EIS Portfolio Service INFORMATION MEMORANDUM

Transcription

1 EIS Portfolio Service INFORMATION MEMORANDUM FOR UK INVESTORS ONLY bamboocapital.co.uk October 2016

2 BAMBOO EIS PORTFOLIO SERVICE bamboocapital.co.uk October 2016 FOR UK INVESTORS ONLY Bamboo EIS Portfolio Service: a portfolio of early stage UK companies with the potential for higher investment returns over the long-term (more than five years) when compared with portfolios of FTSE 250 companies. Investors can also take advantage of significant income tax, capital gains tax and inheritance tax reliefs.

3 Contents Welcome to Bamboo EIS... 1 Section Enterprise Investment Schemes... 2 Bamboo EIS Portfolio Service... 4 Investment Team and Advisory Committee... 5 Investment Approach... 7 Investment and Management Process... 8 The Bamboo Capital Network... 9 Section Tax benefits of an EIS Investment Section The Charges Section The Risk Factors and Conflicts of Interest Section Investor Agreement Section Custodian Agreement Section Definitions Section Frequently Asked Questions IMPORTANT INFORMATION This Information Memorandum, constitutes a financial promotion for the purposes of section 21 of the FSMA and is issued by Bamboo. This Information Memorandum does not constitute a prospectus for the purposes of the Prospectus Rules. Bamboo Capital Management Limited is a private limited company incorporated under the laws of England and Wales (company number ) and is authorised and regulated by the FCA (FRN number ). This Information Memorandum should be read in conjunction with the Investor Agreement and Application Form. This Information Memorandum may be distributed to persons falling within the following categories of investor: (a) existing clients of a financial adviser regulated by the FCA;

4 (b) (c) (d) (e) (f) persons who meet the criteria for being a professional client; persons who qualify as certified high net worth individuals in accordance with COBS 4.7.7(a); persons who qualify as certified sophisticated investors accordance with COBS 4.7.7(b); persons who qualify as self-certified sophisticated investors in accordance with COBS 4.7.7(c); and persons who confirm that they will only invest ten per cent (10%) of their net assets in nonreadily realisable securities by signing the Restricted Investor Statement set out in COBS This document is not available to persons outside the United Kingdom and does not constitute an offer or invitation to invest in any company to any such persons. By accepting this Information Memorandum, you represent and warrant to Bamboo that you are a person who falls within the above description of persons in respect of whom Bamboo has approved distribution of this Information Memorandum as a financial promotion. This Information Memorandum is not to be disclosed to any other person or used for any other purpose. Any other person who receives this Information Memorandum should not rely on its contents. By applying to the Bamboo EIS Portfolio Service, you are confirming that you are aware of the risks associated with non-readily realisable investments. It is very important that you read and fully understand the risks involved with this investment so that you can decide whether it is right for you these risks are outlined in Section 4 of this Information Memorandum. The value of an investment in this product may go down as well as up and you may lose all the money you invest. Investments into smaller companies are likely to have higher volatility than shares listed on the main London Stock Exchange. Further, investments in unquoted companies may take longer to sell than listed shares, and it is not possible to predict how long it will take to sell specific investments. The Bamboo EIS Service will not be appropriate for all potential investors. You should seek advice from a financial adviser, authorised and regulated by the FCA, before deciding whether or not to invest. You will note from this Information Memorandum that investors are required to commit funds to the Bamboo EIS Portfolio Service for not less than 5 years. This is due to the nature of the proposed investments (which customarily require time to realise their growth potential). If you may require your funds within five years of investment, the Bamboo EIS Portfolio Service is not for you. The Portfolio Service is an Alternative Investment Fund for the purposes of the Alternative Investment Fund Managers Directive (2011/61/ EU) ( AIFMD ). The Portfolio Service is not a collective investment scheme within the meaning of section 235 of the Financial Services and Markets Act 2000, nor a Non-mainstream Pooled Investment by virtue of it being a fund complying within the meaning of Article 2 of the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 and, pursuant to clause 15 of the Investor Agreement, Investors are entitled only to the withdrawal rights prescribed by that clause 15. Investors in the Portfolio Service will make Investments together and their Investments will be managed by Bamboo on a common basis. The Portfolio Service will, therefore, constitute a collective investment undertaking within the meaning of the Markets in Financial Instruments Directive ( MiFID ) and, by virtue of the exemption for collective investment undertakings and their operators in Article 2.1(h) of MiFID, the Portfolio Service (and the management by Bamboo thereof) falls outside the remit of MiFID. Prospective investors are advised that the Portfolio Manager is authorised by the FCA as a small authorised UK Alternative Investment Fund Manager. Prospective investors attention is drawn to the fact that the Portfolio Manager is exempted from the AIFMD pursuant to Article 3(2)(a) of the AIFMD (the so-called de minimis exemption ). Therefore, prospective investors shall not benefit from any rights from the AIFMD, nor will the Portfolio Manager comply with any obligation thereunder, except to the extent provided under Article 3(2) of the AIFMD. All Investors in the Portfolio Service will, for the purposes of FCA conduct of business rule 18.5 only, be categorised by Bamboo as retail clients unless otherwise agreed by Bamboo and the Investor. For the avoidance of doubt, as the Portfolio Service is an Alternative Investment Fund, the Portfolio Manager will, for regulatory purposes, treat the Portfolio Service as its client and, other than as set out above, will not owe any client obligations under FCA Rules to Investors. Please do remember that tax rules and regulations are subject to change. Tax treatment also depends on your individual

5 circumstances and we recommend you seek advice to confirm this product is right for you. Please note that all the figures and information provided within this document are correct at 26 September 2016.When reading this Information Memorandum, please note that certain words and phrases have the meanings set out in Section 7 (Definitions).

6 WELCOME TO BAMBOO EIS As an investor with us, you can be assured that we understand that wealth is not easily earned we treat your money carefully and invest it as if it were our own. Bamboo is pleased to introduce the Bamboo EIS Portfolio Service. This is a management service specialising in EIS qualifying investments. Bamboo has brought together a first-rate team of finance, investment and legal professionals which has an enviable contact-base of entrepreneurs, senior professionals, industry leaders, investment bankers, brokers and other intermediaries. This give us access to exceptional deal flow. Our team has extensive experience in both quoted AIM company investment and private company investment (particularly pre-ipo). Our aim is to identify and develop well managed businesses which demonstrate the potential for significant growth in their sector or market. We believe that the Bamboo EIS Portfolio Service represents a compelling investment proposition, both in terms of the attractive tax benefits (see section 2 of this Information Memorandum) and the potential for significant capital growth. The Bamboo EIS Portfolio Service is not appropriate for all potential investors it is important that you read and fully understand the Risk Factors, so that you can decide whether the Bamboo EIS Portfolio Service is right for you. We have endeavored to ensure that this Information Memorandum is clear and transparent as to the investment proposition and the Risk Factors. Nonetheless, we always recommend that you speak with your financial adviser before making an investment. Simon Woolley Founder and CEO 1

7 SECTION 1 ENTERPRISE INVESTMENT SCHEMES Tax-efficient investments with the prospect for growth are a top priority for many high net worth investors the Bamboo EIS Portfolio Service provides an attractive solution The history The government introduced Enterprise Investment Schemes in 1994 in order to encourage investment in smaller companies. Given the additional risks associated with investing in these smaller companies (compared to larger (and often more mature) companies), a number of tax benefits were offered to investors. EIS investment has grown in popularity considerably since the scheme was first introduced and latest data shows that over 22,855 companies have received over 12.2 billion of EIS investment to date. The tax advantages There are five separate tax advantages for which you may become eligible by investing in an EIS: thirty per cent (30%) upfront income tax relief (provided your investment is held for at least three years) one hundred per cent (100%) inheritance tax relief after two years (provided the investments are held at the time of death) one hundred per cent (100%) capital gains tax deferral for the life of the investment tax-free growth (provided income tax relief was given on the full amount invested and has not been withdrawn) loss relief on any holdings that are realised at a loss (net of any income tax relief already claimed on those holdings) Further information on all of these potential benefits is available in Section 2 of this Information Memorandum. Note Tax treatment depends on the individual circumstances of each investor and may be subject to change. The availability of tax reliefs also depends on the portfolio companies maintaining their qualifying status. The risks are detailed in Section 4 of this Information Memorandum. What are qualifying EIS investments? A summary of the qualification criteria following adoption of the 2015 Summer Finance Bill is set out below: the investment must be a subscription for new shares - not a purchase of existing shares the company is not controlled by another company any subsidiary of the company must be more than fifty per cent (50%) owned by the company the company has less than 250 employees at the time investment is made* the company has gross assets that do not exceed 15 million before investment, or 16 million after investment the investee company uses the money raised within 24 months 2

8 any investment of EIS funds does not exceed more than 5 million in any one company in any year and more than 12 million in total* the company is less than 7 years old* the company must carry on a qualifying trade certain activities are excluded (such as financial services, legal or accounting services and real estate) Note At the time of writing this guide, the European Commission is in the process of considering some of the criteria proposed by HMRC. So the information above may be subject to change. Rates of tax, tax benefits and allowances described in this guide are based on current legislation (as well as HM Revenue & Customs (HMRC) practice) and also depend on your personal circumstances. The key risks associated with this product are explained in section 4 of this Information Memorandum. *Except in the case of knowledge-intensive companies where the limits are 500 employees, 20 million and 10 years old. What are the benefits of investing in an EIS? EIS investment can complement and diversify investment and savings strategies: companies that qualify for EIS funding are typically start-up businesses with a strong entrepreneurial drive, which means investing in an EIS could offer the potential for significant growth if the companies are successful; smaller companies typically follow different investment cycles from other parts of the market, so EIS investment can bring extra diversification to your investment portfolio; and although considered a high risk investment, EIS investment may be a useful option if you are looking to complement your pension plans (or other long-term investments (such as ISAs)). This is becoming a more relevant consideration to many investors due to the recent reductions in the lifetime and annual allowances for pensions. As we cannot give you financial advice, we would recommend that you speak to your financial adviser before making any decisions about investing in any EIS product. 3

9 BAMBOO EIS PORTFOLIO SERVICE Objective An investment with the potential to deliver significant returns, as well as a number of attractive tax benefits. The Bamboo EIS Portfolio Service will invest in UK companies across a range of industry sectors. Each Investee Company will have the potential for significant capital growth. We will aim to invest clients money in a portfolio of at least five EIS qualifying companies. These may be either unquoted companies (namely companies whose shares are not publicly listed on a stock exchange), or companies that are already listed on AIM. Investors who could benefit The Bamboo EIS Portfolio Service is suited to investors who are willing to take on a higher level of risk in the pursuit of stronger returns over the longer term. Potential investors may find investing in early-stage, fast growing companies, attractive, but may not know how to (or have the time to) manage a portfolio of such companies, or be able to access a reliable deal flow of investment opportunities. Also, potential investors may not have the ability to carry out due diligence and/or access industry expertise in relation to proposed investments. The Bamboo EIS Portfolio Service aims to provide investors with access to a broad range of tax benefits and to manage and maintain a portfolio of significant investment potential. Investments are selected by the investment team on behalf of Bamboo EIS Portfolio Service investors. The Bamboo EIS Portfolio Service is a discretionary collective portfolio management service, and we believe it is the best way for investors to capture the growth and diversity of UK smaller companies. The Bamboo EIS Portfolio Service is designed to be held for the long term (by this we mean for five to ten years). We may take as long as twelve months to find a range of suitable companies for an Investor s portfolio. It may take even longer than this to sell all an Investor s holdings if they decide to withdraw their money. For this reason, Bamboo EIS Portfolio Service investors should be willing to invest their capital for a minimum of five years. The tax advantages available through the Bamboo EIS Portfolio Service provide you with an additional benefit in comparison with more traditional investment products. 4

10 INVESTMENT TEAM AND ADVISORY COMMITTEE The Bamboo EIS Portfolio Service team of experienced finance, investment, legal and M&A professionals. The team has significant experience in the whole life cycle of investment transacting acquisitions and investments, managing growth in dynamic fast moving businesses and consummating exits. As referred to in the explanation of our Investment Process below (page 8), whilst the Portfolio Manager has the responsibility for deal origination, structuring, execution and portfolio management, the Advisory Committee provides ongoing advice and recommendations, as well as reviewing and challenging the investment policies, strategies, prospective investments and the performance of the Bamboo EIS Portfolio Service. The Advisory Committee currently comprises: Simon Woolley Simon is the Founder and CEO of Bamboo. Simon has significant experience as an advisor, manager and business owner. As a qualified solicitor, Simon started his career in the City of London and then worked for DLA Piper for 16 years (12 years as a Partner) he was Managing Partner of the DLA Piper, Manchester office (350 staff) from 2006 to 2009 and a main board member of DLA Piper International, governing DLA Piper globally (other than the United States). More recently, Simon has formed his own start-up advisory businesses (legal, business and strategic) and has first-hand experience of the needs and challenges of growing businesses. Simon has advised on over 400 deals, ranging from 0.5 million to 1.1 billion (including the 950 million public to private of Arcadia Group; the 715 million purchase of the Daily Telegraph; and the 70 million flotation of Safestyle). Simon has an extensive contact base across the institutional and venture fundraising sectors, as well as banks, private equity houses and professional services. Simon is also a non-executive director of REACT Group plc. Ross Andrews Ross has had a successful career in corporate finance spanning over 30 years. After starting his career working for The London Stock Exchange, Ross gained his experience through working in senior positions for well-regarded corporate finance businesses in London, the Midlands and Manchester. From 2008 to late 2015, Ross was a main board director of Zeus Capital, during which the firm grew from a small corporate finance advisory business to an established investment banking operation. Ross specialised in the AIM market, in terms of IPOs, fundraisings and general advisory services. As well as numerous other flotations and fundraisings, Ross advised on the largest IPO to date on AIM (Boohoo) and one of the largest pharmaceutical IPOs (Quantum Pharma). Ross remains actively involved in the AIM sector. Ross brings a wealth of experience and contacts to the Advisory Committee, particularly in relation to businesses whose strategy is to float on AIM. Ross is a member of the Chartered Institute for Securities and Investment. 5

11 Mike Fletcher Mike is a co-founder and managing partner of Praetura Capital LLP, a business specialising in venture investment and corporate advisory services Praetura Capital, which was incorporated in 2011, has made a number of venture investments across a variety of market sectors. Mike sits on the board of a number of Praetura Capital s investments (including PIB Limited, EC3 Brokers, Praetura Asset Finance Limited, Artorius Holdings Limited and Starcount Pte Limited). He is also a non-executive director of Fairpoint Group Plc and Inspired Energy plc. Mike was previously a managing director of investment bank Altium Capital Limited. He has over 15 years experience in mergers and acquisitions and corporate finance, advising public companies, private equity houses and entrepreneurs. As well as experience of institutional fundraising and advisory, Mike brings significant experience of investing in, and working with, early stage entrepreneurial businesses with high growth potential. Mike is a Chartered Accountant (having qualified with PwC in 1999). 6

12 INVESTMENT APPROACH Bamboo EIS investments will be made into a combination of AIM quoted companies and unquoted companies. Bamboo will act as Portfolio Manager and is responsible for sourcing investment opportunities, as well as structuring, evaluating and executing completion of these investments. Bamboo will utilise its enviable network of professional contacts, entrepreneurs and other intermediaries to source deals for evaluation. Bamboo will adhere to strict investment criteria when selecting potential investment opportunities. Our principal concern with any investment is the management team. If we are not content with the quality of the management team, we will not invest. Assuming that this key requirement is met, our other fundamental investment considerations are: attractive market or sector; potential for strong growth in that market or sector; strong underlying business fundamentals; defensible market position; the potential to improve stakeholder value through financial or operational structural changes; realistic expectations of investment entry valuation; and realistic exit routes within 3 to 4 years of investment. 7

13 INVESTMENT AND MANAGEMENT PROCESS Any decision by Bamboo to invest Bamboo EIS Portfolio Service funds involves a detailed and rigorous process. Once invested, our process also ensures that each investment is closely monitored. Deal origination The Bamboo investment and management process can be summarised as follows: Initial due diligence and analysis The Bamboo team will produce a summary paper of the potential deal analysing: Spending time with the management team the business (including the management team); the market; the potential of the business and threats to it; the current financial position and requirements; the likely investment entry price; and the exit strategy and horizon. Interrogating the financials and business plan Detailed due diligence Assuming the investment opportunity has progressed beyond the initial due diligence stage, an investment paper is produced (which may include appropriate due diligence recommendations and findings by the Bamboo team and/or external due diligence providers - legal, commercial, management, financial and/or market). The deal structure and heads of terms will also be finalised. The investment paper is then considered by the Advisory Committee, who produce a summary investment paper for the Portfolio Manager containing a recommendation on whether or not to invest. The final decision whether to invest is taken by the Portfolio Manager. Post investment monitoring and management Decision on investment proposal by Portfolio Manager Portfolio Manager monitors each investment The Portfolio Manager will regularly update the Advisory Committee in respect of each Investee Company. Monthly management information will be reviewed by the Portfolio Manager and reported on to the Advisory Committee. Portfolio Manager regularly updates Advisory Committee Performance of the business against plan (if applicable), as well as against the exit horizon, is carefully monitored and managed. 8

14 THE BAMBOO CAPITAL NETWORK We provide companies with not only finance, but also expertise and ongoing guidance, from people who have been there and done it before. We are also able to tap in the Bamboo Capital network for focused support. The Bamboo team have a long-established network of entrepreneurs, senior professionals, industry leaders, investment bankers and other intermediaries. The network is invaluable when carrying out due diligence, in providing ongoing monitoring of Investee Companies and in considering exit options. 9

15 CLAIMING YOUR TAX RELIEF We always work closely with you and/or your financial adviser to ensure your tax benefits are delivered in a timely manner, and that we keep you updated throughout the process. The Bamboo EIS Portfolio Service is a managed service, which is an Alternative Investment Fund and does not constitute an unregulated collective investment scheme. The investments we make on your behalf will be held in the nominee of the Custodian (or its nominee). Any reliefs and deferrals are expected to be generated as and when your money is invested in EIS qualifying companies. The Portfolio Service will comprise shares in a selection of EIS qualifying companies, which are collectively managed on behalf of all Investors in accordance with the Investment Objectives and the Investment Restrictions. The relevant date for income tax relief, from a tax year perspective, is the date on which investments are made in each of the Investee Companies. It is not the date on which you invest in the Portfolio Service. Typically, we aim to have invested all of your money within twelve months. Once a company we have invested in on behalf of an Investor has been trading for a period of four months (which may already have happened at the time of our investment), the Company will apply to HMRC for permission to issue you with an EIS3 certificate. This certificate enables you to claim your income tax relief and capital gains tax deferral. You will receive one EIS3 certificate for each Investee Company, meaning your tax relief could be spread over several different tax years. It may be several months from the date of each investment until your certificate arrives. The latest date you can claim for EIS relief is five years after 31 January following the tax year to which the claim relates. Although Bamboo cannot guarantee the speed at which the EIS3 certificates will be issued, we shall work with the Investee Companies to try to minimise delays. 10

16 HOW TO INVEST If you have a financial adviser Please contact them in the first instance and they will help you set up your Bamboo EIS Portfolio Service. Your adviser can call us on or visit us at If you are investing directly Please call our team on and we will talk you through the process. We will also send you any forms you need. This Information Memorandum contains the form of Investor Agreement and Custodian Agreement (Section 5 and 6). Please be sure to read these carefully. As stated in this Information Memorandum, Bamboo does not provide any investment or tax advice to any potential Investor and recommends that the potential Investor seeks advice from his financial adviser (or consults another financial adviser who is appropriately qualified and authorised to give investment and tax advice). 11

17 SECTION 2 TAX BENEFITS OF AN EIS INVESTMENT Please note that (as stated in Clause 7 of the Investor Agreement), the Portfolio Manager does not provide any investment or tax advice to any Investor and recommends that the Investor (or potential Investor) seeks advice from his financial adviser (or consults another financial adviser who is appropriately qualified and authorised to give investment and tax advice). The information below is for information purposes, in respect of which the Investor (or potential Investors) should take advice. EIS investment offers five potential tax benefits: Income tax relief You can claim up to thirty per cent (30%) income tax relief on EIS qualifying investments on condition that you hold on to the investment for at least three years. The most tax relief you can claim for the current tax year is 300,000 (based on the maximum investment of 1,000,000) and you also have the option of claiming up to 300,000 against your income tax liability for the previous tax year. Accordingly, in these circumstances, the maximum investment is 2,000,000 and the maximum income tax relief of 600,000. However, you are not able to claim relief greater than the income tax you pay. Illustration Investor A has taxable income of 100,000 in the relevant tax year. 100,000 has been invested in EIS qualifying companies on behalf of the individual in the same tax year. Tax calculation: The relief can never be higher than the individual s tax liability. Taxable income Tax rate Tax liability First 32,010 of income 20% 6,402 Remaining 67,990 of income 40% 27,196 Tax liability, pre EIS relief 33,598 EIS relief (30% of 100,000) (30,000) Tax liability, after EIS relief 3,598 Reduction in tax liability 89% Inheritance tax relief Although not specifically dealt with under EIS legislation, qualifying EIS shares are eligible for business property relief, which means that, if you keep them for at least two years, your beneficiaries will not have to pay inheritance tax on them, so long as you still have them at the time of your death. Capital gains tax deferral If you make a capital gain on any kind of asset that is taxable, it can be invested in an EIS investment and the tax will be deferred for the life of the investment. Please note that the capital gains tax deferral is not available until your funds have been invested in qualifying companies. Capital gains arising thirty six months prior to, or twelve months after, investment into EIS qualifying companies are capable of deferral. If you die while you still have your EIS investments, the tax deferred on your gain is eliminated. Illustration Investor A sells a property left to him by a relative and has a capital gain of 200,000. Investor A will be liable to pay tax of 56,000 on this gain, at rates prevailing today. Investor A can choose 12

18 to defer that tax liability by electing to invest the whole of the gain of 200,000 into EIS qualifying companies. By doing so, in addition to deferring the gain, Investor A may also be entitled to income tax relief of 60,000 (provided that he has income tax liability on the current, or preceding year, of at least 60,000). Capital gains tax free growth There is no capital gains tax to pay if your EIS investment increases in value, providing income tax relief was given on the full amount invested and has not been withdrawn. Loss relief Loss relief is one of the most compelling features of an EIS investment, because it can reduce the impact of losses from individual EIS investments and may improve the overall risk/return profile of your investment. The ability of loss relief makes an EIS investment different from other types of investment. Some investments, such as ISAs and venture capital trusts, are free from capital gains tax when they go up in value, but there is no tax relief if they fall in value. However, an EIS investment can offer both forms of relief gains are not taxed and losses attract relief. Each company in your EIS portfolio is assessed separately for tax relief. So, you can claim loss relief if shares in one company fall in value, even if the other shares in your EIS portfolio increase in value. The amount of loss relief you receive is based on the difference between the amount you invested in the shares of a company (after deducting income tax relief) and the disposal price. If shares in any EIS qualifying company held through the Bamboo EIS Portfolio Service are disposed of at a loss, you can choose whether to set loss relief against other gains (at that time or in the future) or your income tax (for that year or the year before). This means you decide on the most beneficial use of the loss relief according to your personal circumstances. For a forty per cent (40%) taxpayer, the total tax relief could be up to fifty eight per cent (58%) of the original investment, and for a forty five per cent (45%) taxpayer, the tax relief could be up to sixty one point five per cent (61.5%) of the original investment. Illustration The investment of 100,000 held on behalf of Investor A has been disposed for nil consideration. Proceeds of realised investment NIL Initial investment 100,000 Less EIS income tax relief (30,000) Allowable loss 70,000 Loss relief at 40% 28,000 Net cost of investment for a 40% rate taxpayer 42,000 If loss relief at 45% 31,500 Net cost of investment for a 45% rate taxpayer 38,500 Where income tax relief for the loss is not claimed, the losses can be offset against capital gains in the year of the disposal and any unrelieved loss can be carried forward against capital gains in subsequent tax years. 13

19 SECTION 3 THE CHARGES Portfolio Manager charges The Portfolio Manager has a charging structure which is reasonable, competitive and commercially aligned to a successful outcome for the Investor see below. Initial fee An initial fee, calculated at the rate of two per cent (2%) of Subscriptions, is payable to the Portfolio Manager. The costs of establishing the Portfolio Service, legal and taxation advice costs, the costs for preparing and issuing the Information Memorandum and other direct expenses incurred will be borne by the Portfolio Manager out of this fee. This initial fee will be deducted from Subscriptions. Annual management fee The Portfolio Manager will charge an annual management fee, calculated at a rate of two per cent (2%) of the Net Subscription Amount (as defined below). For these purposes, Net Subscription Amount means, in respect of a Subscription, the amount of such Subscription minus the aggregate of: (a) (b) (c) the initial fee payable to the Portfolio Manager (see Initial fee above); the aggregate amount of Custodian charges retained in cash from the Subscription (see Payment of Custodian fees below); and the aggregate amount (if any) of any initial and/or ongoing financial adviser fees (where the Investor has instructed the Portfolio Manager to facilitate the payment of such fees (see Initial and ongoing financial adviser fees below); The annual management fee accrues from the date on which the Custodian accepts the Application Form and will apply for a maximum period of four years. Whilst the Portfolio Manager charges an annual management fee to cover its operational costs, payment of the annual management fee is deferred the fee is rolled-up and is only payable in the event that the Investments in the Portfolio of an Investor have been realised in amount equal to the Subscription less the aggregate amount (if any) of any initial and/or ongoing financial adviser fees (where the Investor has instructed the Portfolio Manager to facilitate the payment of such fees (see Initial and ongoing financial adviser fees below)). The structure of the annual management fee clearly shows the commitment of the Portfolio Manager to aligning itself to the commercial interests of the Investor: (a) (b) the fee is deferred, restricted to four years and is only payable when an Investor has received realisations equivalent to the Subscriptions invested (net of financial adviser fees); and the fact that the fee is deferred and rolled-up means that there is no need to deduct the fees from the Subscription monies and therefore this does not reduce (i) the amount available for Investments and (ii) the amount of potential EIS tax relief. The annual management fee is to cover the operational costs of providing the Bamboo EIS Portfolio Service. Performance fee The commercial return for the Portfolio Manager comes through a performance fee, which again is linked to a successful outcome for the Investor. 14

20 No Performance fee is payable until: (a) (b) the annual management fee of the Portfolio Manager has become payable (see Annual management fee above) and has been paid; and Investments in the Portfolio of an Investor have been realised in an amount equal to, or greater than, the Performance Fee Trigger Amount (as defined below). For these purposes, the Performance Fee Trigger Amount means, in respect of a Subscription, the amount of such Subscription (disregarding tax reliefs), adjusted as follows: (a) (b) deducting the aggregate amount (if any) of any initial and/or ongoing financial adviser fees (where the Investor has instructed the Portfolio Manager to facilitate the payment of such fees (see Initial and ongoing financial adviser fees below)); and adding the aggregate amount of the annual management fees of the Portfolio Manager (see Annual management fee above) paid by the Investor. The performance fee is payable at the rate of: (a) (b) twenty per cent (20%) of the amount by which aggregated Investment realisations exceed the Performance Fee Trigger Amount up to (and including) the Super-performance Fee Trigger Amount; and fifty per cent (50%) of the amount of by which aggregated Investment realisations exceed the Super-performance Fee Trigger Amount. The Portfolio Manager shall deduct annual management fees and the performance fee from the proceeds of realisation of Investments. The Portfolio Manager may seek to structure the performance fee in the form of shares or another instrument. Other fees and expenses The Portfolio Manager (or any Associate) may charge Investee Companies arrangement, monitoring or other fees (including fees in respect of any person acting as a director or other officer of any such Investee Company). The Portfolio Manager may also engage external advisers and consultants in connection with investments in, and realisations of, Investee Companies and fees arising may be deducted by the Portfolio Manager from any proceeds of realisation of Investee Companies. VAT All Portfolio Manager fees may be subject to Value Added Tax. Custodian charges Custodian annual administration fees The Custodian charges an annual administration fee of 75 (plus VAT) Custodian transaction fees The Custodian charges 0.35% of the value of any shares purchased or sold. VAT is not payable on Custodian transaction fees. Payment of Custodian fees The Custodian, will upon receipt of a Subscription, ensure that there is sufficient uninvested cash held in the name of the Investor to discharge the following Custodian fees: (a) the annual administration charge for the first five years (plus VAT); and 15

21 (b) 0.35% of the Net Subscription Amount (as defined above), to cover the purchase of shares into the Portfolio of the Investor. Financial adviser fees Initial and ongoing financial adviser fees An Investor may seek the advice of a financial adviser in relation to an investment in the Bamboo EIS Portfolio Service and may agree to pay fees to such financial adviser for any initial and/or ongoing advice. If the Investor has agreed to pay fees to a financial adviser for initial and/or ongoing advice, the Investor can authorise Bamboo to facilitate the payment of such fees by completing the authorisation in the Application Form. In these circumstances, the Custodian will: (a) (b) deduct an amount equal to the initial fee from the Subscription and pay the initial fee to the financial adviser; and ensure that an amount equal to four times the agreed ongoing financial adviser fee is held in cash in the name of the Investor, out of which the ongoing financial adviser fees will be paid as and when they become due. Tax treatment of financial adviser fees Where Bamboo is facilitating the payment of fees to financial advisers, these fees will not count towards the amount subscribed to the Portfolio Service (or available for investment in Investee Companies. This will therefore reduce the amount of tax relief that investors are able to claim. Illustrations Our aim is to complete transparency in relation to your investment in the Bamboo EIS Portfolio Service. Please see the illustrations on pages 17 to 22 (inclusive), which set out worked examples of how charges affect your investment and realisations in various circumstances. 16

22 ILLUSTRATIONS Subscriptions Example 1 Subscription with no financial adviser fees facilitated through the Portfolio Manager The Investor sends a cheque for 100,000 to the Custodian. He has not requested Bamboo to facilitate any fees to his financial adviser. Cheque sent to Custodian 100,000 Charges deducted from Subscription Portfolio Manager initial fee 2,400 97,600 (2% + VAT of 100,000) Custodian fees , ( 375 plus VAT, plus 0.35% of 98,000) Net amount available for EIS qualifying investment and tax relief 96,

23 Example 2 worked example of Subscription with initial and ongoing financial adviser fees facilitated through the Portfolio Manager The Investor sends a cheque for 100,000 to the Custodian. He has agreed an initial charge of two per cent (2%) and a charge of one per cent (1%) per annum with his financial adviser for advice in relation to the Bamboo EIS Portfolio Service and has instructed the Portfolio Manager to facilitate these payments to the Financial Adviser. Cheque sent to Custodian 100,000 Charges deducted from Subscription Initial financial adviser charge 2,000 98,000 (2% of 100,000) Portfolio Manager initial fee 2,400 95,600 (2% + VAT of 100,000) Cash retained to pay ongoing financial adviser charges 4,000 91,600 (1% of 100,000 for four years) Custodian fees , ( 375 plus VAT, plus 0.35% of 91,600) Net amount available for EIS qualifying investment and tax relief 90,829.40* *Please note that where the Portfolio is instructed to facilitate the payment of initial and/or ongoing fees to a financial adviser, this will reduce the amount available for EIS qualifying investment and tax relief 18

24 Realisations Example 1 Net investment of 96, and 0% growth after 5 years Gross investment return 96, Custodian exit transaction fees (0.35% of 96,808.40) Fees payable Portfolio Manager annual management fees 0.00 Portfolio Manager performance fee 0.00 Total fees Net investment return 96, EIS tax relief 29, Net return after EIS tax relief 125, Profit on Subscription 25, Note This example assumes: (a) all of the net investment is invested in EIS qualifying investments; and (b) no initial or ongoing financial adviser fees are facilitated by the Portfolio Manager 19

25 Example 2 Net investment of 96, and a loss of 25% after 5 years Gross investment return 72, Custodian exit transaction fees (0.35% of 72,606.30) Fees payable Portfolio Manager annual management fees 0.00 Portfolio Manager performance fee 0.00 Total fees Net investment return 72, EIS tax relief 29, Net return after EIS tax relief 101, Profit on Subscription 101, Note This example assumes: (a) all of the net investment is invested in EIS qualifying investments; and (b) no initial or ongoing financial adviser fees are facilitated by the Portfolio Manager 20

26 Example 3 Net investment of 96, and 25% growth Gross investment return 121, Fees payable Custodian exit transaction fees (0.35% of 96,808.40) Portfolio Manager annual management fees 9, Portfolio Manager performance fee 2, Total fees 12, Net investment return 108, EIS tax relief 29, Net return after EIS tax relief 137, Profit on Subscription 37, Note This example assumes: (a) all of the net investment is invested in EIS qualifying investments; and (b) no initial or ongoing financial adviser fees are facilitated by the Portfolio Manager 21

27 Example 4 Net investment of 96, and 50% growth Gross investment return 145, Custodian exit transaction fees (0.35% of 96,808.40) Fees payable Portfolio Manager annual management fees 9, Portfolio Manager performance fee 8, Total fees 18, Net investment return 126, EIS tax relief 29, Net return after EIS tax relief 155, Profit on Subscription 55, Note This example assumes: (c) all of the net investment is invested in EIS qualifying investments; and (d) no initial or ongoing financial adviser fees are facilitated by the Portfolio Manager 22

28 SECTION 4 THE RISK FACTORS AND CONFLICTS OF INTEREST Everything you do involves risks, which you constantly balance against the possible rewards. Investing is just the same. The Bamboo EIS Portfolio Service is a high-risk product and may not be suitable for all investors. If you are thinking of investing, we recommend that you first seek independent advice. Please note that Bamboo is not able to advise you on whether or not you should invest in this product. The following is a list of some of the risks that a potential Investor should consider. The list is by no means exhaustive. Past performance The past performance of the investment team, or any of the companies in which any of them have previously invested, is not a reliable guide to how this product will perform in future. There is no guarantee that the Bamboo EIS Portfolio Service will achieve its objective. We can make no guarantee of investment performance or the level of growth that will be generated. Your capital is at risk The rules governing which companies qualify for EIS tax relief mean that investments have to be in small and early-stage companies (which are consequently higher risk). The Bamboo EIS Portfolio Service will invest in shares and securities issued by unquoted companies, or companies quoted on AIM. Your capital and investment return are not guaranteed and you may not receive back all of the money which you invest. There is a possibility that investments in some of the companies will be completely lost. Your investment horizon and strategy You should consider the Bamboo EIS Portfolio Service a long-term investment. An investment into the Bamboo EIS Portfolio Service is for a minimum period of five years from the date of investment. Further, investments in unquoted and AIM-traded companies are likely to present a higher risk to your capital than holdings in companies on the main London Stock Exchange. You should not invest in this product unless you have thought carefully about whether you can afford the losses you may incur, and whether it is right for you. As investments into small, unquoted, and/ or AIM-quoted companies are likely to have higher volatility than shares listed on the main London Stock Exchange, the Bamboo EIS Portfolio Service has been designed with the aim of performing over a timeframe of at least five to seven years. Each investment in an EIS qualifying company needs to be held for at least three years to retain the EIS reliefs. Liquidity risk Investments in unquoted and AIM-quoted companies made by the Bamboo EIS Portfolio Service are likely to be more difficult to sell than investing in companies on the main London Stock Exchange. Accordingly, while we will always attempt to redeem your investment if you ask to withdraw your money (after the minimum five year investment period), this will not always be possible. In particular, it is not always possible to sell holdings in unquoted companies. Investors should therefore be aware it could take several years before such shares can be sold, and the timing of sales cannot be predicted. Current legislation and tax reliefs Rates of tax, tax benefits and allowances described in this Information Memorandum are based on current legislation and HM Revenue & Customs (HMRC) practice. These may change from time to time and are not guaranteed. Any tax benefits associated with an EIS investment are based on the personal circumstances of the individual investor. The Bamboo EIS Portfolio Service has been designed with UK resident taxpayers in mind. If you are not resident in the UK for tax purposes, it may not be appropriate or advantageous for you to invest in this product. 23

29 Reliance of senior management Investee Companies, by virtue of their size, are likely to be more reliant on the skills and management of a smaller executive team. In the event that an Investee Company loses a key manager, this could have an adverse effect on such Investee Company which is disproportionate when compared to the loss of a senior executive at a larger more established company. Suitable investment opportunities The Portfolio Manager may not be able to source a sufficient number of attractive opportunities and may not achieve the Investment Objectives, or fully invest the amount subscribed by an Investor to the Portfolio Service. Investor team availability The success of the Portfolio Service will depend in part upon the skill and expertise of the Portfolio Manager and the continued availability of the senior investment team of the Portfolio Manager. Terms of realisation Any form of realisation of an Investment may contain restrictions on the shareholders of the Investee Company, such as delayed payment for a portion of the price paid for the Investee Company (pending, for example, the achievement of certain commercial milestones). In the case of an IPO of the shares of an Investee Company, a restriction on shareholders' ability to sell shares for a limited period of time following the IPO may be imposed in order to ensure an orderly market. It may also be the case that some or all of the price paid for the shares in an Investee Company will be satisfied by the issue of securities in the purchaser company (rather than cash). Maintenance and timing of EIS tax reliefs The Bamboo EIS Portfolio Service invests in companies that we reasonably believe qualify for inclusion in an EIS portfolio. However, there is no guarantee that such companies will be, and will remain, EIS qualifying companies. If an Investee Company fails to meet the requirements of EIS legislation, EIS tax reliefs that have already been claimed may be withdrawn and an Investor may have to repay rebated tax. HMRC gives permission for EIS qualifying companies to issue EIS3 certificates. However, there is no pre-determined HMRC time-frame in which Investee Companies are required to issue the EIS3 certificates required by investors in order to claim their EIS tax benefits. The Portfolio Manager retains complete discretion to realise any Investment, including within the Minimum Period, in which case some or all of the tax reliefs may be lost. The dates on which initial income tax relief, capital gains tax deferral relief and inheritance tax relief relating to an investment in an Investee Company are available will vary depending on the date on which EIS qualifying investments are made. There can be no guarantee as to the availability and timing of the making of EIS qualifying investments and it may not be possible to allot shares in EIS qualifying companies prior to the end of a relevant tax year. Although the Portfolio Manager is targeting investment in at least five EIS qualifying companies, this cannot be guaranteed. The tax reliefs referred to in this Information Memorandum (particularly in Section 2) are those currently available and their value depends on the individual circumstances of Investors. Levels, bases of, and relief from taxation are subject to change. Any such change could be retrospective. Potential investors should consult their own tax advisers before making any investment in the Portfolio Service. In order to obtain the tax reliefs, the Investor must make the proper filings with HMRC within the required time periods, and Investors may lose such relief if they do not make such filings. Any approval by HMRC that an investment is an EIS qualifying investment in no way guarantees or endorses the commercial viability of the Investment being made. Conflicts of interest There may be occasions when the interests of one group of investors may conflict with those of another group (such as other investors or Bamboo). Where conflicts arise, controls are essential to ensure that Investors are always treated fairly. Bamboo has a conflicts of interest policy in place pursuant to the FCA Rules, which sets out how Bamboo identifies and manages conflicts of interest. 24

30 A summary of the Conflicts Policy is available at Investors are required to read and agree to this policy in order to make an investment into the Portfolio Service. When could conflicts of interest be beneficial to investors? The team may invest funds from other Bamboo managed funds alongside funds from the Bamboo EIS Portfolio Service. As a result of this co-investment, investors in the Bamboo EIS Portfolio Service can have access to investment opportunities that may not have been possible without being part of the larger deal with other Bamboo funds. In the case of our unquoted investments, we will often place someone on the board of directors of the companies we invest in, (either as a monitor or a director). Bamboo takes an annual fee for this service from the Investee Company, but this means we are able to closely monitor the investment we have made on behalf of our investors. If we appoint a director, this means that they have a legal obligation to act with the interests of all shareholders in the investee company, not just the interests of Bamboo investors. When could conflicts of interest be detrimental to investors? In the case of an unquoted company, we may have what we believe to be a good opportunity, but unfortunately are unable to invest as much of one group of our investors money as we would like, due to restraints such as the size of company or the amount of investment that qualifies for available tax reliefs. In these instances, investors from different Bamboo managed sources may only be able to invest an amount which is pro-rated down to ensure a fair distribution. 25

31 SECTION 5 INVESTOR AGREEMENT This Investor Agreement sets out the agreement between the Portfolio Manager and the Investor in relation to an investment in the Portfolio Service. 26