The Alternative Investment Platform Investment Guide for EIS/ SEIS/BPR

Transcription

1 The Alternative Investment Platform Investment Guide for EIS/ SEIS/BPR be From the beginning to the end of the process, we offer investors and professional advisors complete financial transparency. For professional advisers, their clients and high net worth investors only The Alternative Investment Platform Investment Guide 1

2 Introduction This guide relates to the Kuber Ventures Alternative Investment Platform for EIS, SEIS and BPR investments and must be read in conjunction with the Scheme Guide. Contents 2 Introduction 3 Ways to Invest 4 Selection of Managers & Portfolios 5 Single Premiums 6 Regular Premiums 7 Risks 10 Charges 14 Amersham Investment Management Limited 15 AMIM Marechale Odexia 23 AMIM Goldfinch 25 Seed Mentors SEIS 30 Blackfinch Media SEIS Music Portfolios 34 Blackfinch EIS Portfolios 37 Blackfinch IHT Portlfolios 38 Boundary Capital 42 Sapia 43 Deepbridge 48 Deepbridge Technology 49 Deepbridge IHT Service 52 Cosgrove Hall Films 60 Atlantic Screen Scores EIS 66 Guinness Asset Management 68 Guinness Sustainable Infrastructure EIS 69 Guinness Sustainable Inheritance Planning 73 Rockpool Investments 77 Seneca Partners 82 Seneca Inheritance Tax Service 87 Parties Involved 88 More Information 2 The Alternative Investment Platform Investment Guide Capitalised terms have their meaning described in the Glossary in the accompanying Scheme Guide which should be read in conjunction with this document. This guide is a financial promotion for the purposes of section 21 of the Financial Services and Markets Act It is issued by Kuber Ventures Limited, which is an appointed representative of Sturgeon Ventures Limited, which is authorised and regulated by the Financial Conduct Authority. It is accordingly an exempt financial promotion for the purposes of article 16 of the Financial Services and Markets Act 2000 (Financial Promotion) Order Please read this document and all related documentation in their entirety before making any investment decision, and please also carefully consider whether you should take independent financial, professional, legal or tax advice. You are strongly recommended to consider the risk warnings commencing on page 7 as well as the additional warnings set out in the accompanying Scheme Guide.

3 More choice, more ways to invest EIS Managers available through Kuber The Managers have been selected to provide a diverse range of strategies covering a wide range of underlying investment opportunities. The following pages describe the current EIS opportunities available through Kuber. The following EIS portfolios are currently available through Kuber: > Boundary Capital Home Run EIS/SEIS > Guinness Asset Management AIM EIS > Amersham Investment Management Odexia Consumer Brands Fund Seed Mentors Goldfinch > Seneca Partners > Blackfinch > Rockpool EIS Portfolio Service Music SEIS Media EIS Exit Focused Exciting Growth Next Generation > Sapia Partners Deepbridge Technology Atlantic Screen CHF We continually seek to offer new EIS opportunities through Kuber, so please check our website for the latest list of available managers and portfolios. bein safe hands The Alternative Investment Platform Investment Guide 3

4 Selection of Managers & Portfolios All managers available through the Scheme have been subject to a thorough due diligence process Based on parameters agreed with its investment committee, Kuber will identify a shortlist of potential EIS Managers from a market wide analysis. These parameters have been established following a selection criteria which are based on a set of criteria widely used by other independent bodies from across the wealth advisory industry. The following are examples of the key areas typically considered > A record of investment in EIS > FCA permissions > A commitment to future EIS launches > In-house investment protocol, key personnel of high sanding, > Quality levels of service, and fair costs Kuber will, through their internal investment committee proceed to make the final selection and negotiate terms with the selected Managers. 4 The Alternative Investment Platform Investment Guide

5 Subscriptions Minimum Lump Sum 20,000 The minimum single premium is 20,000, with a minimum investment of 5000 for each EIS Portfolio. Any lump sum you invest through Kuber will be held by the Custodian pending investment by the Manager or Managers that you have selected. Any additional investment is also subject to the minimum single premium of 20,000. Minimum Monthly Subscription 500 It is likely that the Manager will also have raised capital from other sources which will be co-invested alongside your Kuber investment. You will enter into a single Investor Agreement that will regulate your relationship with each Manager that you have chosen to invest with. The Manager will use its discretion in choosing investments that are suitable and appropriate for you. Each Manager will endeavour to make sure that each of the Investors in its EIS portfolio(s) is appropriately diversified although this is not always possible. For example, where an Investor s total subscription to an EIS portfolio is too small, the Manager may not be able to allocate a pro rata investment in each Investee Company. Your contribution Held as cash by custodian until the Portfolio Manager is ready to invest EIS Portfolio 1 EIS Portfolio 2 EIS Portfolio 3 EIS Portfolio 4 EIS Portfolio 5 Nominee holds EIS shares on your behalf The Alternative Investment Platform Investment Guide 5

6 Regular Premiums How will the money be invested? The minimum monthly contribution is 500 per portfolio. You may vary your contributions at any time. If regular contributions are only made for a short period of time to a particular portfolio, then it is possible that a Manager will have to invest all of your subscriptions into a single Investee Company. be clear and simple 6 The Alternative Investment Platform Investment Guide

7 Risks This section details material risk factors that could adversely impact an investment through Kuber. It does not represent an exhaustive list of risk factors nor has it been set out in any particular order of priority. Investors must carefully consider all of the information contained in this Investment Guide and decide whether an investment through Kuber is suitable for them in light of their personal circumstances, tax position and financial resources. Potential investors are strongly recommended to seek independent financial and tax advice from suitably qualified professional advisers. Investment risks The Managers will be investing in unquoted companies that are not suitable for all types of investor > There is generally no external market for the Qualifying Shares > This means it could be difficult or even impossible to realise the investment or obtain accurate performance information > The return on any EIS will depend greatly on the Manager s investment performance. Past performance of any Manager is no guide to future performance > The Qualifying Shares will not be listed on the London Stock Exchange. An investment in EIS should be regarded as a longer term investment (a minimum of three years) to retain the tax reliefs. Realisation will generally depend on the exit route secured by the Managers > Investments in small or medium unquoted companies by their nature involve a high degree of risk and there is a strong possibility of companies failing. Your capital is at risk and you may not receive back the amount invested or any return > The market value of the shares in an Investee Company may be more or less than the valuation determined by the Manager. You should be aware that the value of an investment in an EIS and the income (if any) derived from it may go down as well as up > The expected life of each investment is three to five years or more; we can t guarantee the availability or suitability of a new investment at the end of this time > The returns accruing from cash deposits or money market funds will principally be affected by movements in interest rates > There is a risk that individual managers do not raise sufficient funds to match some or all of your investments in which case your investment may be delayed or have to be reallocated to an alternative manager The Alternative Investment Platform Investment Guide 7

8 Risks continued Tax and regulatory risks Tax reliefs are subject to approval by HM Revenue & Customs in accordance with their qualifying rules which are subject to change from time to time > It may take considerable time from the date the Qualifying Shares are issued to obtain the income tax relief > Business Relief ( formally known as Business Property Relief) only applies on death and as such Qualifying Shares must be held at this time and must still meet the qualifying requirements > You should be aware that the various tax benefits described in this Investment Guide are based on the Promoter s understanding of the existing tax legislation and HMRC practice. This interpretation may not be correct and it is possible that tax legislation may change in the future, which could adversely affect the performance of any EIS Portfolio and/or your position > The amount of EIS Relief you may gain from subscription to an EIS Portfolio depends on your personal circumstances. You are strongly advised to seek independent professional advice in relation to the tax implications of your investment > The Managers will seek to secure EIS Relief on all investments made. Tax relief could be withdrawn or modified in certain circumstances and neither Kuber, nor the Managers, nor the Administrator accepts any liability for any loss or damages suffered by you or any other person as a consequence of such relief being denied, withdrawn or reduced > You may lose some or all of the tax benefits derived under the EIS if you fail to comply with the relevant legislation. Such a situation might arise, for example, if you cease to be a UK tax resident during the Relevant Period or you receive value from an Investee Company, other than by way of an ordinary dividend, in the period commencing one year prior to the issue of EIS Qualifying Shares to the end of the Relevant Period > There is a risk that the investment manager may take longer than expected to match investments on your behalf resulting in you qualifying for income tax relief in a later tax year or missing deadlines for CGT deferral relief 8 The Alternative Investment Platform Investment Guide

9 Risks continued > Where an Investee Company ceases to carry on a Qualifying Trade during the Relevant Period, its EIS qualifying status may be adversely affected. No guarantee can be given that all investments made by the Managers will carry on a Qualifying Trade, or continue doing so, for the purpose of claiming EIS Relief. The Managers will, where possible, implement measures to protect against this risk such as seeking provisional approval from HMRC that each company in which the Manager intends to invest is an EIS Qualifying Company > Any disposal of EIS Qualifying Shares during the Relevant Period will crystallise an obligation to repay the income tax relief claimed in respect of those shares and profits from the sale of shares will be subject to capital gains tax Other risks > It is possible that Investee Companies may be exposed to exchange rate fluctuations which may affect both the profits of the company and the value of the Qualifying Shares > EIS Qualifying Companies typically have small management teams and are highly dependent on the skills and experience of a small number of individuals > There is no guarantee that EIS qualifying investments will be available to re-invest into when investment proceeds are returned to the Administrator > It is possible that a manager may cease to be authorised to manage your portfolio. Please also refer to the risk section of the Scheme Guide. The Alternative Investment Platform Investment Guide 9

10 Charges The charges that will apply to any investment through Kuber are intended to be clear and simple: First, you may be liable to pay fees to an authorised financial adviser in relation to advice in connection with your investment. On your instruction Kuber will set aside an amount from the money which you subscribe to pay your adviser for the cost of the advice (excluding VAT, if any, for which you remain responsible). The basis upon which payment is made will depend upon the instructions you provide on your Application Form. Initial adviser charges will be deducted from your investment before any money is transferred to your selected portfolio(s). Where you have agreed to pay your adviser an annual fee through Kuber, sufficient funds to cover 4 years fees will be held back and not invested. Please note that Kuber is only able to settle fees on your behalf for advice from a firm regulated by the Financial Conduct Authority. Kuber will apply the following charges > An initial fee of 1.5% of your subscription, which is deducted from your investment > An annual fee of 0.2% of your total portfolio of investments made with capital subscribed through Kuber > An administration fee of 20 per contribution for regular contributions or 100 for single contributions > A transaction fee of 7.50 per investment made > Kuber charges managers an annual fee of up to 0.5% per annum of funds invested in EIS companies for services it provides to the manager > Kuber has, where possible, negotiated reduced fees with EIS Managers to offset the costs associated with investing through Kuber. Generally, this will mean that there is minimal difference in cost between investing through Kuber and investing directly with the EIS Manager The services Kuber arranges or provides include ongoing custodianship, administration and monitoring of your investments. Kuber has negotiated fees with EIS managers for taking responsibility of these services from them unless otherwise identified in this Investment Guide which allows Kuber to keep the annual fees we charge you to a minimum. 10 The Alternative Investment Platform Investment Guide

11 Charges continued Where the Manager charges you a fee directly, this fee will be reduced. Where the Manager charges a fee directly to investee companies it will not be possible for this fee to be reduced solely for those investing through Kuber. In these circumstances the Manager will arrange to rebate part of their fee received from the Investee Company to the client account for the benefit of the investor. This amount can then be used to purchase additional shares in subsequent investee companies or applied to fees. Details of the charges levied by the different Managers are outlined in the portfolio descriptions on the following pages. The table overleaf shows the effective cost of investing through Kuber. Where manager rebates do not cover the ongoing fees in their entirety, the Manager will retain funds to cover fees. The Alternative Investment Platform Investment Guide 11

12 Charges continued Guinness Sustainable Infrastructure EIS Initial charges (% of subscriptions) Annual charges (% of Portfolio) Kuber charge Net investment Manager rebate or fee reduction Effective cost of Kuber Kuber charge Boundary Capital Home Run 1.5% 98.50% 0.99% 0.51% 0.2% Atlantic Screen Music 1.5% 98.50% 0.99% 0.51% 0.2% Deepbridge Technology 1.5% 98.50% 3.45% -1.9% 0.2% Guinness AIM EIS 2 1.5% 98.50% 0.99% 0.51% 0.2% Guinness Sustainable Infrastructure EIS 1.5% 95.80% 0.99% 0.51% 0.2% Rockpool Investments Portfolio 1.5% 98.50% 0.99% 0.51% 0.2% Seed Mentors SEIS 1.5% 98.50% 4.43% -2.87% 0.2% Odexia 1.5% 98.50% 1.97% -0.44% 0.2% Goldfinch 1.5% 98.50% 0.99% 0.51% 0.2% Seneca Partners Portfolio 1.5% 98.50% 0.99% 0.51% 0.2% Blackfinch Music SEIS 1.5% 98.50% 0.99% 0.51% 0.2% Blackfinch Media EIS 1.5% 98.50% 0.99% 0.51% 0.2% CHF Media 1.5% 98.50% 1.49% 0.01% 0.2% Blackfinch IHT Portfolios 1.5% 95.80% 0.99% 0.51% 0.2% Deepbridge IHT Service 1.5% 95.80% 3.45% -1.9% 0.2% Guinness Sustainable Inheritance Planning 1.5% 95.80% 0.99% 0.51% 0.2% Seneca Inheritance Tax Service 1.5% 95.80% 0.99% 0.51% 0.2% Flow of funds Initial subscription Kuber Manager Portfolio account Investee company Kuber charge and Adviser charges paid Bonus Shares or cash rebate Reduced Manager fee Either/Or Manager fee 1 All Guinness fees and the rebate are deferred until they can be paid from the proceeds of Investments. 12 The Alternative Investment Platform Investment Guide

13 Sectors & Strategies Portfolio Strategy Sector Rockpool Exit Focused Project Finance Generalist Rockpool Next Generation Project Finance Genralist Goldfinch Project Finance Media Blackfinch EIS Project Finance Media CHF Media Project Finance Media Atlantic Screen Project Finance Media Boundary Capital Home Run EIS/SEIS Private Equity Generalist/Seed Deepbridge Technology Private Equity Technology Guinness AIM EIS Private Equity Generalist Guinness Sustainable Infrastructure EIS Odexia Consumer Brands Private Equity Retail Rockpool Exciting Growth Private Equity Generalist Seneca EIS Portfolio Service Private Equity Technology Seed Mentors SEIS SEIS Generalist Blackfinch SIES SEIS Media Blackfinch IHT Portfolios Deepbridge IHT Service Guinness Sustainable Inheritance Planning Seneca Inheritance Tax Service BPR BPR BPR BPR Project Finance Strategies invest in companies specifically created to carry out an EIS qualifying trade by the fund or portfolio. Private Equity Style EIS portfolios will invest in companies which are not directly connected to the fund or portfolio. The Alternative Investment Platform Investment Guide 13

14 Amersham Investment Management Limited Manager Overview Who are AMIM? What AMIM says about themselves AMIM is a specialist investment management firm and fund manager founded by two former principles of Tradepoint Stock Exchange (which as a UK Recognised Investment Exchange in 2001 became, as Virt-x, part of the Swiss Stock Exchange). The firm is regulated by the Financial Conduct Authority as an investment advisor and fund manager. The Manager has also appointed an investment advisory committee which will review and undertake due diligence in respect of all potential investments made by the Portfolio. The Manager will have the right to approve or decline any investment proposals put forward by the Investment Advisory Committee. Amersham Investment Management Ltd ( AMIM ) was founded in 2009 by Paul Barnes and Michael Waller-Bridge for the main purpose of developing investment management and support services with regulated businesses. After researching their identified market need, AMIM was subsequently authorised in 2011 as an FCA regulated investment management firm and fund operator with FRN and is organised to provide Regulated Operator services to corporate advisory firms and Investment Management services in respect of EIS and SEIS funds. AMIM, authorised and regulated by the Financial Conduct Authority, thus provides services in the structure, establishment and operation of fund investment schemes which can include VCT, EIS and SEIS funds and once capital has been raised for a particular fund, to undertake the investment management and operation of the fund for its duration and termination. AMIM work with other professionals to provide a best of breed independent service in the management of the Fund. AMIM has its own highly defined strategy for success, which doesn t automatically mean a carry in the investors returns. Their approach and willingness to also use external but known resources enables AMIM Funds to benefit from an extensive, detailed pool of knowledge and experience providing good insights into prospective investee companies, and the ability to conduct highly valuable, cost-effective commercial due diligence and if an investment is made to provide sound ongoing advice to portfolio investments through to exit. 14 The Alternative Investment Platform Investment Guide

15 AMIM Marechale Odexia Portfolio Overview The Portfolio offered on the Kuber platform will be managed by Amersham Investment Investment Management Limited ( AMIM ) ( The Manager ). The Manager will also appoint a relevant experience-led advisory panel which will review and undertake due diligence in respect of all potential investments made by the Portfolio. The Manager will have the right to approve or decline any investment proposals put forward by the advisory panel. Investments will be made predominately in new ordinary shares of UK Qualifying Companies and by providing monies for capital substitution. To reduce the risk of investing in smaller companies the investment Approach will be to concentrate the Fund s focus through targeting:. EMERGING CONSUMER AND LEISURE BRANDS, which have the opportunity to scale significantly. Brands where Odexia and Marechale can provide experience and contacts to accelerate growth, build brand equity and add significant value. > EARLY AND LATER STAGE BUSINESSES, but not start-ups. Businesses which have current revenues of not less than 1 million, but typically much higher, in the preceding 12 months with no over reliance on one revenue stream or customer (so no single customer accounts for more than 40% of an Portfolio company s revenues at the date of investment) > HIGH GROWTH - Businesses with substantiated revenues showing high growth (already achieving or with a potential growth rate in excess of 30% per annum). Future growth at a similar or faster rate. Future forecasts underpinned by assumptions that can be ratified in the due diligence process > GOOD MANAGEMENT TEAMS - Backing exceptional entrepreneurs and management teams, who value partnership > Origination The Manager has entered into an agreement with Marechale Capital plc (the Investment Adviser or MAC ), under which Marechale Capital has agreed to act as Investment Adviser to the Fund, in partnership with Odexia. The partnership between Odexia and Marechale Capital provides the Fund with the opportunity to invest in high growth emerging consumer and leisure brand businesses which would not normally be available to private investors The Alternative Investment Platform Investment Guide 15

16 AMIM Marechale Odexia Portfolio Continued Odexia was founded by Carl Atkinson. Carl has worked as a Director and CEO at some of the UK s most respected and fast growing consumer goods businesses. Currently he originates deals for Private Equity firms with a clear focus on food/drink & health/beauty. His current and previous NED, Chair & Advisory roles include: LDC Private Equity, Pukka Herbs, Radical Skincare, DECIEM, The Organic Pharmacy, Bodyism, BeautyMART, Cognolink, Ark Skincare, Santhilea & Seventh Generation. Exit Strategies In readiness for the launch of the Odexia Consumer Brand EIS Fund, Carl has assessed and met dozens of fast growing consumer brands and assessed each for fit with the Fund s focused investment criteria. This should enable the funds to be invested in a shorter timeframe than is typically achieved by other funds. Carl has relationships with a large number of UK and US based Private Equity funds and trade buyers that make for natural acquirers of businesses in which Odexia Capital invests. The Marechale team has extensive experience in advising, investing, and raising capital for high growth companies and with these complementary skills and experience is a good Investment Adviser partner for Odexia. Marechale will be responsible for raising funds for the Fund, providing assistance to Carl Atkinson in sourcing, screening and negotiating investments for the Fund, preparing investment recommendations for the Investment Advisory Committee, and preparing half yearly and annual reports on the investments. This will free up Carl s time to focus on sourcing, monitoring and assisting Portfolio Companies. The Fund will take a long-term view on the Portfolio Companies and will aim to only look at the possibility of facilitating an exit from an Investment after it has been held for at least three years, thereby ensuring, wherever possible, that the Investment has met one of the key qualifying conditions necessary for Investors to obtain the relevant tax reliefs. However, there may be occasions where an earlier sale is a commercially sensible decision. It is anticipated that most exits from Qualifying Investments in portfolio companies will take place after they have been held for four years though some could take longer depending on market conditions and the nature of the Portfolio Companies. 16 The Alternative Investment Platform Investment Guide

17 AMIM Marechale Odexia Portfolio Continued Exits The Fund anticipates that the options for investors to exit a Portfolio Company may include the following: > An independent company purchases the intellectualproperty rights of the Portfolio Company at price determined by an independent valuer > A sale or part sale of the Portfolio Company > The purchase by the Portfolio Company of shares held by shareholders > The introduction of new investors (not EIS investors, who just buy new shares) to the Portfolio Company > The reduction of the Portfolio Company s share capital > The voluntary liquidation of the Portfolio Company or the sale of the Portfolio Company s assets and subsequent distribution of proceeds to shareholders The Alternative Investment Platform Investment Guide 17

18 AMIM Marechale Odexia Portfolio Continued Specific Risk Mitigation Strategies In addition to best practice and generally accepted commercial principles, the Fund will adopt the following key mitigation strategies for its Portfolio Companies. The Fund s investment strategy includes investing in the following: > EMERGING CONSUMER AND LEISURE BRANDS, which have the opportunity to scale significantly. Businesses that have developed brands which have strong brand characteristics such as; clear focus, unique positioning or products, disruptive strategies and the opportunity to scale significantly > PREDOMINANTLY INVESTING IN FOOD, DRINK AND BEAUTY/ PERSONAL CARE BUSINESSES, where Odexia and Marechale have the most experience and contacts to accelerate growth, build brand equity and add significant value > EARLY AND LATER STAGE BUSINESSES, but not start-ups. Businesses which have current annual revenues of not less than 1 million, but typically much higher, with no over reliance on one revenue stream or customer (so no customer accounts for no more than 40% of a Portfolio company s revenue at the date of investment) > HIGH GROWTH - Businesses with substantiated revenues showing high growth (The business can demonstrate an annualized growth rate in excess of 30% per annum). Future potential growth at a similar or faster rate. The future forecasts are underpinned by assumptions that can be ratified in the due diligence process Specific Risks relating to Consumer brand based businesses Specific risks relating to Consumer Brand businesses which prospective investors should consider carefully beforemaking an investment decision in the Fund, include, amongst others, the following > Demand for consumer goods is vulnerable to changes in fashion. Fashion and consumer demand change continually over time. In order to maintain and grow revenues Portfolio Companies will need to adapt and develop their offerings to changing fashion and consumer demand. There is no guarantee that Portfolio Companies will be able to do this or that their strategy, product development and marketing will achieve profitable results > Proprietary rights and trademarks may be important to the success of Portfolio Companies and their competitive position. Portfolio Companies may seek to protect their proprietary rights through a combination of copyright, trademark and patent laws, trade secrets, confidentiality procedures and contractual provisions, which afford only limited protection 18 The Alternative Investment Platform Investment Guide

19 AMIM Marechale Odexia Portfolio Continued > There is no assurance that Portfolio Companies can commercially protect their proprietary rights or that other third parties will not independently acquire substantially equivalent or superior knowledge, design around the products of Portfolio Companies, copy aspects of the products of Portfolio Companies or obtain and use the proprietary information of Portfolio Companies > It cannot be assessed with certainty how long a period of time it will take for new operations (e.g. new product lines, distribution channels, outlets and geographic territories ) developed by Portfolio Companies to become profitable. There can be no assurance that the estimated costs and revenues associated with each new operation will be accurately forecasted or time lined > Although Portfolio Companies may have been successful in developing new operations in the past, for them to reach the required criteria; there is no assurance that they will continue to be able to do this. Operations overseas involve different commercial, regulatory, financial, foreign exchange and other risks and there can be no guarantee that the historic results of Portfolio Companies in helping them reach the Fund s investment criteria can be repeated in new geographic markets > Portfolio Companies may be affected by loss or damage to any goods they import, and will be vulnerable to other risks including war or civil unrest in the countries from which products sold by them are sourced > The past performance of any asset (such as a restaurant site) acquired by Portfolio Companies is no guarantee of future performance of that asset > The food and drink sector is regulated. There is no assurance that new legal or administrative interpretations or regulations under applicable jurisdictions, will not result in administrative burdens, increased costs, or have other adverse consequences on Portfolio Companies operating in the food and drink sector > Adverse changes in the market place (whether relating to the actions of competitors, changes in the consumer market, changes to government regulations or changes to other market conditions) could adversely affect the viability and financial performance of Portfolio Companies. The ability to implement the business strategy of Portfolio Companies successfully may be adversely impacted by factors outside the Directors control that they cannot foresee, such as technological, legislative or regulatory change The Alternative Investment Platform Investment Guide 19

20 AMIM Marechale Odexia Portfolio Continued > The food and drink sector is regulated. There is no assurance that new legal or administrative interpretations or regulations under applicable jurisdictions, will not result in administrative burdens, increased costs, or have other adverse consequences on Portfolio Companies operating in the food and drink sector. Specific Risk Mitigation Strategies > Adverse changes in the market place (whether relating to the actions of competitors, changes in the consumer market, changes to government regulations or changes to other market conditions) could adversely affect the viability and financial performance of Portfolio Companies. The ability to implement the business strategy of Portfolio Companies successfully may be adversely impacted by factors outside the Directors control that they cannot foresee, such as technological, legislative or regulatory change. In addition to best practice and generally accepted commercial principles, the Fund will adopt the following key mitigation strategies for its Portfolio Companies. The Fund s investment strategy includes investing in the following: > EMERGING CONSUMER AND LEISURE BRANDS, which have the opportunity to scale significantly. Businesses that have developed brands which have strong brand characteristics such as; clear focus, unique positioning or products, disruptive strategies and the opportunity to scale significantly. > PREDOMINANTLY INVESTING IN FOOD, DRINK AND BEAUTY/ PERSONAL CARE BUSINESSES, where Odexia and Marechale have the most experience and contacts to accelerate growth, build brand equity and add significant value. > EARLY AND LATER STAGE BUSINESSES, but not start-ups. Businesses which have current annual revenues of not less than 1 million, but typically much higher, with no over reliance on one revenue stream or customer (so no customer accounts for no more than 40% of a Portfolio company s revenue at the date of investment). > HIGH GROWTH - Businesses with substantiated revenues showing high growth (The business can demonstrate an annualized growth rate in excess of 30% per annum). Future potential growth at a similar or faster rate. The future forecasts are underpinned by assumptions that can be ratified in the due diligence process. > UK BASED BUSINESSES OPERATING PREDOMINANTLY IN THE UK, to minimise currency risk, unknown/risky markets and ensuring proximity between Odexia, Marechale and the Portfolio business. 20 The Alternative Investment Platform Investment Guide

21 AMIM Marechale Odexia Portfolio Continued Specific Risk Mitigation Strategies How do Amersham and Odexia charge for their services > GOOD MANAGEMENT TEAMS - Backing exceptional entrepreneurs and management teams, which value partnership > PREDOMINANTLY EIS ELIGIBLE BUSINESSES - Predominantly the Fund will invest in EIS qualifying investments. Investment in EIS qualifying shares benefit from income tax relief of up to 30% and income tax loss relief of up to 45%. These tax reliefs, when applied together and under certain circumstances, may provide total tax reliefs of up to 61.5% of the original investment amount, and thereby could reduce the amount of investment losses on EIS qualifying investments for relevant investors to 38.5p for every 1.00 invested Investment Fee The Manager will collect and administer a fee of 5% on the total Subscriptions made by Investors to the Fund on the initial close and any subsequent close of the Fund. Of this amount up to 100% will be recovered as an arrangement fee from each of the Portfolio Companies pro-rata to the investment made by the Fund into the Portfolio Company Launch and establishment charges The expected fee for the launch and establishment of the Fund is 1% of total subscriptions raised subject to a minimum payment of 40,000. The launch and establishment fee will be recovered as an arrangement fee from each of the Portfolio Companies pro rata to the investment made into such Portfolio Company by the Fund. Of this amount a minimum fee of 12,750 will be paid to the Manager; the Manager s fee will rise by 0.5% of the total subscriptions raised above 5M.from each of the Portfolio Companies pro rata to the investment made into such Portfolio Company by the Fund. Of this amount a minimum fee of 12,750 will be paid to the Manager; the Manager s fee will rise by 0.5% of the total subscriptions raised above 5M.Administration Fee: 2% per annum of the amount invested in the Portfolio Company, will be payable by the Portfolio Company on an annual basis, payable quarterly in advance. Of this fee, 1% will be payable to the Manager and 1% payable to the Investment Adviser. Performance Fee: This will amount to a 20% performance fee on realised amounts in excess of aggregate Subscriptions made to the Fund net of expenses. Other Fees: The Manager considers there may be additional costs, to be agreed in advance, which may be payable by Portfolio Companies including Fund administration, custodian fees, due diligence, abort fees and any other reasonable fees incurred in managing the Fund. The Manager s annual fee is payable for a period of five years from the close of the Fund. The Alternative Investment Platform Investment Guide 21

22 AMIM Marechale Odexia Portfolio Continued How do Amersham and Odexia charge for their services The fees and charges described above are exclusive of VAT, which will be charged as applicable. Please note Up to 100% of the total investment fee and launch and establishment fees or charges set out above, will not be payable directly from Investors Subscriptions as these will be payable by the Portfolio Companies. Where fees and costs are payable by the Portfolio Companies and not by Investors in the Fund directly, they will, in effect, reduce the returns generated by the Portfolio Companies for Investors. For investments in AMIM Odexia fund through Kuber, the manager will make a payment of an additional 2% commission of the amount invested in companies to Kuber for the services provided by the Kuber Multi Manager Platform. Kuber has instructed the manager to redirect these payments in the form of cash to your account on the Kuber Platform. 22 The Alternative Investment Platform Investment Guide

23 AMIM Goldfinch Portfolio What AMIM says about themselves AMIM believe that this approach helps the Firm both to better investment decisions and to more effectively manage these investments. The principals behind AMIM have many years breadth and depth of experience in dealing with smaller unquoted companies and a track record in delivering results, both in pure financial terms as well as other qualitative measures. AMIM offer a particular understanding of the requirements of the smaller unquoted business as the principals are themselves business builders. How AMIM describes their investment process Key criteria: > To focus on experience in the chosen sector: Investments will not be made in companies where the Fund Manager has not assessed and is confident of the suitability of the investee companies management to be up to the tasks required and that they have been provided with the information required to review and consider in detail the various hurdles and objectives needed to create a successful business in each case. The Fund Manager s directors have been working actively, at all management and director levels, with a broad spread of SME companies for over 25 years and can call on an extensive group of other experienced business practitioners. > To ensure there are strong exit strategies: Investee companies will need to demonstrate a credible exit strategy in order to satisfy the Fund Manager s exit criteria. A trade sale, or outright sale of assets and IP from within the company is the most usual form of exit in this sector and AMIM will need to be convinced there is likely to be strong competition from a variety of trade buyers. Whilst EIS shares must be held for at least 3 years to maintain the EIS tax breaks, experience shows that the best exits sometimes take longer to achieve. The Fund should therefore be viewed as a 3-5 year investment in order to achieve its full exit potential. > To avoid adverse gearing: The Fund will seek to restrict investee company debt to modest levels on an ongoing basis, typically not more than 40% of the total funding requirement of the business needs, or where the Portfolio Company is an asset backed business, debt levels will be no more than 70% of loan to value, with accompanying debt service levels being paid from operating cash flows. As a matter of principle, the Fund intends to keep a tight rein on all debt ensuring that positive cash flows, when derived by the business, are used to pay down debt wherever possible. The Alternative Investment Platform Investment Guide 23

24 AMIM Goldfinch Portfolio Continued How AMIM describes their investment process > To focus on keen entry prices: Capital measures for SME s in the film industry are always difficult to access. The sector expertise and pipeline arrangement with Nyman Libson Paul Film LLP, ( NLPF ) should enable good terms to be negotiated with investee companies, thus creating good upside potential for investors. The Fund Manager is well qualified to fulfil the above investment criteria on account of the following: > The Fund s positioning: AMIM s pipeline deal-flow agreement with NLPF and in particular the Goldfinch Film brand provides access to proposed transactions in the sales agent sector where the potential investee company will operate. This places the Fund in a good position to use this arrangement in this sector. > Its approach to Portfolio Companies management capability: AMIM s approach is designed so that each potential investment is subject to a high hurdle, both in the detail of the operating plan but also the companies management capabilities to both understand and have the experience to overcome barriers to success. This approach is a fundamental step in considering each investment and will be deployed in the due diligence process in each case by AMIM. > ts experience of all market conditions: The principals through their diverse business interests, have operated through a variety of economic cycles and market conditions. Both favourable and adverse conditions have been experienced. Given the UK s current macro-economic environment, its impact on a portfolio company s ability to withstand sustained adverse conditions as well as exploit opportunities, which may arise, consequently will be a key element of the Fund Manager s review and monitoring activities. 24 The Alternative Investment Platform Investment Guide

25 The Seed Mentors SEIS Fund Who is Seed Mentors & Amersham? Seed Mentors Limited Seed Mentors Limited is a privately owned company incorporated in England & Wales, dedicated to finding start-up businesses suitable for investment and then supporting them when investment funds have been provided. Seed Mentors Limited Seed Mentors Limited ( Seed Mentors ) both seek out and have many companies approach them for assistance in securing start-up funds. What Seed Mentors These companies span the entire spectrum of business activity. To facilitate the funding process, Seed Mentors carry out initial due diligence and with companies they believe merit further consideration, they arrange for them to be interviewed on Seed Mentor pitching days, held at a variety of venues, where their plans are subjected to scrutiny and the key entrepreneurs behind the business are questioned in detail. It is usual on such days to have accountants and lawyers in attendance to consider and answer any issues that may arise. Those companies that pass the pitching day event and the accompanying rigorous process would then be recommended to The Second Seed Advantage SEIS Fund s Investment Committee for them to finalise checks, make the necessary submission and to seek investment approval by the Investment Manager. As part of their review process Seed Mentors may put forward conditions to the Investment Committee, which in their opinion should be met prior to investment or as a condition of further funding. In making their recommendation to the Investment Committee, the exact detail of the funding arrangements viz a viz costs, share of equity and the terms under which the management of the proposed investee company work would be considered on a case by case basis. The Alternative Investment Platform Investment Guide 25

26 Seed Mentors and Amersham Overview continued The Investment Manager would consider any recommendations made by the Investment Committee independently and will make the decision as to investment suitability. Seed Mentors now have over fifty five mentors and actively seek to increase the number so as to provide a comprehensive back up mentoring service for the investee companies in various areas of specialism. Seed Mentors will also nominate a suitable Independent Director separate from the mentors to the investee company. With their contacts to various groups of Angel Investors, Seed Mentors also work with others who may participate or procure cofounders of any equity investments where appropriate. Seed Mentors may also make arrangements with suitable referrers who can introduce start-up companies. These arrangements may, for example, be with firms of Chartered Accountants. As part of their review and due diligence exercise, and where it is necessary, Seed Mentors will access any specialists in particular business areas needed to properly assess any applicants. Seed Mentors is not an FCA authorised firm and will not be providing any investment services or undertaking any regulated activities in connection with the Fund. Seed Mentors will provide the services of its directors or such other independently and suitably qualified consultants as it procures to provide the mentoring but such persons shall in each case be persons with a minimum of ten years experience in their particular discipline or who can otherwise demonstrate professional competence to provide mentoring services. 26 The Alternative Investment Platform Investment Guide

27 Seed Mentors and Amersham Overview continued How Seed Mentors & Amersham describes its investment process The fund represents an attractive opportunity to invest with the benefits of SEIS Reliefs and CGT reliefs in a number of small businesses in different business sectors effectively spreading the risk for the Investor compared to concentrating investment in one business sector alone. Seed Mentors have regular pitching events around the UK where potential companies pitch their business plan. Prior to the events each company submits their business plan which is reviewed by the Investee committee. At the event the potential company meets with the Investment Committee, an Accountant and a Solicitor. This ensures that when their business plan is presented there is a wide range of knowledge to challenge their plans. The investment committee then meet and decide on whether investment into these companies is applicable. More due diligence is completed on those companies that could be invested in. A recommendation is then made to Amersham based on the above process who reviews a suite of documents concerning the due diligence and the if content with the proposed investment approves it. The Alternative Investment Platform Investment Guide 27

28 The Seed Mentors SEIS Fund continued How Seed Mentors charge for their services Seed Mentors will not make any charges directly to you but instead fees are charged to the investee companies. Initial Fee There is an Initial Fee payable by Investee Companies to Seed Mentors equal to 7.5% of amounts invested in them by Investors through the Fund, out of which the costs of the establishment of the Fund will be paid. Annual Mentoring Fee Seed Mentors charge a sum equal to 5% of turnover per annum per each Investee Company and a Director s Fee and Other Fees as set out below. Manager s Fee In addition to a launch fee totalling 7,500 in aggregate payable by the Investee Companies (and apportioned between them) deducted from monies invested into the Investee Companies, each Investee Company will contribute 290 per month towards the Manager s on-going fee, together with an additional administrative fee of 1,500 when the Manager s services are terminated. Director s Fee Seed Mentors charge a sum equal to 2% of turnover per annum per each Investee Company for the provision of a director to the Investee Company. Other Fees Investee Companies will pay Seed Mentors additional mentoring fees as Seed Mentors consider necessary of 75 per hour plus VAT after the 20 hours of free advice provided under the Seed Mentors Agreement. These may include due diligence on prospective Investments, audit and reporting, strategic, operational, marketing, financial management and other business, financial and legal advice advisory services on an arm s length basis. Any reasonable arm s length expenses and/or transaction fees incurred by the Manager in managing the Fund and/ or by Seed Mentors in assisting the Manager shall be reimbursed by Investee Companies. Any dispute as to what constitutes a reasonable arm s length expense and/or transaction fee will be determined by the Investment Conflicts Committee. The Manager is also responsible for Custodian Fees which will be recharged proportionately to the Investee Companies. The Manager estimates the Investee Companies will incur an aggregate initial Custodian Fee of 3,500 as Receiving Agent and an aggregate annual fee of 8,500. In addition, Investee Companies will pay Seed Mentors 2% of the invoice value of any contract introduced by Seed Mentors and accepted by the Investee Company. VAT will be charged on all fees as applicable. For investments in The Second Seed Advantage SEIS Fund through Kuber, Seed Mentors will make a payment of 4.5% of the amount invetsed in companies to Kuber for the services provided by the Kuber Multi Manager Platform. Kuber has instructed the managerto redirect these payments in the form of cash to your account on the Kuber Platform. 28 The Alternative Investment Platform Investment Guide

29 The Seed Mentors SEIS Fund Seed Mentors Investements Fund Overview Examples of Seed Mentors Investments The investment style is entirely holistic, covers the whole of the market and judges each company on its merits and is not sector specific. In addition Seed Mentors, unlike others in this area, gives every company that approaches it for funding the opportunity to pitch before a review panel and will not exclude a company based purely on the paperwork submitted because it is a fact that there can be some very good ideas that are simply not well expressed in documents but which on presentation become more attractive. In addition the mentoring and support is part of Seed Mentors ethos of investment. The fund is a continuation of the strategy established by the first fund using procedures and processes that have been established for finding and selecting suitable investee companies. Video Now Limited Video Now will focus on working predominantly with film studios (Sony, MGM, Universal etc) in order to release their back catalogue titles as Home Entertainment and selectively, on other platforms including theatrical rerelease. Film Development Company Limited The Film Development Company Limited will focus on the Development stage concentrating on the creation of intellectual property for the theatrical film industry (cinema). The company will undertake the purchasing of the underlying rights to turn a book into a sellable film production package. The rights that are sold are not merely speculative because the com-pany will sell the rights at a pre negotiated price with a targeted profit margin of 25%. The rights are sold before the production of the film and bear no production risk. Luxin Limited LUXIN will handle a wide range of entertainment including documentary, music and TV series made by broadcasters and independent producers. Luxin Limited is going to enter the video entertainment market as a supplier of top quality titles on disc (DVD and Blu-ray) digital downloads (DTO/DTR) and selectively, Subscription Video on Demand (SVOD). It will also release movie titles in cinemas. The business will acquire the necessary rights to do so from content owners. The Alternative Investment Platform Investment Guide 29

30 Blackfinch SEIS Music Portfolios Examples of Blackfinch related investments The following artists were selected for the first portfolio in the Blackfinch SEIS Music Portfolios THE KLAXONS 4 Top 40 singles (including 1 top 10 single), 2 top 10 albums, 1 Platinum UK selling album, 1 Mercury Music Prize and countless other awards Klaxons are one of the UK s most loved musical groups. The last 2 albums have sold a combined total of 370,000 units in the UK alone. The Klaxons third album, Love Frequency, was commissioned by one of the Blackfinch Music Portfolio companies and released in June CARA DILLON An Irish folk singer who has released four solo albums selling over 100,000 records and in 2003 won The Meteor Irish Music Award for Best Female. She performed at the opening ceremony of the 2006 Ryder Cup to a worldwide audience of 500 million. In 2010, Cara narrated the opening sequence and recorded Summer s Just Begun for Disney s Tinker Bell and the Great Fairy Rescue. Cara also recorded the vocals on a song called Come Dream a Dream which forms the closing sequence of the night time spectacular show, Disney Dreams! Cara s album, A Thousand Hearts, was commissioned by one of the Blackfinch Music Portfolio companies and released in May PULLED APART BY HORSES A band taken under the wing of Radio One, who have playlisted each of the band s last 5 singles, Pulled Apart By Horses are one of the UK s top rock acts. The band are well known for their incredible live show and have released 2 albums through well respected UK indie Transgressive, selling over 35,000 records. Pulled apart By Horses latest album, Blood, was commissioned by one of the Blackfinch Music Portfolio companies and released in September ANNIE EVE If you fell under Daughter s spell in 2013 then you ll likely be obsessed with Annie Eve in Drowned in Sound Annie Eve is an impressive singer songwriter from London and has an impressive résumé that includes supporting the likes of Daughter, Fionn Regan, Little Green Cars, and more recently Matt Corby on his sell out UK tour. Her debut album, Sunday 91, was commissioned by the Blackfinch Music portfolios and released in August THUMPERS Loved by BBC Radio One, BBC 6 Music & XFM London 2 piece Thumpers produced their most recent album under the stewardship of David Kosten (Everything Everything, Bat For Lashes) the band have created a glorious kaleidoscopic pop record. Their debut album, Galore, was commissioned by one of the Blackfinch Music Portfolio companies and released in May The Alternative Investment Platform Investment Guide

31 Blackfinch SEIS Music Portfolios continued Blackfinch investment style Blackfinch fund overview The service will focus on the creation and monetisation of recorded music by established artists which will be licensed to, or distributed by major record labels (Universal Music, Sony and Warner Bros). The portfolios access companies that qualify for SEIS relief. Capital will only be deployed into companies that have received advanced assurance from HM Revenue & Customs that they qualify for SEIS relief. All companies will produce and exploit recorded music, and will secure distribution with a major record label (Universal Music, Sony or Warner Bros). Funding new independent music which has the benefit of major label distribution allows investors to participate directly in the commercial success of the album. The companies are able to secure terms with the major labels because the album has been produced independently. This enables investors to participate in a greater share of the revenues from that album than otherwise would have been possible. Blackfinch works closely with the leading artists managers and the major labels to develop attractive opportunities. Investee companies will commission albums from both new and established artists. Established artists have a track record and a known fan base. These are likely to deliver more predictable returns than new, undiscovered artists, but with a lower chance of a breakout success when compared to new artists. Blackfinch will charge an annual management fee equivalent to 2% of capital invested. Blackfinch, company directors or key management will be entitled to a 25% share of distributions from the portfolio investments, subject to the investors receiving 100p for every 100p invested (ignoring tax reliefs). It is expected that 95% of the value of these companies is captured in the first 3 years and held as cash within the company. Blackfinch will contact investors at the end of the three year holding period, to offer the choice of exiting or remaining invested. The portfolio service will follow a blended investment strategy, investing in a portfolio of emerging talent and established artists. The Base Case envisages a return of more than 20% per annum (excluding any Capital Gains Tax benefits), and for the Target Case, a return of more than 40% per annum (excluding any Capital Gains Tax benefits). The Alternative Investment Platform Investment Guide 31

32 Blackfinch SEIS Music Portfolios continued Who is Blackfinch? What Blackfinch say about itself How Blackfinch charges for its services Blackfinch is an established UK provider of capital protected and tax efficient investment solutions. Our philosophy is based on transparency and simplicity. Our services provide real solutions to real financial planning challenges faced by individuals today. We have been operating in the UK retail investment market since Our focus has been primarily on tax efficiency, coupled with capital preservation, and our track record reflects a growing client base, with group assets under administration and management of approximately 500 million. Blackfinch will not make any charge directly to you but instead fees are charged to the investee companies. The investment manager will charge investee companies an initial transaction fee of 5.5% of the investor s subscription and a further annual monitoring fee of 2% of the investors subscription for up to 5 years. Both the initial and the annual fee will be charged on a pro rata basis to investee companies. A performance fee of 25% of the distributions above 1.00 per 1.00 invested, excluding SEIS income tax relief, will be paid to the Investment Manager. The performance fee will only become payable once 1.00 per 1.00 subscribed has been distributed to investors. For investment in Blackfinch EIS Media and SEIS Music Portfolios through Kuber, Blackfinch will make a payment of 1% of the amount invested in companies to Kuber for the services provided by the Kuber Multi Manager platform. Kuber has instructed the manager to re-direct these payments in the form of cash to your account on the Kuber Platform. All fees and charges are exclusive of VAT which will be charged where applicable. 32 The Alternative Investment Platform Investment Guide

33 Blackfinch SEIS Music Portfolios continued How Blackfinch describes its investment process INVESTMENT STRATEGY The portfolio of investments will comprise albums from established artists. Each of the companies will commission an album from an artist with a track record and a known fan base. Each Blackfinch SEIS Portfolio tranche will typically invest in 5 artists albums and each investee company will have a funding requirement of up to 150,000 to record and market an album. COMPANY SELECTION Artists are selected on the basis of selling at least 30,000 albums whilst targeting significantly more. For an album to achieve the breakeven figure (and recoup 150,000) it will need to sell the equivalent of 30,000 albums. All artists will be selected by mutual consent: Record label, Ian Brown and the SEIS company (directors: Joe MacCarthy; Rich Cook). INVESTMENT CRITERIA Criteria will be that the artist has a reasonable chance of selling 30,000 albums. The objective criteria are that artist will have had to either: 1. Had a lifetime sales of 50,000 records in the UK (i.e. have an established fan base), or 2. Their last album will have had to have UK sales of at least 20,000 on an independent record label, or 30,000 on a major label. Ian Brown and the record label are dedicating time and resource to the artists and the release. They also only earn as the SEIS company earns, so there is partnership/alignment in the fee structure. The Alternative Investment Platform Investment Guide 33

34 Blackfinch EIS Portfolios Blackfinch investment style The service will focus on the media sector and invest in music publishing and television distribution. The portfolio companies target capital preservation by investing in companies underpinned by intellectual property and which have predictable income streams and/or high levels of contracted revenue. Blackfinch fund overview The portfolios access companies that meet the qualification requirements for EIS relief. Capital will only be deployed into companies that have received advanced assurance from HM Revenue & Customs that they qualify for EIS relief. The entertainment and media sectors are an established and important part of the UK economy, accounting for more than 54bn of economic output which is approximately 4% of GDP. The sector is expected to grow by 3.1% per annum over the next 5 years. The Blackfinch music publishing companies will create and own the music copyright for a catalogue of at least 40 original music scores and soundtracks for different films and television programmes. Each music score will generate publishing royalties. Music publishing royalties are the revenues due to the creator of that underlying intellectual property and are generated from a number of sources. The Blackfinch Television distribution companies sell the broadcast rights for television programmes on behalf of producers. The companies acquire the distribution rights for those television programmes by advancing money to the television producer which is recovered in first position, along with sales commission and expenses, from the sales of the programme to international broadcasters who license those rights. Usually, the majority of the revenues will come from one reputable primary broadcaster (e.g. BBC) and are for a known amount which is contracted in advance. These contracted revenues offer an element of capital protection to investors. The remainder of the revenues are from sales to credit-worthy international broadcasters which are not contracted in advance. The level of revenues required to recoup the costs of production from revenues which are not contracted in advance is relatively low compared to the international value of the programmes as assessed by the Blackfinch specialist management team. 34 The Alternative Investment Platform Investment Guide

35 Blackfinch EIS Portfolios continued INVESTMENT STRATEGY The Blackfinch Media EIS Portfolios allow investors to access the attractive tax benefits of EIS by investing into EIS qualifying media companies managed under a capital preservation mandate. The Blackfinch Media EIS Portfolios will invest into two sectors: music publishing and television distribution. Each investee company has a funding requirement of up to 5,000,000 and has received Advanced Assurance from HM Revenue & Customs that they qualify for EIS relief. Our portfolio companies target capital preservation by investing in companies underpinned by intellectual property and which have predictable income streams and/or high levels of contracted revenue. The EIS has a target return to the investor of 1.20p per pound invested. MUSIC PUBLISHING The EIS portfolios will invest into First Score Music Limited (FSM), a company which will create and own a catalogue of at least 40 scores and soundtracks for different films and television programmes. Those scores are expected to be created within the first year of investing into the company and will be generating revenues from year 2. FSM will effectively create and provide the music score to a film or television producer in return for the publishing royalties derived from that score. The company s director is Rupert Christie, an experienced composer and music supervisor who was responsible for writing the score for a number of films including Mamma Mia and a number of television programmes, including Band of Brothers. His experience in the market and knowledge of film-makers and other composers makes him well placed to help select film and TV projects for FSM, and also identify composers who may be best suited to a particular film score. The company is also in negotiations with Cutting Edge ( com), an established music licensing company based in both London and LA who, in addition to Rupert Christie and the company s management, will help source deal flow for the company and administer it. Because they are part-based in LA, Cutting Edge are well placed to source opportunities from the independent film production community based in Hollywood and have already sourced more than 20 projects that would meet the mandate for FSM to create the score for. As part of its administration services, Cutting Edge will provide some of the infrastructure for music supervision, monitoring and collection of revenues for music commissioned by FSM. They have significant experience in this sector they successfully managed film score catalogues worth more than $20m. They have been responsible for the music for films including The Kings Speech and Drive. The Alternative Investment Platform Investment Guide 35

36 Blackfinch EIS Portfolios continued After 3 years, FSM will have built up a music catalogue made up of a portfolio of publishing rights which has a predictable long-tail income stream effectively generating an annual yield which can be easily valued on the basis of the discounted cash-flows for the purposes of sale or refinance. Because of their predictable revenue streams, the market for the sale of music publishing catalogues is relatively mature and the intention would be to (partially or fully) sell FSM or its catalogue to provide an exit for investors. TELEVISION DISTRIBUTION The EIS portfolios will invest into Back Catalogue Distribution Limited (BCD), a TV distribution company which will acquire the distribution rights for a portfolio of approximately 25 different television projects which meet the investment criteria: > Any programme must be licensed by a reputable primary broadcaster > The majority of BCD s sales advances (by value) must be contracted in advance > The amount of non-contracted revenues at inception must not exceed 40% of mid sales estimates for any project (i.e. equivalent to a 40% LTV, which is a conservative advance rate) as assessed by BCD s specialist management team > All projects must be Ofcom compliant (not pornographic or offensive) BCD s director is Terry Back (see IC Biog) who, as a Partner of Grant Thornton from 1997 to 2014, led their media team and advised a number of TV distribution companies. His experience in the market and his knowledge of TV producers and broadcasters makes him well placed to help select TV projects for BCD and also identify broadcasters to which the programmes should be sold BCD will provide sales advances to TV producers and will sell the (pre-contracted) primary broadcast rights and some of the core territories directly. It will then subcontract the distribution of the long tail of other territories to a sub-distributor who is better placed to undertake that role because of their infrastructure and their relationship with broadcasters in the minor territories. The company is in negotiations with a number of specialist distributors including DCD Rights ( to act as sub-distributor for some of the BCD programmes. Using a sub-distributor will enable BCD to keep its overhead controlled and for it to focus on the larger, more lucrative core territories where the management have an existing relationship with broadcasters. After 3 years, BCD will have a portfolio of approximately 25 projects for which it is acting as distributor. Many of these will be part way through their 18 month revenue cycle and the company will have visibility over self-generated liquidity to provide a cash backed exit for investors without the need for a sale or refinance of the company. We are also able to facilitate longer term investments targeting permanent deferral of CGT and/or business relief as part of an IHT planning strategy. The EIS Portfolio is subject to a 2% initial fee. Further details on fees and charges can be found on p7 of the brochure and p17 of the due diligence. 36 The Alternative Investment Platform Investment Guide

37 Blackfinch IHT Portfolios About Investment Strategy The Blackfinch IHT Porfolios have been developed to manage a portfolio of shares in companies that meet the qualification requirements for Business Property Relief and which also have a focus on capital preservation and mitigating risk. This is balanced by a strategy to generate strong upside potential through a low and transparent charging structure. The discretionary management service only places investors with companies that meet our quality benchmark and strict due-diligence requirements which are assessed by our Investment Committee that includes third party experienced individuals. The companies must qualify for Business Property Relief and verification had been obtained from an independent tax specialist firm to this effect. Our investments blend capital preservation with the potential for competitive returns, according to an investors preference. Blackfinch oversees the business operations of the companies and the security behind the underlying assets, to ensure their accordance with our business plan and investment strategies. The Alternative Investment Platform Investment Guide 37

38 Boundary Capital Manager Overview Who is Boundary Capital? What Boundary Capital says about itself Boundary Capital was set up in 2009 by Investors and technology entrepreneurs to develop and finance technology businesses. It has assisted and invested in many start-ups and spin-outs from Universities, Incubators and Technology Hubs. One of the critical success factors in commercialising technology is the quality of the management and its early engagement into the ventures. If rigorously qualified executives can be sought and appointed to manage the spin-outs in an economic and replicable way, and indeed mentor the ventures before they are spun-out or started, then the ventures stand a far greater chance of success and are significantly derisked for investors. If these executives also invest their own time and money, then their interests are further aligned with the founders and investors of the venture. As outlined elsewhere, Boundary Capital has partnered with an exclusive network of executives ( the Venturers ) for their specific domain expertise and their track record in working with small businesses. The Venturers are able and willing to invest their own personal funds alongside the ventures. In this way the interests of the parties are aligned as well as reducing the requirement for risk capital. We believe, alternative approaches such as paying market rate fees for the appropriate executive are inferior both in the diminished alignment of interests (even if some sweat equity is apportioned as well), the increased investment required, and the due diligence required for investment which is less reliable than due diligence conducted by an experienced executive who has to invest his own funds if the venture is invested. In addition, Boundary Capital also provides commercialisation support and processes to assist with IP development/protection, strategy, business development and finance whilst the venture is in an early stage position and therefore not able to sustain market-rate fees for all of these processes. The support provided by Boundary Capital varies depending on the requirement of the venture. In a university spin-out there is rarely an experienced entrepreneur at the start, whereas in other technology start-ups there may well be an entrepreneur and if they are a first time entrepreneur then they may not be suitably experienced. Whatever the requirements, Boundary Capital will typically install an executive on the Board of the companies in which it leads the investment. 38 The Alternative Investment Platform Investment Guide

39 Boundary Capital continued The investment focus is cross-sector (with the exception of capital intensive ventures such as drug discovery) as long as the investee company has revenues or a revenue horizon less than two years away and there is a defensible, commercial advantage compared to the competition as well as a technical one. The manager is looking for viable businesses with some commercial validation, and will not invest in concepts. A key part of the investment process is co-investment validation, i.e. where a Venturer is deployed, they provide the domain expertise and primary commercial validation and they will be required to make a personal investment. They may also earn sweat equity i.e. shares based on their time and expertise, which will depend on the stage of the venture and the value they bring to it. While the issue of sweat equity may ostensibly reduce investment returns to the investor upon exit, sweat equity usually reduces the amount of cash burn in the early years of the investment and fully aligns Venturers interests. Track Record The Venturers receive sweat equity alongside their cash investment. The consideration of sweat equity reduces the cash overhead required for the investee company to operate. The Investment Team at Boundary Capital has over 39 years between them and have led 60 separate company investments of which 49 have been exited. Of these investments, they have between them raised and managed funds of 23.3 million in aggregate and increased them to a value of 57.4 million. The Alternative Investment Platform Investment Guide 39

40 Boundary Capital Alternative Investment Fund EIS/SEIS Portfolio Boundary Capital s investment style Boundary Capital s portfolio overview The Boundary Capital Home Run EIS / SEIS Portfolio is designed to develop and invest in early stage technology businesses by providing experienced executives as well as funding. These executives are selected by domain knowledge and venture track record, and invest personally alongside the Portfolio. Their personal investment aligns interests with other investors and helps keep overheads low. The Portfolio represents an opportunity for UK taxpayers to invest in high-growth technology companies which exhibit disruptive step-change innovations and come with significant commercial potential (the Home Run ). In addition to the risk mitigants associated with EIS and SEIS relief, the manager intends to further mitigate the investment risk by diversifying the portfolio and adopting an advanced co-investment strategy. The Portfolio has 3 key factors: > Experienced Investment Team with prior track record; > Co-Investment model: The Portfolio looks to only invest alongside Venturers, sector-experienced executives who co-invest personally and take an active Board role. This strategy is designed both to add value to the investments and to de-risk them; > Blended EIS and SEIS tax benefits providing up to 81% downside mitigation. The Portfolio has a targeted blended rate of between 70:30 and 50:50 of EIS:SEIS. As an illustration, if the Portfolio were to achieve a targeted 3x return within 5 years at 50:50 SEIS/EIS blend then the overall return to investors including maximum tax reliefs is an average annual return of 55.0% per annum. The Portfolio and subsequent similar Funds are aiming to make between four and twelve SEIS and EIS-qualifying investments each year, of typically 150,000 to 500,000 per investment. The Portfolio Target term is five years, and the manager will seek to dispose of the investments as soon as practically possible after the end of the term while seeking to achieve good value and orderly exits for the investors. Boundary Capital Partners LLP is authorised and regulated by the Financial Conduct Authority. 40 The Alternative Investment Platform Investment Guide

41 Boundary Capital Alternative Investment Fund EIS/SEIS Portfolio continued Examples of Boundary Capital s related investments CertiVox is a security software company, providing encryption, identity and key management solutions without the need for thirdparty certificates. The product has many applications for business and government. The business is generating revenues and has also raised over 2.4m from venture capital investors (Octopus Ventures and Pentech Ventures) following Boundary s investment. Warwick Analytics is a spin-out of Warwick University. The software quickly identifies root-cause-analysis of faults and bottlenecks in production systems. The venture has secured 94,000 in TSB grant funding alongside Boundary s investment. It has partnerships with Teradata and SAP and is working with initial customers from the automotive and healthcare sectors. Starbon Technologies is a carbon-based, mesoporous material invented at York University. The material has many applications: catalysis, adsorption and purification. The venture has revenues from a number of multinational chemical companies and has secured 97,000 in TSB grant funding. Intelligent Tools is a software and hardware company providing realtime data capture solutions at construction sites for monitoring the time and attendance of personnel, and the movement of vehicles and material. It has revenues from a number of blue-chip construction companies. There is an initial fee payable to the Manager of 0.5% which has been reduced for investment through Kuber. An Annual Management Fee of 2.00% will be payable to the Manager. The Manager shall also receive a performance fee, if the realised gain is a positive amount on termination of the portfolio. The performance fee shall be 20% of the amounts realised in excess of 1.00 for each 1.00 subscribed. All fees and costs are exclusive of VAT which will be charged where applicable. The Alternative Investment Platform Investment Guide 41

42 Boundary Capital Alternative Investment Fund EIS/SEIS Portfolio continued How Boundary Capital charges for its services An annual Management fee of 2.00% will be payable to the manager. We credit 1% of the amount invested in shares back to investors from their investment via Kuber The Management shall also receive a performance fee, if the realised gain is a positive amount on termination of the portfolio. The performance fee shall be 20% of the amount realised in excess of 1.00 for each 1.00 subscribed. All fees and costs are exclusive of VAT which will be charged where applicable. > No fees to investors 100% of investment qualifies for tax relief > Payable by investee company 5.5% investment fee 2.0% per annum plus 150 per month > Contingent performance fee 20% of investment proceeds for 1 above 1.10 invested 42 The Alternative Investment Platform Investment Guide

43 Sapia Partners LLP About Sapia Partners LLP Sapia is a private, independent investment management and corporate finance advisory firm. The senior team is comprised of highly specialised, senior professionals with expertise in investment banking, principal investments, private equity and private and public debt. The team at Sapia will make the investment management decisions based on the advice from the Investment Adviser, Deepbridge Advisers. Sapia acts as Investment Manger for the following poretfolios: > > Atlantic Screen Music > > CHF Media EIS > > CHF Media EIS/SEIS > > Deepbridge Technology The Alternative Investment Platform Investment Guide 43

44 Deepbridge Advisers Ltd How Deepbridge describes its investment process The investment strategy of the EIS favours opportunities emerging from the application of technologies which serve the environment, particularly with regard to non-fossil fuel power generation. Therefore, all investment proposals, such as onshore wind, are considered within the context of their potential economic and environmental benefits. Investment Exit The successful timing and mechanism of exit from the Investee Company is a critical component in both the selection and the investment performance of the Deepbridge EIS. Identifying the appropriate exit point is dependent on the exit routes available at that time and the risks and opportunities presented by the next stage of innovation. Deepbridge intends to offer Investors a number of options to suit their requirements, including the sale or flotation of Investee Companies to return cash, or the continued management of the Investee Companies to maintain Inheritance Tax Relief. It is envisaged that investment in the Investee Companies will be held for a minimum three years, in accordance with the requirements of the Enterprise Investment Scheme. 44 The Alternative Investment Platform Investment Guide

45 The Deepbridge Technology Growth EIS Fund overview A compelling opportunity for private investors to participate in a selected portfolio of actively-managed high-growth technology companies, taking advantage of the significant tax benefits available under the Enterprise Investment Scheme. The Deepbridge EIS invests in technology growth companies that have a proven technology, clear intellectual property and are operating in a high growth/high value market sector. The investment objective is to generate tax-free investment returns of 1.60 for every 1.00 invested, after a minimum three year period. Deepbridge will charge no fees to the investor, thus securing the maximum 100% allocation to the portfolio of Investee Companies. The portfolio of Investee Companies has been identified, subjected to a rigorous degree of due diligence, and all Investee Companies have received Advance Assurance from HMRC: therefore Investor subscriptions will be deployed with immediate effect. Deepbridge Advisers invests in a portfolio of actively-managed Investee Companies, offering investors the opportunity to participate in significant capital growth underpinned by proven market demand, and experienced and aligned management teams. Investment style The Deepbridge Technology Growth EIS is focused on investing in high growth companies that are seeking to commercialise and expand, specifically in three sectors: > > Eco-innovation: including waste water treatment and conservation, advanced materials, and renewable energy generation technologies > > Medical technology: such as medical and surgical instrumentation, devices, and diagnostics > > IT-based technology: particularly Enterprise Application Software and Software as a Service > > Our investment strategy is summarised below > > Primary selection criteria > > Deepbridge employs strict criteria in the selection of Investee Companies The Alternative Investment Platform Investment Guide 45

46 The Deepbridge Technology Growth EIS > > A significant market potential with clear and existing market demand > > Innovation-driven products that have the potential to create new market segments or displace current market offerings > > Technology-driven businesses with a clear and realistic path to commercialisation > > Robust intellectual property which may or may not be patented or have patentable IP protection > > Passionate, energetic and experienced founding team > > A clear exit strategy to be implemented within 3-4 years Investment Period As Deepbridge has already identified the portfolio of Investee Companies, each of which has already received advance assurance from the HMRC for EIS purposes, capital deployment is expected to be immediate. The investments are expected to be held for a minimum three years. Portfolio composition The initial portfolio comprises of six identified Investee Companies, each of which possess common attributes of a technology that is disruptive to current technologies, an aligned senior management team, a clear market need and demand, and resilient barriers to market entry. Stage of Investee Companies Investee companies are at the pre-commercialisation stage, with high growth potential, cashflow generation in place, and an order book of blue-chip clients. Capital Growth The focus of the Deepbridge Technology Growth EIS is to generating significant capital growth for investors over a three-four year period. It 46 The Alternative Investment Platform Investment Guide

47 The Deepbridge Technology Growth EIS is not expected that the Investee Companies will pay dividends during the three year EIS holding period. As the Deepbridge EIS is free of fees to the investor, Investors can maximise the tax reliefs available for their investment. EIS Relief All of the Investee Companies have received EIS Advance Assurance from HMRC. Exit On exit, Deepbridge Advisers intends to offer Investors a number of options to suit their requirements. This will include, but not be limited to, the sale/flotation of the Investee Companies to return cash, or the continued management of the Investee Companies to maintain Inheritance Tax Relief. The Deepbridge Investment Team has invested into a number of EISqualifying high growth technology companies including: Examples of Deepbridge related investments Resonant Software: Resonance Spftware has developed a unique adaptive business process software suite, which enables corporate users to optimise decisiondriven, loosely-structured, and human-centric business processes. Historically, numerous factors such as the sophisticated nature of products, diverse criteria, discretionary decisions, and market pressures, all conspire against the efficiency of the prescribed process automation. The solution developed by Resonant Software enables the corporate user to document how they want a specific business operation to function, make the operation function the way they want with the push of a button, and then enable the user to measure the resulting operation in real-time. The Company is currently engaged with a number of clients including Sagicor and TIAA-CREF in the US insurance market. The funds raised will be used to further develop the product into an identified new market area, specifically Governance-Risk-Compliance principally in the Insurance and Banking sectors in the geographical markets of the UK and Europe. The Alternative Investment Platform Investment Guide 47

48 The Deepbridge Technology Growth EIS AlgaeCytes: The Company has developed a proprietary strain of freshwater algae and the accompanying technology process, from which can be derived 99.9% pure Omega 3 and associated fatty acids. The business model of AlgaeCytes Ltd involves the collaboration of the Company with clients such as large foodstuff manufacturers by establishing plants at client sites with a long term contract to service and support the operations at each client and in doing so securing long term tenure of business. As foodstuff manufacturers increasingly seek to exploit this consumer demand, it is reasonable to expect such manufacturers to seek technology to install rather than construct their own. The vast majority of Omega 3 is currently derived from marine algae and fish sources. AlgaeCytes represents a sustainable and taste-neutral alternative to current supply derivations of Omega 3 production. Sky Medical Technology: The Company has developed the OnPulseTM technology platform, a technology which has been proven to dramatically improve blood flow (both volume and velocity) and elevate oxygen levels in the blood, with the potential to displace both pharmaceutical and device solutions available on the market today. The initial target applications that Sky is pursuing are Deep Vein Thrombosis ( DVT ) and Sports Injury/Recovery for elite athletes, with additional markets to follow. The OnPulse has received regulatory approval for sales in the EU, Canada and Australia, and is in the midst of device approvals process for the United States. The technology platform has been incorporated into the first generation commercial product, namely Geko, and is currently commercially available in the UK and Australia for DVT prevention and increased blood circulation. 48 The Alternative Investment Platform Investment Guide

49 The Deepbridge IHT Service About Investment Strategy The Deepbridge IHT Service is a discretionary investment management service that invests in asset-backed renewable energy opportunities that benefit from contractual revenues available under the Renewables Obligation. In doing so, the Service seeks to ensure an enduring focus upon capital preservation, whilst offering the opportunity to receive an annual yield of up to 6%. A cost-efficient estate planning component of an investor s portfolio, the Service can exempt a portion of the Investors estate from IHT, after a two-year holding period. The Service seeks to invest in Companies whose business models are based on building, acquiring and operating wind and hydropower renewable energy generation installations. The Companies will rely on proven technologies such that the output of electricity is both stable and predictable, and benefit from long term price support mechanisms mandated by the UK Government, such as index-linked Renewables Obligation Certificates. As it is anticipated that the Companies will engage in the construction of renewable energy projects, they will engage proven engineering, procurement and construction contractors as is normal in the industry. The principal selection criteria for development projects include: Preliminary accreditation for FiTs in place, or full accreditation for ROCs secured; > Full planning permission place; > All environmental licensing secured; > An offer for Grid Connection received; and > Once constructed the project is fully insurable, including loss of revenue. The Alternative Investment Platform Investment Guide 49

50 CHF Media Fund EIS Portfolio CHF Media Group Ltd ( CHF ) is the parent company of CHF Entertainment, the production arm of CHF, and is the reincarnation of the Iconic British animation company Cosgrove Hall Films. The original Cosgrove Hall created highly successful animated programs such as Danger Mouse, Cockleshell Bay, Count Duckula, Jamie and the Magic Torch and Wind in the Willows, and produced Fifi and the Flowertots, Postman Pat and Roary the Racing Car amongst many others. CHF's new suite of shows are produced in the UK by a highly talented creative and animation team. CHF fully supports the Government's Animation Tax Credits and use of Enterprise Investment Schemes to fund and monetise CHF's Intellectual Properties through broadcast, digital and organic mediums. CHF Enterprises Ltd (the Strategic Adviser ) is wholly-owned by CHF Media Group Ltd and is an Appointed Representative of Sapia Partners LLP, FCA number (the Manager ). Sapia is a private, independent investment management and corporate finance advisory firm. The senior team is comprised of highly specialised, senior professionals with expertise in investment banking, principal investments, private equity and private and public debt. The team at Sapia will make the investment management decisions based on the advice from the Strategic Adviser. CHF is comprised of a team of directors and senior employees in areas of finance, production, merchandising and licensing. Together they have an unrivalled numbers of years of experience in the family and children s television industry. CHF were delighted when long-time friend of Cosgrove Hall, Sir David Jason OBE, agreed to come on-board as a voice actor in CHF s new suite of animated shows. But what is more, Sir David also accepted the invitation to become a shareholder of CHF Media Group as well as personally investing in the shows. The CHF Creative and Commercial Committee ( CCC ) is at the heart of the decision making process and is key to the success of the shows. It is responsible for identifying prospective shows that not only offer excellent family entertainment but also offer the potential to generate significant commercial returns to Investors. The members of the CCC have been selected for their specific skill sets and track records. The CCC is comprised of experts in all areas of family entertainment from the development and creation of content through to financing, production, broadcast distribution, toy creation and licensing. As such, the committee is well-placed to rigorously screen potential shows, including the stress test of the commercialisation avenues, before such shows are transferred to investee companies and recommended to the Manager by the Strategic Adviser for investment into each of the S/EIS shows. 50 The Alternative Investment Platform Investment Guide

51 CHF Media Fund EIS Portfolio continued What CHF say about themselves Manchester based Cosgrove Hall was formed in 1976 by Brian Cosgrove and his business partner the late Mark Hall. Their enthusiasm and creative brilliance was immediately recognised, resulting in the studio quickly establishing itself as the leading producer of animated programmes in the UK, creating shows and films that have entertained and are continuing to entertain millions of people all over the world. Over the past four decades, Cosgrove Hall have created or produced such iconic children s programmes as Danger Mouse, which was regularly watched by 21 million viewers, Count Duckula, The BFG, the Wind in the Willows, Postman Pat and Roary the Racing Car to list just a few. During their illustrious careers, Brian Cosgrove and Mark Hall chalked up over 25,000 minutes or approximately 1,000 episodes of animation and scooped a host of awards including six BAFTAs and two international Emmys. More recently, the success of Cosgrove Hall was highlighted at the 2012 British Academy Children s Awards when Brian Cosgrove was presented with a special award for his outstanding creative contribution to the industry. In 2011 Brian Cosgrove and Mark Hall came out of retirement to form CHF Entertainment, the production arm of CHF, which has become a creative force to be reckoned with and is now back doing what it does best producing high quality, imaginative and trusted animated entertainment for children and their families across the globe. The first show was Pip Ahoy!, funded by EIS with a raise of over 4 million. Within the first few weeks Pip Ahoy! reached number one in the ratings and toy, plush and other broadcast and licensing deals quickly followed, continuing the CHF successful suite of shows. The success of Pip Ahoy! has led to the launch of a new slate of shows also to be funded by Seed and EIS. By investing in CHF shows, an Investor not only has the opportunity to become part of the Cosgrove Hall tradition of creating or producing internationally renowned, original, intelligent and educational animation shows much loved by children and their parents but also sharing in the potential of commercial returns enjoyed by the likes of Peppa Pig, Thomas and Friends, Bob the Builder and many other children s television programmes. The Alternative Investment Platform Investment Guide 51

52 CHF Media Fund EIS Portfolio continued How CHF describes its investment process CHF will invest in companies which each individually own the intellectual property rights to a new family entertainment or children s show originated or developed by CHF. The capital raised will be used to develop, produce and monetise the shows. CHF will invest in a selection of shows, both those in development and production. An explanation of what constitutes a show in development and a show in production is set out below. The success of investee companies will derive from all revenue inflows relating to their intellectual property rights such as broadcasting, licensing and merchandising sales; the potential returns to Investors are not capped and so will be shared pro rata with other investors according to their respective shareholdings. The Creative and Commercial Committee (the CCC ) is at the heart of CHF and is key to its success. As previously described, it is responsible for identifying prospective shows that not only offer excellent family entertainment but also offer the potential to generate significant commercial returns. EIS, SEIS and animation tax credits Under the Kuber model, investors will be able to invest in EIS shows if their desired strategy is to exit or in a combination of EIS and SEIS shows if their desired strategy is growth. CHF investments in investee companies with shows in production qualify for EIS Relief while investments in investee companies with shows in development typically qualify for SEIS Relief. As a consequence, Investors into the shows should benefit from either a blend of the EIS and SEIS or EIS relief alone and other tax advantages as follows: > between 30% and 50% upfront income tax relief (depending on EIS or S/EIS) > unlimited Capital Gains Tax (CGT) deferral in respect of EIS investments > 50% CGT wipe out in respect of SEIS investments > 100% CGT free gains upon disposal > Loss relief available assuming an investor has capital gains to invest, an investor risks 13.5p on a 1 SEIS investment and risks 38.5p on a 1 EIS investment > 100% inheritance tax relief provided that investments are held at the time of death and have been held for two years 52 The Alternative Investment Platform Investment Guide

53 CHF Media Fund EIS Portfolio continued Development, production and investment process In addition, it is anticipated that all of the shows in which investment is made will qualify for tax credits under the Animation Tax Credits introduced by the Finance Act The relief is in effect a 20% rebate on certain qualifying expenditure incurred by each investee company in producing the show. This 20% boost should serve to accentuate investee company profits and reduce any potential losses, therefore further mitigating investment risk. CHF Entertainment, the production arm of CHF, has a team of industry leading animators, artists and other creatives who are employees of CHF or independent contractors whose role it is to come up with ideas to be considered for development by the CCC. On occasion, if the concept is strong enough, the CCC will consider proposals from external sources. The CCC will choose the best of these ideas - those with potential for critical acclaim and commercial success - for development and production. Once the CCC has made its decision, CHF Entertainment will transfer any intellectual property rights it owns in these embryonic ideas to a newly incorporated investee company, one for each potential show. Each investee company will have at least one director who is wholly independent of CHF. This Independent Director will be responsible for taking decisions and managing the affairs of the investee company where other directors may have a conflict of interest as a result of their roles within CHF. When referring to a show in development, that show is still at the stage where its concept and characters are being tested and it requires further work before it can be presented to a broadcaster or a digital platform with a view to securing a broadcasting contract. Typically the funds raised under the SEIS for development of such a show would be used for the creation of a show bible, storyboards, scripts and a pilot. Development costs would vary from show to show depending on the type of animation and the complexity of the subject matter. When the CCC decide that a show is ready to go into full production, further funds will be required. Having exhausted its SEIS limit of 150,000, the investee company can benefit from an EIS investment to raise the necessary additional funds. Production costs will vary from show to show but would typically be between 3 to 5 million. It is anticipated that the majority of an Investor s Subscription Monies will be invested in investee companies with shows in production. The Alternative Investment Platform Investment Guide 53

54 CHF Media Fund EIS Portfolio continued To ensure that investee companies shows have the best possible chance of success both critically and more importantly, commercially each will have access to the full range of CHF s extensive in-house expertise and support. The price per share at which CHF will invest in investee companies will be determined by how far advanced its show is in terms of its development and production. If a show is still in an incipient state for example where it has yet to be commissioned by a broadcaster the risks for an Investor are greater than where a show has already been picked up by a broadcaster or digital media platform. This is the case even when the reliefs under the SEIS are taken into account. To reduce these risks and to give an advantage to those Investors who invest into shows at an early stage, where an investee company s show is still in development, CHF will invest at a significantly lower share price. The price at which CHF invests will be approved by the Independent Director. 54 The Alternative Investment Platform Investment Guide

55 CHF Media Fund EIS Portfolio continued Monetisation of the shows Once an investee company s show has been produced and an initial broadcast contract has been entered into with a broadcaster or digital media platform, an investee company will aim to generate revenue initially by licensing the broadcast rights to its show on a worldwide basis and by exploiting the ancillary rights. Investee companies could benefit from a diverse set of revenue streams ranging from broadcasting, publishing and gaming to mobile and internet content and merchandising on a global basis, including but not limited to:- > Broadcast distribution > Licensing and Merchandising > Traditional and e-publishing > Mobile and internet content > Music rights > Live shows Fund Overview > Theme parks Investing into CHF provides an exciting and unique opportunity for UK Tax payers to invest in both SEIS and EIS qualifying media production companies whilst also benefitting from risk mitigation in the form of S/ EIS reliefs and Government backed Animation Tax Credits. Why CHF? > Strong and proven track record: over past 40 years, Cosgrove Hall have produced iconic children s programmes such as Danger Mouse, Postman Pat, Roary the Racing Car to list just a few > Multi BAFTA and International Emmy award winning creative team > Pip Ahoy! successfully funded in 2013/14 via our in-house EIS offering is now on air on Channel 5 s Milkshake and Cartoonito in the UK every day for 5 years to great media acclaim > Multiple revenue streams from Broadcast and License and Merchandising sales with unlimited investment returns > All shows are produced in the UK and qualify for the Government s Animation Tax Credits > 100% investment allocation The Alternative Investment Platform Investment Guide 55

56 CHF Media Fund EIS Portfolio continued The investment objective is to generate tax-free investment returns of 5 time s initial net investment after a minimum three year period. CHF will not charge fees directly to the investor, thus securing the maximum 100% allocation to the portfolio of investee companies. The portfolio of investee companies has been subjected to a rigorous degree of due diligence by the CCC and all investee companies have received Advance Assurance from HMRC for S/EIS status. Therefore investments will be deployed with immediate effect. This will enable those Investors that participate in this tax year to claim Income Tax Relief in the 2013/14 tax year. Key Features and Benefits > Investing in both Seed EIS and EIS qualifying companies creating and producing family entertainment content > Target tax free returns of 5 times net investment, deriving from all revenue inflows relating to the intellectual property such as broadcast sales and licensing and merchandising sales, with unlimited upside and no cap > No subscription deadline > EIS certificates targeted for 4-6 weeks post investment > Focus on investee companies creating content with production team with proven track record, the benefit of government backed incentives and strong sales estimates The Market and potential investment returns A suite of shows with a production budget of just a few million pounds can generate many multiples of this through the sale of ancillary merchandise such as books, toys and games. The value of the UK children s book market in 2012 was 405 million, representing 14% of the total UK Market. In the UK in 2013, just over a quarter of all sales of toys and models ( 730 million out of a total of 2.94 billion) involved products made under license to a marketed entertainment product, such as an animated children s TV show. The sale of toys continues to be a growing market; pre-school toys grew 12% to 400 million in The global broadcast brand licensing industry is enormous (in 2009 it was estimated to be worth 115 billion) and the characteristics of animation mean it is well-placed to exploit the market. Indeed, the most successful television brand of all time, The Simpsons, is an animated programme with global DVD and merchandise sales of more than 5.1 billion. Closer to home, Bob the Builder is reported to have generated over 3 billion in global 56 The Alternative Investment Platform Investment Guide

57 CHF Media Fund EIS Portfolio continued merchandising and license sales since 1996 and Peppa Pig generates over 150 times its original production budget every year in license sales in the UK alone. Thomas and Friends generates over 200m per year and has done so for the last 14 years. CHF targets a return equivalent to 5 times net investment after a 5 year period, but returns could be many multiples higher. It is important that Investors invest in CHF for capital growth rather than for capital preservation, as there are no guarantees of returns. EIS Relief Exits How CHF charges for its services All of the investee companies will have received S/EIS Advance Assurance from HMRC. In light of the three-year EIS and SEIS holding periods, the Manager will seek to realise the Investments only after they have been held for three years. It is anticipated though that exits will be within 3 to 5 years from the date an investee company s show is first broadcast. The most likely exit route will be through a trade sale of an investee company though management buy-outs, share buy backs, refinancing s and liquidation may also be considered as appropriate. CHF will not make any charge directly to the investor but will instead charge fees to the underlying investee companies. This allows for 100% allocation for investors. CHF intends that Investors should benefit from Tax Reliefs on the full amount invested in the shows. For this reason the charges described below are payable by investee companies rather than by CHF by reference to the amount invested in the investee companies. Fund management charges One off fundraising charge 2.5% of the amount invested in investee companies Annual management charge 1.75% of the amount invested in investee companies Annual secretarial charge - 0.3% of the amount invested in investee companies For investment into CHF shows through Kuber, CHF will make a payment of 1.5% of the amount invested in investee companies to Kuber for the services provided by the Kuber Multi-Manager platform. Kuber has instructed the Manager to re-direct these payments in the form of cash to an investors account on the Kuber platform. In addition, CHF will pay Kuber 0.5% per annum quarterly in arrears based on funds invested. VAT will be added where applicable. The Alternative Investment Platform Investment Guide 57

58 Atlantic Screen Scores EIS EIS Overview Atlantic Screen Scores Limited has been established for the purposes of creating and exploiting intellectual property in the form of original music composed for major internationally released films and television productions. Atlantic Screen Scores will work with producers to create original music for film and television by contracting with established international composers to create these music compositions. Atlantic Screen Scores Limited will exploit the ownership of the copyrights, earning income in the form of copyright royalties collected worldwide from television companies and theatres by the local performing right societies. In order to maximise the income arising, Atlantic Screen Scores Limited will engage Copyright Administration Services Limited to administer the efficient collection of royalties on its behalf. Copyright Administration Services Limited, a wholly owned subsidiary of Atlantic Screen Music Ltd (ASM), and is one of the UK s leading music publishing administration companies and administers many catalogues owned by third party rights holders. Their experience and management of film and television music and rights is arguably unequalled in the industry, emphasised by the success of their present business, ASM, and by earlier launches of two other companies investing in the production of film scores, Atlantic Screen Composers Limited and Atlantic Screen International Limited The investment objective is to generate tax-free investment returns of 1.76 for every 1.00 invested, after a minimum three year period. Atlantic Screen Music will charge an annual management fee of 80,000 to the EIS Company. A number of the film score investments have already been identified Investment style The Core Proposition The core proposition of Atlantic Screen Scores is to identify, through its already established client base, and through rigorous due diligence those film and TV scores from which the company can maximise both royalty streams and the underlying asset values. Atlantic Screen Scores will own the intellectual property and music publishing rights in the composed songs and music from origination and will retain ownership of the copyright created. It will collect the broadcast and box office royalties created by way of broadcast and theatrical performances and also exploit the ownership of these music Compositions by way of releasing soundtracks and licensing the music for use on adverts and other synchronisation opportunities that arise 58 The Alternative Investment Platform Investment Guide

59 Atlantic Screen Scores Investment style Stable Real Returns Atlantic Screen Scores will mainly invest in bigger budget Hollywood films and TV network driven TV series, where the income streams are easier to predict and the asset values of the library of scores that the company will build up will have greater value. The music earns royalties in perpetuity and therefore will always have a long term value which it is the intention that the EIS Company sell within the next 5 years. Revenue is generated from five main sources: > Cinema box office (excluding USA) average 0.5% of gross box office value when films are screened; > Broadcast (including USA) e.g. a broadcast on BBC would generate a 2,000 royalty, a broadcast on ABC (USA) would generate a 10,000 royalty; > Digital downloads of films e.g. Netflix, itunes; > Sale of film soundtracks; > Selling music for use in adverts, trailers etc. typically 2,000 to 25,000 per use. Technology Advances With the proliferation of digital platforms whether they be VOD platforms, TV channels, online digital download sites, they all pay royalties for their music content, and as such, through ownership of the underlying music rights to film and TV projects their income streams continue to grow. Investment Period As Atlantic Screen Scores has already identified a number of film scores it wishes to invest in capital deployment will be immediate, the investments are expected to be held for a period of four years at which point regular royalty streams have been generated and the library of rights invested in can be sold. Portfolio Composition It is planned that the EIS invest in approximately 15 different films and TV projects. The Alternative Investment Platform Investment Guide 59

60 Atlantic Screen Scores Continued Capital Growth The focus of Atlantic Screen Music will be to generate significant capital growth over a four to five year period. It is not expected that the company will pay dividends during the three year EIS holding period. EIS Relief The company has already received EIS Advance Assurance from HMRC. Exit Exit will be through sale of the library rights to a major music publishing company. There is a fairly active market in the trade of such rights. Examples of Atlantic Screen Music - related investments The Atlantic Screen Music Team has invested into 2 previous EISqualifying companies. An example appears below: Atlantic Screen Investments Ltd: a Company funded through Octopus Investments that has invested in 19 film and TV scores, targeting a return of 130p for each net 100p invested, an expected IRR of approximately 10% from Initial Investment. Who Are Atlantic Screen Music? Atlantic Screen Music is the manager to Atlantic Screen Scores Ltd, and is responsible for sourcing the investment opportunities and advising the investment manager on the structuring and execution of investments made. Atlantic Screen Music will also advise on the strategic development of the EIS Company throughout the investment period and on the options available to release the investment once the EIS-qualifying three year period has expired. The investment manager will be Sapia Partners LLP ( Sapia ), under FRN Sapia is a private, independent investment management and corporate finance advisory firm. The senior team is comprised of highly specialised, senior professionals with expertise in investment banking, principal investments, private equity and private and public debt. The team at Sapia includes senior members who will make the investment management decisions based on the advice from the management of Atlantic Screen Music. 60 The Alternative Investment Platform Investment Guide

61 Atlantic Screen Scores Continued Who Are Atlantic Screen Music? Atlantic Screen Music management have 50 years+ experience in the field of investment and administration in music royalty copyrights. The Company is chaired by Stephen Orchard, a leading figure in the UK radio industry for over 25 years. He is currently chief executive officer of a UK commercial radio group holding eight station licences. His career in commercial radio has ranged from presenter and programme director to various senior directorship positions in GWR Group plc and GCap Media plc. What Atlantic Screen Music say about themselves The team of Atlantic Screen Music brings together professionals form both film finance and music copyright exploitation, it s this unique combination of skill bases that allows the team to effectively evaluate the investment opportunities in this specialised area of music investment. Atlantic Screen Scores Ltd will benefit from the experience gained from the team and the previous EIS companies established by Atlantic Screen Music. We believe that the market for film and TV music exploitation will continue to grow as demand for home entertainment grows, whilst at the same time markets continue to grow in developing countries around the world. A key earner for the company is cinema and year on year the global box office continues to grow. How Atlantic Screen describes its investment process The due diligence process adopted by the Atlantic Screen Music Team includes: Scripts: The scripts of the projects are read professionally and reports provided as to the creative value of the project. Sales projections: The projections and details of actual distribution licences are reviewed to assist in valuing the likely performance of the projects which itself will help determine the likely music royalty values generated. Production Budgets: A review of the detailed production budgets and especially the music budget will help to evaluate the scale and provide some insight in the likely music values anticipated The Alternative Investment Platform Investment Guide 61

62 Atlantic Screen Scores Continued How Atlantic Screen describes its investment process Investment Criteria > Film must be bonded to guarantee delivery of the final project and ensuring > No first time directors and producers > Majority to be big budget projects of $20m+ > Top sales agent or studio attached for distribution purposes. Opportunity Origination Atlantic Screen Music will review over 50+ investment opportunities every year, out of which it will select approximately 15 to invest in. Risk management and value building The Atlantic Screen Music team will monitor the activities and performance of the Investee company on behalf of investors in the EIS. They will also actively monitor the performance and the administration of royalty streams generated by its investments made. Any decisions or actions required in relation to the rights and interests of Investors in the Investee Companies will be taken by Sapia Partners, they will also review the investee company in terms of delivering and monitoring compliance with its business plan. The performance of the Investee Company is measured against milestones to monitor progress. Deviations are promptly identified and addressed with the management team. Effective support of this company, the essence of enhancing value, requires more than reviewing the monthly operating report and attending board meetings. Sapia will engage and interact with Atlantic Screen Music and the Investee Company during their development, maintaining their focus, assisting with strategic, operational and commercial issues and providing hands-on support when required. 62 The Alternative Investment Platform Investment Guide

63 Atlantic Screen Scores Continued Investment Exit The successful timing and mechanism of exit from the Investee Company is a critical component in both the selection and the investment performance of the Atlantic Screen EIS. Identifying the appropriate exit point is dependent on the exit routes available at that time and the risks and opportunities presented by the next stage of innovation. Sapia, advised by Atlantic, will look to offer Investors a number of options to suit their requirements, such as, but not limited to, the sale of the Investee Company to return cash, or the continued management of the Investee Company to maintain Inheritance Tax Relief. It is envisaged that investment in the Investee Company will be held for a minimum three years, in accordance with the requirements of the Enterprise Investment Scheme. Key Risks Along with the risks identified in the Scheme Guide, please note that there are a number of risks specific to the Atlantic Screen Scores Limited EIS fund. Investing in EIS funds is considered to be HIGH risk. The risks listed below are non-exhaustive and there may be further risks yet to be identified: Poor performance of a film at the box office There is a risk that the film will not generate the revenues as initially set-out. This will negatively impact the value of any investment made by the Atlantic Screen Scores Limited EIS fund. This is likely to lead to reliance on broadcast royalties, meaning the investment would take longer to recoup, and for potential returns to be realised. A portfolio of investments will allow diversification to help mitigate the impact this may have. Investing into a film that does not complete Charges If a film does not complete an investment will lose its value. However, as an investment strategy Atlantic Screen Scores Limited EIS fund will only invest in films that are bonded. This means an insured guarantee is put in place that the film is made within the budget and delivered by a certain pre-agreed date. Atlantic has a flat one off fee of 80,000 per annum which is levied directly to the investee company. The Alternative Investment Platform Investment Guide 63

64 Guinness AIM EIS Fund overview Guinness AIM EIS 2014 has been established to make investments in AIM-listed companies that are eligible for EIS tax reliefs. Investment objective is to provide tax-free investment returns of over 1.30 per 1.00 invested, net of all fees, in addition to 0.30 of EIS Income Tax Relief. This is an Approved Fund for EIS purposes. Therefore, for Income Tax Relief purposes all the Investments will be deemed to have been made on the Closing Date provided 90% of the Subscriptions have been invested by the first anniversary of the Closing Date. How Guinness describes its investment process Investors will be able to claim Income Tax Relief in the 2013/14 tax year. In addition, as an Approved Fund, the process of claiming EIS Income Tax Relief is greatly simplified. Rather than receiving an EIS 3 certificate for each investment made, Investors will be issued with a single EIS 5 Certificate with which EIS Income Tax Relief and other tax reliefs can be claimed. Origination The Investment Manager sources Investments through its network of contacts with AIM Nominated Advisers and Brokers. Each AIM company is required to appoint a Nominated Adviser and Broker, selected from a list of advisers approved by the London Stock Exchange. Guinness Asset Management is an active investment manager in the UK quoted investment market and is well known to the London advisory community. In addition, the Investment Manager reviews the Stock Exchange announcements of upcoming share issues to ensure it reviews all relevant issues. Due Diligence The first stage due diligence of a share issue by an AIM company entails a review of the documentation including any relevant admission document for an IPO, annual report and accounts, corporate literature and brokers research. This is set in the context of the sector and the market as a whole to provide the Investment Manager with an initial view of the attractiveness of the investment proposition. Companies that pass the first stage due diligence are invited to present to the Investment Manager and time is spent in meeting and understanding the management team and their approach. Where appropriate, references are taken and site visits made. 64 The Alternative Investment Platform Investment Guide

65 Guinness AIM EIS continued Transaction Where the Investment Manager wishes to proceed with an investment, a short form report is circulated to the Investment Committee to review and provide approval. The Investment Committee has the opportunity to question the Investment Manager on their approach and rationale for an investment, and further analysis will be undertaken if required. Monitoring AIM companies are required to publish results half yearly. The Investment Manager will meet with each Investee Company regularly and question management on progress and performance. Exit How Guinness Charges for its services As the Investee Companies are quoted this provides the Investment Manager with flexibility on exit. The Investment Manager intends to offer Investors a number of options to suit their requirements. This will include the sale of Investments to return cash, continued management of the Investments to maintain Inheritance Tax Relief or reinvestment into a follow-on Guinness EIS fund. All fees are deferred until they can be paid from the proceeds of investments to ensure EIS Relief is maximised for investors. At this time, Guinness will levy the following fees: > Initial fee of 2.0% > Annual Management Fee of 1.75% > Performance fee of 20% on returns over 1 per 1 invested For investment in Guinness AIM through Kuber, Guinness will make a payment of 1% of the amount invested in companies to Kuber for the services provided by the Kuber Multi Manager Platform. Kuber has instructed the manager to re-direct these payments in the form of cash to your account on Kuber Platform. All fees and charges are exclusive of VAT which will be charged where applicable. The Alternative Investment Platform Investment Guide 65

66 Guinness AIM EIS continued The Investment Manager will invest in a portfolio of AIM listed companies that it believes will offer capital gain underpinned by sound financial assumptions and robust management teams. Our investment strategy is summarised below: Investment Style AIM Companies The Service is focused on investing in companies that are listed on AIM and which will benefit from EIS tax reliefs. In exceptional circumstances companies listed on ISDX Growth Market or pre-ipo companies may be considered for investment, up to a maximum of 20% of Subscriptions in aggregate. Investment Period The Investment Manager will commence investing from 6 April 2014 and it is intended that Subscriptions will be fully invested within 12 months. The Investment Manager intends to hold the Investments for the EIS Three Year Period. Diversification The Investment Manager is targeting a portfolio of approximately 10 investments to provide diversification to Investors. Sector and Stage The Investment Manager will review potential investments across a range of EIS qualifying sectors and will look to have a balanced spread of investments. Investee companies are also likely to be at different development stages, with some early stage businesses with high growth potential and some more mature businesses with more predictable cashflows. 66 The Alternative Investment Platform Investment Guide

67 Guinness AIM EIS continued Capital Growth The focus of the Service is on generating capital growth. It is not expected that many Investee Companies will pay dividends during the three year EIS holding period. This will help maximise tax reliefs for Investors as dividends are usually subject to income tax whereas a capital gain realised after the EIS Three Year Period will be exempt from capital gains tax. EIS Relief Investments will only be made into companies that have received EIS Advance Assurance from HMRC. Exit On exit the Investment Manager intends to offer Investors a number of options to suit their requirements. This will include, but not be limited to, the sale of the Investments to return cash, continued management of the Investments to maintain Inheritance Tax Relief or sale and reinvestment into a follow-on Guinness AIM EIS fund. The Alternative Investment Platform Investment Guide 67

68 Guinness Sustainable Infrastructure EIS About Guinness EIS has been established to make investments in UK Sustainable Infrastructure companies that are eligible for EIS tax reliefs. Investment objective: tax-free investment returns of over 1.15 per 1.00 invested, net of all fees, in addition to 0.30 of EIS Income Tax Relief. Characteristics of Sustainable Infrastructure companies that the Investment Manager expects to invest in: stable and predictable cashflows underpinned by long term contracts operating performance that has low correlation with other asset classes proven technologies to minimise operational risk creditworthy counterparties for long term supply or sale contracts Investment Strategy EIS Qualifying Technologies The core focus of Guinness EIS is to invest in Sustainable Infrastructure projects. The Investment Manager is targeting investments in companies focused on: Combined Heat and Power ( CHP ) Generation Grid Balancing and Reserve Power Waste Heat Recovery Waste Management Unsubsidised Renewables 68 The Alternative Investment Platform Investment Guide

69 Guinness Sustainable Inheritance About The Guinness Sustainable Inheritance Planning Service has been launched to help Investors pass more of their wealth onto their family. The Service has no initial fee for advised clients and will make investments into companies that qualify for Business Property Relief (BPR). The Service invests in unquoted Sustainable Energy businesses that qualify for BPR. Guinness Asset Management has built a track record investing into companies specialising in sustainable energy. These companies have attractive investment characteristics: predictable revenues, low technology risk and low correlation with other asset classes. Investment Strategy Guinness are aiming to deliver annual returns to Investors of in excess of 5 per cent, which can be accessed through regular redemptions or retained within the Service for capital growth. The investments will be in one or more private companies. Private companies usually qualify for BPR in the UK, which means that Investors can benefit from 100 per cent relief from inheritance tax (IHT) provided the shares have been held for no less than two years at the time of death. Guinness make direct investments on behalf of Investors, so Inheritance Planning Service allows you to retain ownership and control of your capital. The service has no initial fee for advised Investors. > Sustainable Energy - Subscriptions will be invested in companies that own and operate Sustainable Energy businesses. These projects are characterised by generally long-term, stable, inflation-linked revenues. > UK - Guinness only intend to make investments into companies and assets that are located in the UK. This means that projects operate within the UK s stable legal and regulatory framework. > Multiple Projects - Diversification will be achieved by investing in multiple Sustainable Energy projects. > Proven Technologies - The Investment Manager minimises technology risk by only investing in projects which use proven technologies that have an established operating history. > Consented Projects - The Investment Manager believes the optimal tradeoff between development risk and financial return can be achieved by investing in businesses whose projects have already obtained the required permissions and consents, either before it has started construction or when operational. > Strong Counterparties - The Investment Manager will seek to work with companies whose project developers and construction and contractors have a successful track record of delivering operating projects on time and on budget. The Alternative Investment Platform Investment Guide 69

70 Rockpool Investments Manager Overview Who is Rockpool? What Rockpool says about itself How Rockpool describe its investment process Rockpool is a private equity investment firm based in London. It sources investments for its network of very high net worth individuals, many of whom are successful entrepreneurs. The firm s mission is to make private company equity investing as accessible as the stockmarket, helping private individuals to profit from the growth of some of the UK s best private companies. Rockpool combines the personal service of an investor network, which offers direct access to individual investments, with the scale and delivery capability of portfolio-building services, which attract committed funds from a wider base of investors. Rockpool is headed by Matt Taylor, who was a driving force behind the growth of Foresight, one of the largest VCT managers, helping to build assets under management to over 400 million. Deal flow Rockpool sources potential deals from the team s wide contact base and from the Rockpool Network. Many of the Rockpool Network members are successful entrepreneurs, whose profile and contact networks attract companies that are looking for financing. Company selection Investment decisions are made by Rockpool s investment committee, based on a rigorous due diligence process. This involves multiple meetings with the target s management team, customer referencing and a full financial and legal investigation, typically taking 3-6 months. Portfolio management Rockpool typically takes a pro-active role in investee companies development. It will have the right to appoint a director, working closely with executive management to ensure that business strategy and exit planning are managed in line with shareholder interests. 70 The Alternative Investment Platform Investment Guide

71 Rockpool EIS Portfolio Service Rockpool s portfolio overview Rockpool s EIS Portfolio Service makes it easy for you to build a portfolio of unlisted equities, using the Enterprise Investment Scheme to enhance returns and reduce risk. The Service is designed to be tailored to your needs. You decide how much to commit to your portfolio and how widely you want to diversify your investment. You can also choose between three investment strategies, designed to deliver a range of risk and return. You can change these options at any time, in line with our aim to make Rockpool s EIS Portfolio Service the most flexible route to tax-efficient investing. We select companies for your EIS portfolio, investing in businesses in a wide range of sectors and at every stage of their development. Our typical EIS investment is 2-5 million of equity into a well-established business with good growth prospects. We guide the companies through the whole process from investment through to exit, and we report to you regularly on their progress. Rockpool is committed to giving investors and advisers the tools they need to better understand the Enterprise Investment Scheme. That is why we sponsor a specially designed website, which you can find at Rockpool creates tax-efficient alternative investments for a network of very high net worth individuals. We call this the Rockpool Network. Our Portfolio Services enable a wider audience of private investors to co-invest alongside the Rockpool Network. Many members of the Rockpool Network are successful entrepreneurs, who have made money themselves and know what works. They join the Rockpool Network to share deals and experience and to tap into our flow of attractive unlisted companies. We don t invest in any opportunity unless Rockpool Network members decide to invest. This informs our decision-making with an enormous breadth of experience, truly focussed on the long-term success of the target company. Rockpool s investment style Growth capital and management buyouts across a wide spread of sectors The Alternative Investment Platform Investment Guide 71

72 Rockpool EIS Portfolio Service continued Investment strategies There are three investment strategy options. Investors can choose one or combine them. Exciting Growth Designed for investors who see value in smaller companies and are prepared to take more risk in pursuit of higher growth potential. Exciting growth opportunities typically arise when ambitious businesses reach a moment of change. They need capital to establish or cement a competitive advantage, which could multiply investors capital by 3 times or more over a 5 year period. With full EIS benefits, this would translate into taxfree compound annual growth of 34% or more. The focus is on capital gains, so exciting growth investments do not usually pay dividends in the first 3 years. Investment returns often depend on a sale of the company, so timing is hard to predict. The average hold period is likely to be 5 years, with some investments exiting sooner and some later. Exciting growth may include start-up companies, but our intention is that most companies will already have significant revenues and will be profitable or close to profitability. Next Generation Maybe you re thinking of putting part of your wealth aside for your heirs, but you don t want to lose control of your assets. Next Generation investments are typically shares with preferential dividend rights in companies which Rockpool believes offer a lower risk profile, based on factors such as consistent profitability, a strong balance sheet or contracted revenues. The focus is on preserving the real value of your capital and saving 40% inheritance tax. A dividend yield of 5% will normally be targeted, equivalent to a pre-tax yield of 7.1% on net cost for an investor who obtains full EIS income tax relief when investing. Exit Focus This strategy is designed for investors whose focus is on a predictable exit as soon as possible after the 3-year minimum holding period. Assuming that an investment is sold at a cost after a 3.5 year hold period, the 30% income tax relief alone would deliver a 10.7% compound annual return. As with Next Generation investments, Rockpool often uses shares with preferential dividend rights to reduce risk, while selecting companies with a lower risk profile. A mechanism is built into each investment to incentivise the company to deliver an exit for the Exit Focus shares during the 4th year. The focus is on the total return at exit, rather than dividends. Our aim is that investors should receive proceeds of between 1.10 and 1.20 per 70p of net cost, equivalent to between 13.8% and 16.6% compound annual growth respectively. 72 The Alternative Investment Platform Investment Guide

73 Rockpool EIS Portfolio Service continued Examples of recent investments Exciting Growth Strategy A specialist installer of commercial kitchens, which also manufactures some bespoke equipment and provides maintenance services. Since 2010 a new management team have increased sales by 80% to 18 million, with profits rising to 1.3 million. This team is now buying the business, investing 250,000 personally to support their plan to double sales over the next three years. Rockpool investors are providing 3 million, including 800,000 of EIS-qualifying shares. Assuming that the business is sold after 3.5 years at a valuation representing five times profits, proceeds to investors in the shares would be around five times the net cost of investment. Next Generation and Exit Focus Strategies A company set up to build and operate a crematorium. Freehold property backing and predictable profits make this an attractive business for investors with lower risk tolerance. Investors received shares with a 5% fixed dividend plus a share of any upside. The company plans to offer to buy back shares at the end of the three-year EIS minimum hold period, giving Exit Focus investors an opportunity to realise their investment with profits. Next Generation investors will be able to keep their capital invested to take advantage of potentially rising income and freedom from inheritance tax. How Rockpool charges for its services Charges Rockpool will not make any charge directly to you or on your portfolio. Investee companies will be required to pay Rockpool an annual management charge equal to 2.0% of the amount invested. Rockpool will be entitled to receive a performance incentive in the form of an option to subscribe for shares in each investee company. Rockpool may retain for its own benefit any arrangement fees and directors or monitoring fees which it receives from investee companies. For investment in Rockpool through Kuber, Rockpool will make a payment of 1% of the amount invested in companies for you to Kuber for the services provided by the Kuber multi-manager platform. Kuber has instructed Rockpool to redirect these payments, in the form of cash, to your account on the Kuber Platform. All fees and costs are exclusive of VAT which will be charged where applicable. The Alternative Investment Platform Investment Guide 73

74 Seneca Partners Manager Overview Who is Seneca? Seneca Partners is an independent investment and corporate finance business for private individuals, entrepreneurs, companies, funds and trusts. Their team brings together decades of success in providing investment solutions and success for investors. With offices in Manchester, Liverpool, Leeds and Birmingham, Seneca Partners maintains a strong local presence in the SME heartlands and the established, trusted and high quality contact networks of the Seneca Partners team, which includes fellow professionals, funders, investors and SMEs themselves, is critical to the ability of the Seneca Partners team to source the most interesting and compelling investment opportunities. About Seneca Capital Seneca Partners Limited is the Portfolio Manager of the Seneca EIS Portfolio Service and is responsible for sourcing suitable investment opportunities and advising on the structuring, valuation and execution of these investments, as well as the ongoing management of the portfolio companies post-investment. Seneca advises on the strategic development of investee companies throughout the investment period and on the options available to realise each investment once the three year EIS qualifying holding period has passed. November 2011 Microvisk Technologies won the Healthcare Project of the Year Award and Redx Pharma was named Start-Up Company of the Year at the prestigious BioNow Biomedical Awards. It showcased the leading biomedical companies in the North West of England. Acceleris completed multiple fundraisings for these businesses under the Investment Scheme. 74 The Alternative Investment Platform Investment Guide

75 Seneca Partners Manager Overview continued September 2011 Memsstar was named the 20th fastest-growing technology company in the UK in The Sunday Times Microsoft Tech Track 100 for Acceleris led an equity fundraising under the Investment Scheme for this company in April 2007; June 2011 RedX Pharma won Knowledge Business of the Year at the Liverpool Daily Post Regional Business Awards; December 2010 RedXpharma won New Technology Deal of the Year award at the Insider North West Dealmakers Awards. Acceleris were lead advisers to RedXpharma and led an equity fundraising under the Investment Scheme for this company in Sept 2010 of 2 million. Advisory Partners Network ( the Network ) The Network comprises successful entrepreneurs, business owners and senior level executives with whom the Seneca Capital team have trusted and long-standing relationships. The Seneca Capital team is able to call upon the knowledge and experience, which exists within the Network, when reviewing new investment opportunities and when managing portfolio investments. Members of the Network share the same passion and enthusiasm as the Seneca Capital team for helping businesses grow and use their contacts and experience to help Investee Companies thrive. What Seneca says about itself Seneca Capital was formed in 2010 bringing together a first class team of finance professionals with over 100 years of combined investment expertise, extensive contact networks and exceptional deal flow. Seneca Capital has a partnership with EIS specialist, Acceleris, to provide an EIS Portfolio Service for our investors. We have a dedicated team who specialise in private company equity investments targeting companies who can demonstrate sound underlying business fundamentals and strong growth potential. Our focus is on helping established companies to grow and consequently we rarely engage with start-up businesses. Our EIS Portfolio Service targets well managed businesses that can demonstrate established and proven concepts, good balance sheet strength, profits or visibility of profit and cash generation, which are looking to take the next step in their growth phase. The Seneca EIS Portfolio Service is a compelling investment option which combines the significant tax benefits available under the Investment Scheme and the potential for attractive returns. We do not factor tax reliefs into our targeted investment returns and consider each opportunity on its merits regardless of the tax reliefs available. The Alternative Investment Platform Investment Guide 75

76 Seneca Partners Manager Overview continued How Seneca describes its investment process Deals are introduced to us through our network of experienced professionals, entrepreneurs, corporate contacts and introducers or from a member of the Advisory Partners Network. We typically review in excess of 500 investment opportunities, meet over 200 businesses every year and transact only a fraction of these. The application of strict investment criteria and extensive screening combined with detailed due diligence processes are designed to ensure that only the best investment opportunities are transacted for the Seneca EIS Portfolio Service. Investment Criteria Many of the investment opportunities that are received do not meet our investment criteria and therefore are not considered beyond initial review phase. The key investment criteria for our Portfolio Service investments are summarised below: > Attractive growth prospects > Defensible market position > Realistic entry valuation expectations > Strong underlying business fundamentals and management team > Opportunity to enhance value from improved financial and operational practices and structures > Exit available between 3 and 4 years > Ability and desire to transact promptly Investment Process Those businesses that meet the majority, or indeed all, of the above investment criteria are then subject to our detailed investment process which is designed to identify issues that may not be apparent on initial review. 76 The Alternative Investment Platform Investment Guide

77 Seneca Partners Manager Overview continued An overview of our investment process is included below: Stage one: Stage one consists of producing a summary of the potential deal including key features, market analysis, possible entry price, exit strategy, potential returns and key Due Diligence (DD) issues. Stage one highlights key concerns with the deal as well as an idea of DD costs and the potential deal structure. The paper is presented to the Investment Committee who either decline the opportunity or consent to investigating the opportunity further and moving to stage two. Stage two Stage two consists of a full investigation of the investment opportunity, preparation of a full investment paper with DD findings (legal, commercial, management and financial), finalisation of deal structure and agreement of terms. Following a second stage approval from the Investment Committee, a summary of these findings is presented to the Portfolio Manager who then makes the final investment decision. After stage two approval, Seneca Capital move to deal completion followed by post deal ratification. Post deal ratification and on-going management: This involves six monthly updates to the Portfolio Manager from the Investment Adviser. The Investment Adviser reviews the management information on a monthly basis, monitors any underperformance and manages alignment to the exit strategy. When an exit offer is presented, the entire process is repeated before any sale is agreed or completed. Investment Process Those businesses that meet the majority, or indeed all, of the above investment criteria are then subject to our detailed investment process which is designed to identify issues that may not be apparent on initial review. An overview of our investment process is included below: Stage one Stage one consists of producing a summary of the potential deal including key features, market analysis, possible entry price, exit strategy, potential returns and key Due Diligence (DD) issues. Stage one highlights key concerns with the deal as well as an idea of DD costs and the potential deal structure. The paper is presented to the Investment Committee who either decline the opportunity or consent to investigating the opportunity further and moving to stage two. The Alternative Investment Platform Investment Guide 77