Guinness EIS 5. Information Memorandum with Application Form. Sustainable Energy

Transcription

1 Guinness EIS 5 Effective from SEPT 2013 Information Memorandum with Application Form Sustainable Energy Companies with long-term, stable cashflows Investments that qualify for EIS tax reliefs The Service will invest in unquoted securities. Such investments can be more risky than investments in quoted securities or shares and market-makers may not be prepared to deal in them. Unquoted securities may be subject to transfer restrictions and may be difficult to sell. It may be difficult to obtain information as to how much an investment is worth or how risky it is at any given time. Investing in private companies may expose you to a significant risk of losing all the money invested. Before investing, you are strongly recommended to consult an authorised person specialising in advising on investments of the kind described in this document. You should not invest through the Service unless you have taken appropriate independent advice.

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3 Guinness Asset Management Limited Guinness EIS 5 1 Letter to Investors September 2013 Dear Investor, One of my golden rules of investment is never invest for a tax break alone ensure the underlying investment is sound. Our Guinness EIS Service is built on our recognition of the attractive investment characteristics of Sustainable Energy companies: predictable revenues, low technology risk and low correlation with other asset classes. We have lined up some high quality investments in our EIS Service, and are confident our investment objectives can be met. Our fifth EIS offering, Guinness EIS 5 has a first closing on 31 December 2013 and will remain open until final closing on 30 June In addition to the investment returns, investors will benefit from the tax reliefs available through the Enterprise Investment Scheme as the Service will only make EIS qualifying investments. These benefits include 30% income tax relief, capital gains tax deferral and a capital gains tax free disposal for capital profits realised on the sale of any investment, and relief from inheritance tax through business property relief. We are aiming to deliver investment returns to investors of in excess of 1.20 net of all fees (effectively 1.50 including EIS Income Tax Relief) per 1.00 invested. Beyond the financial returns, I believe that the Investments will make an important contribution to improving the sustainability of the UK economy and reducing UK dependence on fossil fuels. We have an excellent team in place to deliver on Guinness EIS 5 s objectives and I encourage you to invest. Yours faithfully Tim Guinness Chairman, Guinness Asset Management

4 2 Guinness Asset Management Limited Guinness EIS 5 Important Notice Please note that certain expressions used in this Notice are defined in the definitions list on pages 4 and 5. This Information Memorandum is issued for the purposes of section 21 of the Financial Services and Markets Act 2000 ( FSMA ) by Guinness Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority and whose registered office is at 14 Queen Anne s Gate, London SW1H 9AA. It is issued solely for the purpose of seeking Subscriptions from potential investors for an investment in the discretionary portfolio investment management service known as the Guinness EIS 5. This Information Memorandum is provided to you on a confidential basis. You may not copy, reproduce or further distribute this Information Memorandum or any of its content to any other person at any time, nor discuss with any other person the proposal in this Information Memorandum without the prior written consent of Guinness Asset Management otherwise than for the purpose of evaluating this investment opportunity. The Investment Manager has taken reasonable care to ensure that all facts stated in this Information Memorandum are true and accurate in all material respects at the date stated on this Information Memorandum and that there are no other material facts, or opinions, which have been omitted, which would make any part of this Information Memorandum misleading. The Investment Manager accepts responsibility accordingly. However, where information has been obtained from third party sources, the Investment Manager cannot accept responsibility for the completeness or accuracy of that information and potential investors must form their own opinion as to the reliance they place on that information. You will need and be expected to make your own independent assessment of the Service and to rely on your own judgement (or that of your independent financial adviser) in respect of any Subscription you may make to the Service and the legal, regulatory, tax and investment consequences and risks of doing so. The Service will invest in unquoted securities. Such investments can be more risky than investments in quoted securities or shares and market-makers may not be prepared to deal in them. Unquoted securities may be subject to transfer restrictions and may be difficult to sell. It may be difficult to obtain information as to how much an investment is worth or how risky it is at any given time. Investing in private companies may expose you to a significant risk of losing all the money invested. Before investing, you are strongly recommended to consult an authorised person specialising in advising on investments of the kind described in this Information Memorandum. You should not invest in the Service unless you have taken appropriate independent advice. Guinness Asset Management, its directors and employees do not accept any liability for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any information or opinions contained herein or in any other communication in connection with an investment through the Service. However, this disclaimer does not affect any liability which Guinness Asset Management may have in relation to the Service under the FSMA, regulations made under the FSMA or the FCA rules. The Investment Manager may promote the Service outside the United Kingdom (although this Information Memorandum will not itself be considered to amount to an offer of the Service or of the Investment Manager s portfolio management services in any jurisdiction in which the making of such an offer would for any reason be unlawful, either generally or in specified circumstances). However, any prospective investor outside the United Kingdom, prior to investing, is expected to assure him- or herself of the consequences under the law of his/her place of residence of an application to invest through the Service. Investors resident in overseas jurisdictions should note that representations in this Information Memorandum with respect to taxation and tax advantages are only intended to apply in relation to typical UK-resident individuals. No representation is made that these or any other such tax advantages apply for the benefit of Investors from overseas. Any application to invest through the Service may only be made and will only be accepted subject to the terms and conditions of this Information Memorandum (which includes the Investor Agreement contained in this Information Memorandum). In compliance with the provisions of the FCA Rules that implement the EC Distance Marketing Directive, which will apply to you in circumstances where your subscription to the Service has not resulted from a face-to-face meeting with either the Investment Manager or your own independent financial adviser, the Investment Manager specifically draws to your attention that you have a right to cancel your subscription. Your rights in this respect are more fully set out in the Investor s Agreement which forms part of this Information Memorandum. By receiving this Information Memorandum you agree to be bound by the foregoing conditions and restrictions. Investing through the Service is speculative and involves a significant degree of risk. The attention of prospective Investors is drawn to the contents of the section in this document entitled Risk Factors.

5 Guinness Asset Management Limited Guinness EIS 5 3 Contents Letter to Investors... 1 Important Notice... 2 Contents Definitions... 4 Investor Factsheet... 6 Investment Opportunity What do we mean by Sustainable Energy?... 8 UK Sustainable Energy Subsidies Investment Strategy EIS Tax Reliefs The Investment Manager The Guinness EIS Team Investment Process Investor Information Guinness EIS Investments Directory Risk Factors Guinness Asset Management Frequently Asked Questions Investor s Agreement Schedule 1 Investment Objective and Restrictions Schedule 2 Fees and Expenses Application Form and Suitability Questionnaire Name of EIS Service Guinness EIS 5 Investment Focus Target Size Sustainable Energy companies that qualify for EIS Relief 10 million Closing Date Initial Close: 31 December 2013 Second Close: 4 April 2014 Final Close: 30 June 2014 Target Investment Period For Subscriptions received by 1 April 2014, the Investment Manager will endeavour to invest these by 5 April Subscriptions received after this date will be invested in the 2014/15 tax year. Minimum Individual Subscription 10,000 Investment Manager Guinness Asset Management Limited Expected Life of Service 4 to 5 years Regulatory Guinness EIS 5 is a discretionary managed service, and is not an unregulated collective investment scheme within the meaning of the Financial Services and Markets Acts Guinness Asset Management Limited T: Queen Anne s Gate F: London SW1H 9AA E: eis@guinnessfunds.com United Kingdom W: Phone calls may be recorded

6 4 Guinness Asset Management Limited Guinness EIS 5 Definitions Administrator Applicable Laws Application Form Associate Associated Parties Business Property Relief or Inheritance Tax Relief Capital Gains Tax Deferral Relief or CGT Deferral Relief Carry Back Relief CGT Closing Date EIS EIS Income Tax Relief EIS Qualifying Company EIS Relief EIS Three Year Period Fees and Expenses Financial Intermediary Financial Intermediary Fee The Share Centre Limited, in its capacity as a provider of administration services and certain other services in relation to the Service; Relevant UK laws and regulations, including the FCA Rules; An application form to participate in the Service to be completed by a prospective Investor in the form set out at the end of this document; Any person or entity that controls or is controlled by the Investment Manager. Control refers to the ability to exercise significant influence over the operating or financial policies of any person or entity; Associated Parties include relatives, business partners and trustees of certain settlements where you or a relative are a settlor or beneficiary. Relatives are spouses and civil partners, lineal ancestors and descendents (e.g. parent, grandparent, great grandparent, child). Brothers and sisters are not counted as Associated Parties; Relief from IHT pursuant to sections Inheritance Tax Act 1984; Relief by way of deferral of CGT (Section 150C and Schedule 5B of the Taxation of Chargeable Gains Act 1992); Income tax relief in respect of a subscription made in the 2013/14 tax year into an EIS Qualifying Company up to 1,000,000 may be carried back to the 2012/13 tax year to set against an individual s income tax liability for that year, where income tax relief may be claimed at up 30% of the amount invested, save to the extent that income tax relief has already been claimed under the EIS for the 2012/13 tax year. Capital gains tax; A date by which Subscriptions may be accepted by the Investment Manager for the creation of Portfolios; Enterprise Investment Scheme, as set out in sections 156 to 257 of the Income Tax Act; Relief from income tax available under the EIS on subscription for shares; A company that meets the requirements for EIS Relief and Capital Gains Deferral as set out in section 180 Income Tax Act 2007; Relief from income tax available under EIS, related CGT relief on disposal and Loss Relief; The period commencing when a subscription for shares is made in an Investee Company, and ending three years after that date, or three years from the commencement of the Investee Company s trade, whichever is later; The fees and expenses set out in Schedule 2 to the Investor s Agreement on page 33 of this Information Memorandum; A firm authorised under the Financial Services and Markets Act 2000 who promotes and markets the Service to its clients and/or arranges the Subscription for the Investor; A fee agreed by an Investor that is payable to a Financial Intermediary. This fee could be for: a. provision of a personal recommendation to subscribe to the Service; and/or b. arranging a Subscription for the Investor. FiT FCA Feed-in Tariff; The Financial Conduct Authority;

7 Guinness Asset Management Limited Guinness EIS 5 5 FCA Rules Guinness Asset Management or Investment Manager HMRC IHT The FCA s rules made under powers given to the FCA by the Financial Services and Markets Act 2000; Guinness Asset Management Limited, which is authorised and regulated by the FCA; HM Revenue & Customs; Inheritance Tax; Income Tax Act or ITA Income Tax Act 2007; Information Memorandum This information memorandum issued in relation to the Service and dated September 2013; Investee Company Investment Investment Management Team Investor Investor s Agreement kwh Loss Relief Nominee Ofgem Performance Fee Portfolio Qualifying Investors ROC RHI RPI Service or Guinness EIS Service Shares Subscription Total Return A Company in which the Service invests on behalf of Investors; Investments made through the Service on behalf of Investors; Shane Gallwey, Edward Guinness, Hugo Vaux and selected other employees of Guinness Asset Management; Any client who is accepted by the Investment Manager and enters into an Investor s Agreement and invests through the Service; An Investor s Agreement to be entered into by each Investor, in the terms set out on pages 25 to 33 of this Information Memorandum; Kilowatt hour; Relief in respect of income tax for allowable losses pursuant to section 131 of the Income Tax Act; Share Nominees Limited or such other nominee or other agent as the Investment Manager or Administrator may appoint from time to time to be the registered legal holder of Investments on behalf of Investors; The Office of Gas and Electricity Markets (and its statutory successors); The Performance Fee payable to the Investment Manager as described on page 33 of this Information Memorandum; In respect of an Investor, the Investments made through the Service which are allocated to him or her in consideration for his or her Subscription (together with any uninvested cash from time to time constituting a part of that Subscription) and which shall at all material times be registered in the name of the Nominee on his or her behalf; UK taxpayers eligible to claim EIS Relief; Renewable Obligations Certificate; Renewable Heat Incentive; Retail Price Index; Guinness EIS 5, as described in this document, which is a discretionary managed service set up to enable Investors to invest in EIS Qualifying Companies; Shares in an Investee Company subscribed for by the Service on behalf of Investors; A subscription made to the Service, net of any Financial Intermediary Fee, on the terms set out in this Information Memorandum; The aggregate value of an Investment or collection of Investments comprising net asset value, plus the aggregate of all distributions (both revenue and capital) made.

8 6 Guinness Asset Management Limited Guinness EIS 5 Investor Factsheet Guinness EIS 5 (the Service ) has been established to make investments in UK Sustainable Energy companies that are eligible for EIS tax reliefs. Investment objective: tax-free investment returns of over 1.20 per 1.00 invested, net of all fees, in addition to 0.30 of EIS Income Tax Relief. Sustainable Energy Characteristics of Sustainable Energy projects that the investee companies are expected to invest in: Technologies include Solar stable and predictable cashflows from sale of electricity or heat operating performance that has low correlation with other asset classes additional revenues from long term, government-backed, inflation-linked subsidies low technology risk blue chip counterparties Wind Hydro Anaerobic Digestion Biomass Other technologies that will be considered include Combined Heat & Power, Short Term Operating Reserve and Heat Pumps. Investment Team Investment Manager Investment Committee Shane Gallwey Lord Flight Edward Guinness Tim Guinness Dr Malcolm King Tom Hill-Norton Hugo Vaux Andrew Martin Smith Tax Reliefs 30% EIS Income Tax Relief CGT Free Disposal CGT Deferral Loss Relief Inheritance Tax ( IHT ) Relief Charges To Investee Companies 2.0% Transaction fee 2.0% Annual Monitoring fee To Investors A Performance Fee of 20% on returns over 1 per 1 invested, only charged providing that more than 1.20 per 1 invested has been returned to Investors Non-advised Investors will be subject to a 3% initial fee. Guinness Asset Management will facilitate the payment of fees to advisers if so instructed. Target Size 10 million Closing Date Initial Close : 31 December 2013 Second Close : 4 April 2014 Final Close : 30 June 2014 Minimum Individual Subscription 10,000 Expected Life of Service Regulatory 4 to 5 years Guinness EIS 5 is a discretionary managed service, and is not an unregulated collective investment scheme within the meaning of the Financial Services and Markets Acts 2000.

9 Guinness Asset Management Limited Guinness EIS 5 7 Investment Opportunity Guinness EIS 5 (the Service ) has been established to make Investments in UK Sustainable Energy companies that are eligible for EIS tax reliefs. The investment objective of Guinness EIS 5 is to deliver tax-free investment returns of over 1.20 per 1.00 invested, net of all fees, in addition to 0.30 of EIS Income Tax Relief. Sustainable Energy Guinness EIS 5 will invest in companies across the Sustainable Energy sector. Investment opportunities offer characteristics of stable and predictable cashflows sometimes supported by long term, government-backed, inflation-linked subsidies such as Feed-in Tariffs (FITs), Renewable Obligation Certificates (ROCs) and the Renewable Heat Incentive (RHI). Investee Companies often have low technology risk, blue chip counterparties, limited competition and low correlation with other asset classes. The risk/return trade-off of investing in Sustainable Energy can be managed to provide higher returns than expected from traditional structured EIS and VCT products, while mitigating risks through a focus on companies with predictable revenue streams from established technologies. Return Sustainable Energy Venture Capital Start-Ups Investment Drivers The opportunity to develop, build, own and operate small-scale Sustainable Energy in the UK is driven by several powerful factors: High energy costs The price of Brent crude oil has risen from under $10 in 1998 to over $110 in September Average annual domestic standard electricity bills in the United Kingdom have also risen in recent years, from 268 in 1998 to an estimated 500 in 2012 (source: Department of Energy & Climate Change). Government policy The UK Government s stated objective to meet its renewable energy target (15% of energy generated from renewable sources by 2020), reduce greenhouse gas emissions, encourage distributed energy and improve energy security, has led to a number of generous incentive schemes which create a number of attractive investment opportunities. Security of energy supply The UK has been a net importer of oil since 2004 and a net importer of natural gas since The search for shale gas and increased focus on renewables are a result of the UK s dependency on oil from the Middle East and natural gas piped from Russia. The risk of disruption to UK energy supply and of price spikes increases the need to use the energy we consume more efficiently and to take advantage of alternative sources of energy. Structured or Limited Life EIS & VCTs Risk

10 8 Guinness Asset Management Limited Guinness EIS 5 What do we mean by Sustainable Energy? Guinness EIS 5 will invest in companies across the Sustainable Energy sector, where companies that use established technologies with long track records have attractive investment characteristics. Some of the technologies these companies use include: Solar Solar photovoltaic panels generate electricity from sunlight. A 50 kilowatt peak (kwp) solar installation will be made up of approximately 200 solar panels, and will generate electricity all year round. The electricity can be sold to businesses or to the grid, and investee companies usually receive ROCs for generating electricity from renewable sources. These ROCs are sold to enhance returns see the box on ROCs on page 9. Wind Britain is one of the windiest countries in Europe. Wind turbines generate electricity by using the kinetic energy in the wind to turn a turbine. Wind speeds tend to be faster above higher ground, so many turbines are built on hills. The electricity can be sold to businesses or the grid, and investee companies usually receive ROCs. Hydro Hydro power has been used to generate electricity for over 100 years in Britain. Run-of-river hydro diverts a proportion of a river s water through a turbine before returning the water to the river lower down. Guinness reviews hydro projects that will benefit from FITs or ROCs and sell electricity to local businesses or to the grid. Anaerobic Digestion Anaerobic digestion plants use the natural decomposition of organic materials such as food waste or crops to generate methane. This methane can then be fed in to the gas network and piped to our homes, or burnt on site to drive a turbine and generate electricity. Projects can benefit from FiTs for the electricity they generate and RHI payments for the heat generated and sell the heat and electricity to local businesses or to the grid. Biomass Boilers Biomass boilers are simply boilers that generate heat from burning wood. The wood is often dried in chip or pellet form, increasing the energy output and reducing ash waste. Wood is a replenishable source of energy and, therefore, biomass boilers benefit from RHI payments to encourage businesses to move to a sustainable energy source. The Investment Manager will consider other technologies for investment including Combined Heat Power (CHP) plants, Short Term Operating Reserve (STOR) installations and Heat Pumps. With established technologies, the expected energy output of projects can be forecast over long periods with known variability in factors such as the weather and the performance of the assets. A combination of the ability to sell the electricity under contract and the long term nature of the supporting Government subsidy framework provides good visibility of prices over long periods and can provide an inflation link to the revenues. By building a portfolio of projects, the specific risk of any one site can be mitigated.

11 Guinness Asset Management Limited Guinness EIS 5 9 UK Sustainable Energy Subsidies The UK Government s stated objective is to meet its renewable energy target (15% of energy generated from renewable sources by 2020), reduce greenhouse gas emissions, encourage distributed energy and improve energy security. This has led to a number of generous incentive schemes, as follows: Feed-in Tariffs Feed-in Tariffs (FiTs) are the payments made to suppliers of renewable energy by their electricity utility for each kilowatt hour of electricity generated from a renewable source. FiTs are indexed to the Retail Price Index and are payable for 20 years. Technologies benefitting from FITs that qualify under EIS: hydro, anaerobic digestion Renewable Obligation Certificates Renewable Obligation Certificates (ROCs) are issued for each megawatt hour of electricity produced by accredited renewable energy generators. They are designed to encourage electricity utilities to buy electricity from renewable sources, or pay a penalty. The buy-out price that utilities can buy themselves out of this obligation is set by Ofgem and indexed to the Retail Price Index. The pooled fund is recycled to ROC holders proportionately to their number of ROCs. Technologies benefiting from ROCs that qualify under EIS: solar, wind, anaerobic digestion, hydro, biomass, geothermal, landfill gas, tidal and wave Renewable Heat Incentive The Renewable Heat Incentive (RHI) is a subsidy paid to support the owner of non-domestic renewable heat generating equipment. The financial incentive is calculated based on the kilowatt hours of heat generated from a renewable source. The RHI is indexed to the Retail Price Index and is payable for 20 years. Technologies benefiting from the RHI that qualify under EIS including biomass boilers and heat pumps

12 10 Guinness Asset Management Limited Guinness EIS 5 Investment Strategy The Investment Manager will primarily invest in companies that develop, build, own and operate energy projects in the UK and that are eligible for EIS Reliefs. It has developed its investment strategy with the aim of delivering investment returns in excess of 1.20 per 1.00 invested (net of all fees and before EIS Relief). The key elements of the investment strategy are summarised below: Sustainable Energy Diversification Proven Technologies Consented Projects Strong Counterparties Asset Backed Pre-approved Visible Exit The Investment Manager will primarily invest in companies that develop, build, own and operate Sustainable Energy projects. These projects are characterised by long-term, stable revenues, in some cases inflation linked. The Investment Manager will invest across a number of project types where attractive opportunities are available. The Investment Manager will typically make Investments of between 500,000 and 5,000,000 in each Investee Company. Investee Companies may own several renewable energy generating installations across several technologies, providing diversification. The Investment Manager will aim to minimise technology risk by only investing in companies that use proven technologies with an established operating history. Where possible it will secure equipment performance guarantees from manufacturers. Banks typically identify certain equipment that they will lend against, and the Investment Manager aims to make Investments that facilitate future bank financing. The Investment Manager believes the optimal trade-off between development risk and financial return can be achieved by investing in a company which has already achieved the required permissions and consents, but before it has started construction. The Service may also invest in companies developing earlier stage opportunities or companies with later stage operating projects where the risk return profile is attractive. The Investment Manager will seek to work with companies whose project developers and engineering, procurement and construction (EPC) contractors have a successful track record of delivering operating projects on time and on budget. It will also seek to work with high quality counterparties on long term contracts. Investment Manager will only invest equity in companies, often at the construction stage of a project. Investee Companies may look to raise debt finance once they have stable operating histories. The Investment Manager prefers early stage companies to be 100% equity financed, ensuring Investors have senior claim over cash flows and assets. The Investment Manager will confirm that Investee Companies have received EIS advance assurance from HMRC prior to investment. The Investment Manager will exit Investments individually or as a portfolio as soon as practicable after the EIS Three Year Period. Investee Companies are expected to be attractive to third parties looking to secure stable, and in some cases inflation-linked cash flows. The main routes to exit are likely to be a trade sale, a sale to an aggregator, or a sale to a financial buyer. The Investment Manager is incentivised to ensure an exit within five years as no Monitoring Fee will be payable after that period.

13 Guinness Asset Management Limited Guinness EIS 5 11 EIS Tax Reliefs The main tax benefits that can be claimed by a Qualifying Investor (i.e. a UK tax-paying individual, and in some cases the trustee for such an individual) are as follows: 30% Income tax relief Following investment into a qualifying Investee Company, a Qualifying Investor will receive an income tax rebate of up to 30% from HMRC. The relief is restricted to the amount that reduces his income tax liability to nil. An individual can invest a maximum of 1 million per tax year for EIS Income Tax Relief purposes. Investors can claim income tax relief in the tax year in which they invest, or carry the relief back to the tax year immediately preceding the Investment. Capital gains tax free disposal Capital Gains Deferral (deferral unlimited) Loss relief (up to 45%) Inheritance tax relief Investors will not pay capital gains tax on gains from the disposal of shares in EIS Qualifying Companies where the EIS Income Tax Relief is retained and the disposal occurs after the end of the EIS Three Year Period. Investors who meet the residence requirements can defer capital gains that have arisen within 36 months before or 12 months after an investment in an Investee Company. If shares in an EIS qualifying company are disposed of at any time at a loss (after taking into account EIS income tax relief), the loss can be set against either the investor s income tax or capital gains tax liability. Once an Investment has been held for at least two years, it should qualify for Business Property Relief, meaning that it will reduce the Investor s taxable estate for the purposes of inheritance tax. Notes Investors should be aware that this reflects the current tax legislation and HMRC practice. This is subject to change at any time. Capital Gains Deferral is only a deferral of the original gain and a CGT liability will crystallise on a disposal of the Investment, at the CGT rate prevailing at that time. The information and examples in this section are generic in character, and do not represent advice to any Investor on his or her personal tax circumstances. Investors are recommended to seek their own tax advice before investing. The tax treatment depends on the individual circumstances of each client and may be subject to change in future.

14 12 Guinness Asset Management Limited Guinness EIS 5 Illustrative Return The table below shows the benefits of EIS Tax Relief on an investment of In the example investment proceeds of 1.20 on a 1.00 investment give a return of 4.7% per annum over four years. This is enhanced by the 30p EIS Income Tax Relief, which increases the total proceeds to a tax-free return of 14.4% per annum over the investment period. Illustrative returns for an investment made under the EIS Investor proceeds pre EIS Relief 1 Rate of Return pre EIS Relief 2 Investor proceeds including EIS Relief Rate of Return including EIS Relief Write off % % % % % % % % % % % Assumptions made for table 1. Investor proceeds are after all fees have been deducted. 2. The Rate of Return is the annualised effective compounded return rate and is calculated assuming a four year investment period. 3. Investor proceeds for a write off assumes loss relief is received on the whole investment at 40%. During due diligence the Investment Manager will confirm that potential Investee Companies have received EIS advance assurance from HMRC in respect of any Investment. Sustainable Energy companies often have a large proportion of their assets represented by fixed plant which helps provide clear visibility over long-term and sometimes inflation-adjusted revenues.

15 Guinness Asset Management Limited Guinness EIS 5 13 The Investment Manager Guinness Asset Management is a London-based specialist fund management company. Together with its US sister company, Guinness Atkinson Asset Management, the firm currently manages over US$600 million. Guinness Asset Management manages EIS portfolios for a large number of clients invested across renewable energy companies. As well as its EIS service, Guinness Asset Management provides actively managed, long-only equity portfolios designed to deliver real returns for long-term investors. Company Established in 2003, Guinness is independent, and is wholly owned by its employees. Investment process Specialist portfolios Guinness conducts all research in-house, and invests in accordance with its clearly articulated investment process, with high conviction and with no benchmark-led constraints. Guinness s portfolios give investors access to its specialist expertise in the Energy sector, in Asian equities, in global dividend portfolios and global asset management companies. The Guinness equity fund range, accessible in a Dublin OEIC, is authorised for investment by UK private and professional investors. Guinness Asset Management is authorised and regulated by the Financial Conduct Authority. A snapshot of some of our non-eis funds Funds and managers A word from the managers (September 2013) Guinness Global Equity Income Fund Dr. Ian Mortimer, CFA & Matthew Page, CFA Guinness Global Energy Fund Tim Guinness & Will Riley Guinness Global Alternative Energy Fund Edward Guinness Guinness Global Money Managers Fund Tim Guinness & Will Riley We don t chase yield, we want capital and dividend growth. Our aim is long-term capital growth and a steady rising dividend stream, balanced with a yield higher than the global market average. We expect the Fund to yield around 3-4%. Oil demand from emerging markets is outstripping supply growth, including North American shale oil. China s transition from investment-led to consumer-led growth will herald rapid growth in the mass adoption of transportation, and is positive for oil and gas. However, energy equities are under-owned and undervalued buy the market, and we believe there are opportunities to be exploited. The outlook for the alternative energy sector continues to improve, reflected in continued new sources of finance for alternative energy projects. As one of the only funds that is investing in alternative energy as a pureplay strategy, we are well placed to capture the returns from an industry that is only now beginning to recover from Years of experience in the asset management industry have taught us that, in times of rising equity markets, companies in the sector can generate extraordinarily good returns for their shareholders. Asset management is a growing sector global assets under management continue to rise. With successful companies able to grow using relatively little capital, overall shareholder returns can be very high. For more information on Guinness s equity funds, including performance and portfolio reviews: Visit: guinnessfunds.com info@guinnessfunds.com Call:

16 14 Guinness Asset Management Limited Guinness EIS 5 The Guinness EIS Team The Investment Manager comprises a highly experienced team of professionals with backgrounds in renewable energy, private equity, investment management and corporate finance. Through the team s long involvement in the energy and renewable energy sectors it has developed strong investment skills and a broad professional network, which it leverages in the origination and assessment of investment opportunities. Shane Gallwey Fund Manager Shane Gallwey has, over the last fifteen years, launched, advised, invested in and sold a large number of EIS businesses. He was previously a director of Northland Capital Partners, where his focus was on advising growth companies on capital structuring, with an emphasis on tax-efficient funding through EIS and VCT for a range of small to mid-size technology and alternative energy companies. From 2002 to 2006 Shane was based in Gibraltar with Trafalgar Financial Futures. Prior to that he spent six years at HSBC Investment Bank. Shane holds an MA from the University of Edinburgh, and is a CFA Charterholder. Edward Guinness Fund Manager Edward Guinness is co-manager of the Guinness Alternative Energy Fund, having joined Guinness in January Prior to joining Guinness Asset Management, Edward worked from 2003 as a merger arbitrage analyst for the Arbitrage Associates Fund at the Tiedemann Investment Group in New York. In 1998 he joined HSBC Investment Bank, where he worked in the Corporate Finance Department in the Energy & Utilities Team and in the Telecoms & Technology Team. Edward graduated from Cambridge with an MA (Hons) in Engineering and Management Studies. Dr Malcolm King Investment Manager Malcolm joined Guinness Asset Management s EIS Team as an Investment Manager in October Prior to joining Guinness, Malcolm worked for the Carbon Trust and its subsidiary CT Investment Partners (now 350 Investment Partners) where he led or managed 15 transactions in the cleantech and renewables sector. From 2006 to 2008 Malcolm worked as a Consultant for Angle technology plc where he was heavily involved in the management of the Carbon Trust Angle Incubator, the leading cleantech incubator of its kind in Europe. Malcolm has a PhD in Physical Chemistry from Cambridge University and a BSc(Hons) in Chemistry from the University of Pretoria. Hugo Vaux Analyst Hugo joined the Guinness EIS investment management team in His role includes sourcing and assessing potential transactions, monitoring existing investments and assisting on marketing. Prior to joining Guinness Hugo gained experience at SandAire Wealth Management undertaking macroeconomic analysis in the investment team. He has an MSc in Finance and Investment from the University of Bristol and a BA in Economics from Exeter. Giles Robinette Finance Officer Giles Robinette joined Guinness Asset Management in October 2005 and is the chief accountant, finance and compliance officer. Giles has over 23 years experience in the investment management industry. Before joining Guinness he worked in various finance, operations and compliance roles at Midland Montagu Asset Management, Newton Investment Management and Berry Asset Management. Giles graduated from Birmingham University with a degree in Commerce in 1984 and qualified as a Chartered Accountant with Coopers & Lybrand in 1987.

17 Guinness Asset Management Limited Guinness EIS 5 15 The Investment Management Team are joined by Tim Guinness, Tom Hill-Norton, Andrew Martin Smith, and Lord Flight on the Investment Committee: Tim Guinness As founder and Chief Investment Officer of Guinness Atkinson Funds in the US and of Guinness Asset Management in the UK, Tim Guinness is a logic-based value investor with nearly 35 years of experience. From 1999 to November 2002, he was Joint Chairman of Guinness Flight Global Asset Management Ltd. (which merged with Investec in 1998), and was the CEO from 1997 to Tim graduated from Cambridge University with a degree in engineering. He then completed a Master s Degree in Management Science at the Sloan School M.I.T. in the United States. Tom Hill-Norton Tom Hill-Norton is the CFO of Belltown Power Limited, a UK renewable energy power company. Tom has been a private equity investor in renewable energy projects since 2006, involved in solar, wind, hydroelectric and landfill gas projects in the UK and in emerging markets. Tom assisted in launching the Guinness EIS business and helped make the first three investments in solar project companies. Tom is on the Guinness EIS Investment Committee and sits on the boards of Redan Power, Spire Energy and Electric Avenue. Tom has an MBA from INSEAD and an MA (Hons) from The University of Edinburgh. Andrew Martin Smith Andrew Martin Smith began his career at Hambros Bank in 1975 as a graduate from Oxford University. He has over 30 years experience in the financial services industry and currently works as a senior adviser with Guinness Asset Management. He is Chairman of Parmenion Capital Management and a Director of other investment related companies including Church House Investments and North Investment Partners. Andrew has spent the last 15 years specifically involved in the fund management industry firstly as Chief Executive of Hambros Fund Management. He joined Berkshire Capital Securities after Hambros successor fund management interests were acquired by Investec. Lord Flight Howard Flight is Chairman of the EIS Association and a director of Flight and Partners, which manages the Flight & Partners Recovery Fund. Lord Flight was the co-founder of Guinness Flight, a highly successful fund manager which merged with Investec in He continued to be a director of Investec Asset Management. From 1997 to 2005 he served as a member of parliament and as a member of the Conservative Shadow Treasury Team. He is currently the director of businesses with over 50 billion of funds under management, and sits in the House of Lords. Track Record The Guinness team has a track record of investing in the energy sector since Since 2010, the Guinness EIS team has raised and invested 15 million in EIS qualifying renewable energy companies. The Investment Management Team leverages the considerable EIS and investment expertise of Tim Guinness, CEO of Guinness Asset Management, Andrew Martin Smith, former-ceo of Hambros Fund Management, Lord Flight, Chairman of the EIS Association and Tom Hill-Norton, CFO of Belltown Power. The Investment Committee brings extensive UK investing experience to the Guinness EIS team as well as in-depth understanding of both the global and UK energy and alternative energy markets.

18 16 Guinness Asset Management Limited Guinness EIS 5 Investment Process The Investment Manager will follow its formalised internal processes to ensure that due care is taken in the identification, selection, execution, monitoring and exit of Investments. Exhibit 1: Investment Process Origination Due Diligence Transactions Monitoring Exit Regular pipeline meetings: Discuss and prioritise origination leads Dealflow: Guinness networks Third party sources 1. Initial screening Internal assessment Short form memo to Investment Committee 2. Full DD Exclusivity 3rd party tech and legal EIS advance assurance Long form memo to Investment Committee Managed internally: Investment Committee sets budget, timeline 3rd party support from lawyers and accountants Final approval on investment Regular management reports and financial statements Board seat on Investee Companies, where appropriate Investment Manager: Actively monitor exit routes Investment Committee: Initial decision to commence any process Final decision on any sale i) Origination The Investment Manager sources Investments through its networks of contacts in the energy sector. Guinness Asset Management has been dedicated to the energy sector since inception and has, consequently, established a broad range of contacts across the sector as well as privileged relationships with landlords, installers and project developers. All origination leads are discussed at the Investment Manager s regular pipeline meetings, where they are prioritised according to the investment strategy. ii) Due Diligence Origination leads that have been prioritised during pipeline meetings are initially screened internally. The Investment Manager responsible prepares a short-form investment memorandum for consideration by the Investment Committee. It is submitted to the Investment Committee by , and the Investment Committee responds within five working days with an initial approval or rejection. If the Investment Committee grants initial approval for a potential investment, it provides the Investment Manager with a budget and timeframe for the completion of comprehensive due diligence. The Investment Manager, where possible, secures a period of exclusivity while they carry out due diligence. During due diligence, the Investment Manager may engage technical advisers to assess technical aspects of the investee company, and legal advisers to verify documentation such as agreements, permits and planning permission. The Investment Manager is responsible for overseeing external advisers and performing its own assessment of potential investments. The Investment Manager compiles the findings of its due diligence into a long-form investment memorandum, which is circulated to the Investment Committee by and subsequently discussed at Investment Committee meetings which are held on an ad hoc basis as required. iii) Transaction If the Investment Committee grants final approval based on a long-form investment memorandum for a potential Investment, it provides the Investment Manager with a budget and timeframe for completing the transaction. The Investment Manager primarily manages transactions internally, but it may also engage third parties such as technical consultants, lawyers and accountants for transaction support. iv) Monitoring The Investment Manager seeks to establish regular formal communication with management teams. The Investment Manager remains closely involved in each Investee Company during the life of an Investment. Investee Companies are also required to provide the Investment Manager with regular management reports and financial statements. In addition, the Investment Manager will seek representation on the board of an Investee Company, where appropriate. v) Exit The Investment Manager actively monitors opportunities for exits either of individual Investments or the portfolio as a whole. Any potential exit strategy will be described in a short-form memorandum and submitted to the Investment Committee for final approval prior to the commencement of any sale process.

19 Guinness Asset Management Limited Guinness EIS 5 17 Investor Information How to Invest The Investor s Agreement and Application Form are included at the back of this document. The minimum Subscription to the Service is 10,000. An acceptance by Guinness Asset Management of an Application Form on or before a Closing Date will (subject to exercise of cancellation rights, if relevant) create a binding agreement between the Investor and Guinness Asset Management. Investors will be notified of an acceptance of their Application Form. The Service may have multiple Closing Dates at the discretion of Guinness Asset Management. Reporting to Investors The Investment Manager will provide Investors with statements and reports twice a year, with details of Investments made and performance of their Portfolios. In addition, Investors will receive an annual financial statement of their holdings. Full EIS approval When the Service has made an Investment and the Investee Company has been trading for four months, the Investee Company will apply to HMRC for full EIS approval (a delay of four months is necessary only if the Investee Company has not commenced trading at the time of the Investment). If the Company is trading the application for full EIS approval can be made immediately. If the Investee Company does not start to trade immediately following the Investment, the four months start with the commencement of trade). EIS3 certificates Once EIS approval is granted by HMRC the Investee Company will forward the appropriate EIS3 certificates to the Investment Manager to send to each Investor in the Service who has indicated that they wish to claim EIS Income Tax Relief or CGT Deferral Relief. The Investment Manager will distribute EIS3 certificates to Investors as soon as they are received from the Investee Company. The Investment Manager can arrange for your EIS3 certificates to be sent directly to your accountant or adviser for ease of administration. The latest date on which an Investor can claim EIS Income Tax Relief is five years after the 31 January following the tax year to which the claim relates. Important notice for Investors deferring capital gains Investors should note that EIS3 certificates may not be available prior to 31 January 2015 and, therefore, Capital Gains Tax for the year 2013/14 may need to be paid by investors by 31 January 2015 and reclaimed following receipt of EIS3 certificates. Trust investors The trustees of certain settlements are potentially eligible to claim CGT Deferral Relief only (they may not claim EIS Income Tax Relief) where, broadly, all the beneficiaries are individuals. Trustees should seek their own advice about their eligibility. Discretionary Managed Service Guinness EIS 5 is a discretionary managed service. The Service is structured so that Investments are made by the Investment Manager on behalf of each Investor. Each Investor has a segregated account with the Administrator, and remains the beneficial owner of cash and Investments for both legal and taxation purposes at all times. The Administrator participates in the Financial Services Compensation Scheme, which provides compensation to eligible Investors in the event of a firm being unable to meet its customer liabilities. Guinness EIS 5 is not an unregulated collective investment scheme within the meaning of the Financial Services and Markets Act How to claim your EIS Reliefs A claim for EIS tax reliefs can only be made once you have received your EIS 3 certificate. When you complete your tax return, you should enter the amount you have invested for the year in which you are entitled to receive the EIS Income Tax Relief. If you have completed your tax return already and sent it to your Tax Office, you can make the claim by completing the claim section of the EIS3 certificates when you receive them and sending them to your Tax Office. The EIS3 form can be sent to HMRC at any time to claim EIS Income Tax Relief and Capital Gains Tax Deferral Relief. For Capital Gains Tax Deferral Relief, you will need to specify the capital gain or gains against which the investment is to be set, with dates when the capital gain or gains were realised and amount of capital gain to be offset.

20 18 Guinness Asset Management Limited Guinness EIS 5 EIS Qualification Criteria The key criteria for qualification for EIS Relief and CGT Deferral Relief are as follows: Maximum individual investment of 1 million per tax year for EIS Income Tax Relief purposes; any individual together with Associated Parties may not hold over 30% in an Investee Company. The Service may hold more than 30%; The Investee Company must not be under the control of another company (or another company and persons connected with that company); Investment must be made as equity in ordinary shares; Investment must be held for at least the EIS Three Year Period; Maximum company gross assets of 15 million prior to subscription of EIS monies and 16 million immediately after; Maximum amount of State Aided investment monies, including from EIS and Venture Capital Trust investors, that can be received by a company is 5 million in any 12 month period; Maximum company employees of fewer than 250 full-time or equivalent at the time of investment; Carrying out a qualifying activity for at least four months before claim can be made for EIS tax reliefs; Trade must continue for at least three years in total from subscription or its commencement, if later; Trade must commence within two years of the subscription for shares, so the longest minimum holding period would be five years; The shares must not be issued in consequence of disqualifying arrangements as set out in section 178A ITA.

21 Guinness Asset Management Limited Guinness EIS 5 19 Guinness EIS Investments The Guinness EIS team has invested in six companies that were set up by leading renewable energy entrepreneurs to develop, build, own and operate renewable energy generation projects. A brief summary of each company is shown below. Redan Power Limited Redan Power has installed solar panels on 14 purpose built barns located in East Anglia. The landlords are able to use the barns and up to 20% of the electricity generated at a discount. Any electricity not consumed on site is sold by Redan Power to a green power utility for a fixed price that is higher than the Government-set export tariff. Redan Power receives the Feed-in Tariff payments for the electricity generated. The Feed-in Tariffs and payments by the landlords increase annually by RPI. In November 2012, one year after the first sites were commissioned, Redan Power installed a further 100kWp of installations on social housing in southern England. Electric Avenue Limited Electric Avenue has installed solar panels on 142 houses in southern England. The householders are able to use up to 100% of the electricity generated at a discount. Electric Avenue receives the Feed-in Tariff payments for the electricity generated which includes an export tariff for half of the electricity generated. The generation tariff and export tariff increase annually in line with the RPI. Spire Energy Limited Spire Energy has funded the construction of a portfolio of solar installations on six National Express bus depots and manufacturing facilities owned by Ecotherm, a subsidiary of Kingspan plc. The landlords pay a commercial rate for electricity produced and commit to use a significant portion of the projects output. Spire Energy receives the Feed-in Tariff and any power not used on site is sold to a green power utility for a fixed price that is higher than the export tariff. The company is agreeing terms for follow on installations to use available cash flow, which are expected to enhance the returns to the original EIS investors. Free Green Energy Corporation Limited Free Green Energy Corporation is building solar installations on commercial sites in southern England. These sites range from 50kW to 500kW and are all roof mounted, qualifying for 1.7 ROCs. Free Green is currently working with EvoEnergy, a leading UK solar installer based in Nottingham and with installation teams nationwide. In September 2012 the company agreed to use approximately the first 12 months of cash flow to buy out the development partner s share of revenues at a price that is expected to enhance returns to the original EIS investors. Renewable Asset Limited Renewable Asset Limited is building solar installations on commercial and industrial buildings in Northern Ireland. Northern Ireland has an attractive subsidy to encourage solar installation, whereby installations benefit from 4 ROCs. Myroe Energy Limited Myroe Energy Limited sources, installs, owns and operates renewable energy generating projects with a range of developers in the UK. Projects are expected to earn a mixture of ROCs, RHI payments and energy purchase payments from customers.

22 20 Guinness Asset Management Limited Guinness EIS 5 Installation Photos Heath Farm: 37kWp Swindon: 3.43kWp Basildon: 172kWp Sapley Park Farm: 49kWp Dorset: 3.5kWp Dundee: 50kWp Installation Partners