selection strategy has outperformed market trend to date. Our specialist brokers work with individual clients to assemble a collection of wines in line with their investment goals in terms of capital to invest, investment term and attitude to risk.
Our specialist brokers work with individual clients to assemble a collection of wines in line with their investment goals
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As a registered Charity, it is extremely important to the Victoria Foundation and its trustees that our investments are expertly and transparently managed. We have found that Vin-X offer a very professional level of service which in many ways emulates the service that one could expect from a good quality advisory stock broker. This has included timely reports both regular and ad hoc, valuations, portfolio structuring and buying advice.
Graham Ball, Chairman of the Board of Trustees, The Victoria Foundation, May 2012
En primeur Dependent on the industry critics view and our own analysis we may on occasion recommend that clients invest in wines en primeur, i.e. buying wine at the earliest possible stage, in barrel. Typically wines are promoted through this Bordeaux invented system in the Spring following the previous Autumn harvest. En primeur wines are launched onto the market with scores from key critics and this is the markets first indicator of value potential. Many merchants may be obliged to take a sizeable allocation at this stage, as an independent broker Vin-X is free to guide its clients only into the best opportunities. Buying en primeur is deemed to be highly speculative as it is, in essence, buying a future in wine and is therefore seen to be a higher risk proposition. The benefits are: P rice - typically wine will be bought at the lowest market price P rovenance - the wine is still at chteaux and when ready will be delivered to the clients bonded storage facility A ge - acquiring at the earliest stage means you have all the upside potential of the maturation process and associated growth in value S econdary market - There is a guaranteed secondary market trigger when the en primeur wine goes physical, i.e. the wine is scored again by critics and bottled and shipped. From this point they are acquired in the secondary market.
London City Bond provide an In-Bond storage service, accordingly no VAT or Duty payments on the wine are charged until the wine is removed from bonded storage. Client wines are recorded and labelled with HM Revenue & Customs approved rotation numbers and logged to the clients name. Vin-X provides a custodial oversight to client accounts ensuring the correct general management of the service but ownership title of the wine always rests with the client. The independent review of client wines by Knill James verifies the ongoing correct storage and treatment of Vin-X client wines. This service is new to the industry and we believe is an essential measure to protect investors in fine wine.
The Vin-X management fee The management fee encompasses the following for each wine acquisition: Analysis, selection and sourcing of fine wine Provision of bonded storage and insurance for three years from purchase Market information essential for investors Dedicated fine wine broker to guide and support the client through the investment process. The fee is 5% of the purchase price of the wine per year for three years fixed, i.e. 15% payable on purchase. VAT is charged on the management fee in accordance with English Law. Should the wine be held in bonded storage beyond the first three years covered in the management fee further charges would apply to cover the ongoing service detailed above. For more information, please speak to a Vin-X consultant on tel no. 0203 384 2262 or visit our website www.vin-x.co.uk.
Wine storage Vin-X client wines are stored with one of the industry leading specialists for the secure storage of fine wine, London City Bond at their Vinotheque facility at Burton on Trent. Storage conditions are carefully managed to ensure the optimum environment for wine to be stored, protecting the ongoing provenance of the wine and accordingly its financial value.
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We recommend that you consider your wine investment as a medium to long term investment of at least 3-5 years.
Are there any risks? All investments carry risk and prices may go down as well as up, fine wine is no exception. Fine wine investment prices vary so always check that you are paying a fair price. Vin-X is leading the way to develop a good code of practice across the industry and our operating systems and independent audit of client wines are geared to protect investor interests.
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What are the storage arrangements? The management fee includes 3 years storage at leading bonded warehouse London City Bonds Vinotheque facility. Your wine is held in a dedicated subaccount of the Vin-X custodial master account. Correct storage conditions are essential for protecting the good provenance of the wine and will affect the value of your investment. The payment of VAT and Duty on wine is deferred until such time that the wine is removed from bonded storage.
fee. If you already have a private bonded account, Vin-X can arrange the transfer of any purchases into your own account in bond, however, there may be a handling fee for such transfers.
Can I store my wine at home? Vin-X recommends that investment grade wines are stored in bonded storage for both provenance and Tax purposes. Vin-X will arrange the storage of any wine purchased from Vin-X in a referenced sub account in your name as part of the management
Is there any tax payable on profits? For more information on the tax treatment of fine wine please see page 11 or contact Vin-X for a specialist tax report. In principle fine wine generally qualifies as a wasting asset or chattel in accordance with HM Revenue & Customs guidelines and any profit from sale is exempt from Capital Gains Tax. There may be implications for Income Tax if an investor is deemed to be trading in wine and advice should be sought. Wine stored and then sold on in bond is generally exempt from Duty or VAT charges. There are potential efficiencies for companies who invest in fine wine.
The management fee includes 3 years storage at leading bonded warehouse London City Bonds Vinotheque facility.
How do I sell my wine? Vin-X will either offer a fair market price for the wine or undertake to broker the wine into the market (a target price may be set, but Vin-X cannot be liable to guarantee the level of return). Please note that while Vin-X does not charge any additional commission for brokering client wine, a Liv-ex transaction charge will be passed on. Vin-X clients are also free to sell their investment wines at auction or through any leading wine merchant. It is recommended that the commission charges being made by the seller are checked.
Can I drink my wine? Yes of course, ultimately all wine will be drunk, hence the fundamental supply and demand dynamics of wine as an investment class. But should you prefer to keep your valuable investment wine in storage for the future some great wines are available to drink from our retail wine division, Tipple at www.tipplewines.co.uk. For all Vin-X terms and conditions please go to our website www.vin-x.co.uk
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Our retail wines division Tipple was introduced in 2012 as a result of our growing relationship with producers of fine wines who also had superb wines which didnt have the investment value of their first wines but were extremely special wines available to drink now. We were, at that time, also receiving requests from our Vin-X clients for wines to drink rather than have stored In Bond. As a consequence Tipple was born and now offers a collection of wines that are relatively hard to find on the UK high street. We have broadened our list from our original focus on French wines to encompass New and Old World wines and we will carefully grow this collection over time. Tipple is currently an online service only, however clients of Vin-X that do not have internet access can get information on Tipple wines from their Vin-X consultant and we can arrange the delivery of wine direct to your home. For more information please visit www.tipplewines.co.uk
Forum House, 41-51 Brighton Road, Redhill, Surrey, RH1 6YS Tel: 0203 384 2262 www.vin-x.co.uk