BROCHURE
abc ESTATE PLANNING - IEP CLASSIC BROCHURE CONTENTS IMPORTANT INFORMATION 1 WELCOME TO INGENIOUS 2 INTRODUCTION 4 MANAGING YOUR INVESTMENT 6 THE INVESTMENT PROCESS 7 CHARGES 9 THE FINE PRINT 10 RISK FACTORS 12 TAXATION 14 OPERATION OF THE SERVICE 15 DEFINITIONS 17
abc ESTATE PLANNING - IEP CLASSIC IMPORTANT INFORMATION THIS NOTICE IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt about the content of this brochure and/or any action you should take, you are strongly recommended to seek advice immediately from a financial adviser authorised under the Financial Services and Markets Act 2000 (FSMA) who specialises in advising on investment opportunities of this type. Nothing in this brochure constitutes investment, tax, legal or other advice by Ingenious Capital Management Limited (the Manager) and your attention is drawn to the section headed Risk Factors on pages 12-14. An investment in IEP Classic, an Ingenious Estate Planning service, will not be suitable for all recipients of this brochure. This brochure constitutes a financial promotion for the Service pursuant to Section 21 of the FSMA and is issued by Ingenious Capital Management Limited, 15 Golden Square, London, W1F 9JG, which is authorised and regulated by the Financial Conduct Authority. The address of the Financial Conduct Authority is 25 The North Colonnade, Canary Wharf, London, E14 5HS. The Manager has taken all reasonable care to ensure that the facts stated in this brochure are true and accurate in all material respects and that there are no material facts in respect of which omission would make any statement, fact or opinion in this brochure misleading. Delivery of this brochure shall not give rise to any implication that there has been no change in the facts set out in this brochure since the date hereof or that the information contained herein is correct as of any time subsequent to such date. The Manager accepts responsibility accordingly. This document is not intended to constitute a recommendation or provide advice of any sort to any prospective investor. Any references to tax laws or rates in this brochure are subject to change. Past performance is not a guide to future performance and may not be repeated. The value of your investment can go down as well as up and you may not get back the full amount invested. You should consider an investment in the Service as a medium to long-term investment. No person has been authorised to give any information or to make any representation concerning the Service other than the information contained in this brochure or in connection with any material or information referred to in it and, if given or made, such information or representation must not be relied upon. This brochure does not constitute an offer to sell or a solicitation of an offer to purchase securities and, in particular, does not constitute an offering in any state, country or other jurisdiction where, or to any person or entity to which, an offer or sale would be prohibited. IEP CLASSIC Managed and promoted by Ingenious Capital Management Limited This brochure contains information relating to investing in the Service. An investment may only be made on the basis of this brochure, the investor agreement and the relevant application form. All statements of opinion or belief contained in this brochure and all views expressed and statements made regarding future events represent the Manager s own assessment and interpretation of information available to it as at the date of this brochure. No representation is made, or assurance given, that such statements or views are correct or that the objectives of the Service will be achieved. A prospective investor must determine for himself or herself what reliance (if any) he or she should place on such statements, views or forecasts, and no responsibility is accepted by the Manager in respect thereof. 1
BROCHURE WELCOME TO INGENIOUS Providing simple solutions to the complex problems our clients face For more than 15 years, investors have chosen Ingenious to manage their funds. Individuals, companies and institutions have entrusted us with more than 9 billion, which we have managed under a range of carefully designed investment strategies. A common thread runs through it all: investors looking for a simple solution, often to a complex problem, from a firm that they can trust to manage their money carefully. Preparing for changes in circumstances that you may face at any stage of your life is the cornerstone of sound financial planning especially when it comes to protecting the legacy you are creating for your loved ones. The unavoidable truth is that without suitable planning, inheritance tax can significantly reduce the value of your estate. The impact may vary, but the issue is universal. We have designed our Ingenious Estate Planning suite of products to address this challenge. IEP Classic is a simple, flexible service that offers you protection from the impact of inheritance tax in just two years and provides you with peace of mind that this part of your legacy is being managed carefully and professionally. IEP Classic is part of the Ingenious Estate Planning family of services. This is an area in which we specialise. Over the past decade, our investors have trusted us to manage more than 800 million in investments that have been specifically structured to meet the needs of estate planning. By choosing to invest in IEP Classic, you too will benefit from our experience in this vital area of financial planning. Your financial adviser will offer guidance on whether IEP Classic is right for you. In the meantime, I would like to thank you for considering an investment in IEP Classic and taking the time to read this brochure. I hope you find it clear and helpful. Please contact the Client Relationship Team on 020 7319 4291 to discuss this opportunity further. Neil Forster Chief Executive, Ingenious 2
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BROCHURE INTRODUCTION IEP Classic: protecting your financial legacy from IHT Providing financial security for your family is one of life s principal goals. But without careful planning, the impact of inheritance tax (IHT) may reduce the total value of your estate and compromise your financial legacy. Today, the value of your estate above the nil-rate band (currently 325,000, or 650,000 including the allowance of your spouse), will be subject to inheritance tax at 40% on death 1. Therefore, if your estate is worth 1 million, your beneficiaries could face a tax bill of up to 270,000, regardless of their financial circumstances. The greater your financial success, the greater their potential burden. IEP Classic provides you with a simple method to protect some or all of your estate from IHT and preserve its value for your loved ones. In contrast to certain other well known estate planning strategies, IEP Classic achieves this goal in just two years and does not require you to sacrifice control over your assets in order to do so. What is IEP Classic? IEP Classic is a discretionary investment management service that protects your investment from IHT by investing in companies that qualify for Business Relief (BR). With an investment in IEP Classic, you become a beneficial shareholder in these companies and the value of your investment becomes exempt from IHT after just two years, or even sooner if your investment is replacement business property. Each investment is carefully selected and overseen by the Manager in line with a conservative investment strategy designed to preserve the value of your investment and deliver steady growth. IEP Classic is designed to: 99 carefully grow and preserve the value of your investment 99 allow you to access your investment if needed 99 protect your investment from IHT The potential impact of an investment in IEP Classic is illustrated below. What is BR? BR is a UK tax relief introduced in 1976 to enable business owners to pass shares in unquoted trading companies from generation to generation without being subject to IHT. Shares in BR qualifying companies become 100% exempt from IHT once they have been held for two years; considerably less time than is required with most other estate planning strategies. BR is commonly used by private investors as an effective tool for estate planning. Ingenious is one of the largest managers of BR qualifying investments for private investors. The impact of an IEP Classic investment on a 1m estate 2 No estate planning 250k IEP Classic investment 350k IEP Clasic investment Property Other Assets 140k IHT Net value to beneficiaries: 860k Property IEP Classic Net value to beneficiaries: 960k Other Assets 40k IHT Property Net value to beneficiaries: 1m IEP Classic Other Assets 0 IHT 1 Some individuals may be eligible for a reduction in their IHT rate to 36% subject to a qualifying charitable donation. In some circumstances, an individual may also be able to claim a transferable nil rate band from their deceased spouse. 2 Notes: (1) assumes a 650,000 nil rate band applies; (2) based upon the value of the IEP Classic investment at death. 4
abc ESTATE PLANNING - IEP CLASSIC Why IEP Classic? IEP Classic provides a simple estate planning solution designed to deliver the following key benefits: Control You retain beneficial ownership of your investment and can access your funds as needed. Other methods can require you to give up control of your assets. Efficiency The value of your investment is fully exempt from IHT after only two years. Other methods can take up to seven years. Why IEP Classic? Transparency Investments are managed under a carefully designed investment strategy. You will be provided with regular performance updates and access to a dedicated support team. Simplicity No restrictions on health, age or occupation. Subject to customary checks required by law, your investment should be complete shortly after application. Protection A conservative investment strategy designed to carefully grow and preserve the value of your investment. Why Ingenious? For more than 15 years, investors have chosen Ingenious to manage their funds. In that time, we have raised and deployed more than 9 billion, including over 800 million in BR qualifying investments. At Ingenious, our goal is to provide our clients with simple, effective solutions to some of the key financial planning challenges they face, from a firm that they can trust to manage their money carefully. Our business principles: 99 Providing straightforward solutions to financial planning and investment challenges 99 Understanding risk and client objectives and managing investments accordingly 99 Managing client money with the same level of care we expect for our own investments 99 Backing our judgement and investing our money alongside our clients Our commitment to you: 99 Careful management of your funds under a strategy designed to deliver steady growth and value preservation 99 Transparency and a dedicated team to support your investment needs 99 Control for you over your investment 5
BROCHURE MANAGING YOUR INVESTMENT Keep control of your assets as you plan for the future 3 Having spent a lifetime carefully building your legacy and making decisions on how best to provide for the financial wellbeing of your family, would you want to sacrifice control of your assets as you plan for the future? Unfortunately, many common estate planning strategies require you to do just that in return for protecting your estate from IHT. IEP Classic is different. CONTROL You retain control over an investment that will be exempt from IHT after only two years, or even sooner if your investment is replacement business property. MAKING WITHDRAWALS At any time, you may look to realise some o all of the value of your investment. The Manager will aim to facilitate payments within one to six months, depending upon available liquidity. ADDITIONAL CONTRIBUTIONS You have the option to make further contributions to the Service. Each contribution (of at least 10,000) will need to be invested in BR qualifying companies for two years to become exempt from IHT. DRAWDOWN You can elect to draw down the growth generated by your investment annually (payable in February, subject to available liquidity), or seek to build the value of your investment by leaving the growth in the Service 3. All payment requests can be made by submitting a payment request form to the Manager. Realisations will be subject to the terms and conditions set out in your investor agreement and this brochure. Any funds withdrawn during your lifetime may give rise to tax charges. Further detail on the taxation of your investment can be found on page 14. 3 Any growth generated by your investment will remain in your BR portfolio unless specifically directed in your application form or subsequently through a drawdown direction. Drawdowns will be facilitated by realisations from your investment and will be subject to the same terms and conditions that apply to all realisations. 6
abc ESTATE PLANNING - IEP CLASSIC THE INVESTMENT PROCESS Carefully preserving the value of your legacy By definition, the primary aim of an estate planning service should be to protect estate value. Therefore, our investment strategy for each investor s BR portfolio prioritises steady growth and preservation of capital. The investment strategy The Service is operated by the Manager with investments overseen by a highly experienced advisory committee and fund management team. The Service is supported by Ingenious extensive professional infrastructure. The Manager will only invest into a BR company that operates a trading strategy (outlined below) suited to our core objectives for each investor s BR portfolio of capital preservation and stable growth, within the sectors that form the core of its business: media, clean energy and real estate 4. Managing risk 5 Although no investment can be without risk, the Manager s primary goal is to limit risk for an investor as far as possible. Safeguards employed by the Manager include: Ensuring that the share capital for each BR company is funded exclusively by subscriptions made by the Manager from investments in the Service or certain other services in the Ingenious Estate Planning family 6 to avoid conflict with third party investment Closely monitoring the activities of each BR company and placing senior employees of the Ingenious Group on the board of each BR company Requiring each BR company to follow the Manager s chosen trading strategy, focusing on transactions that: 99 demonstrate clearly defined, predictable returns 99 follow transparent, well-understood investment models 99 suit IEP Classic s focus on capital preservation and steady growth Ensuring that each transaction undertaken by a BR company is subject to approval by an advisory committee of experienced investment executives Supporting each BR company with specialist Ingenious fund management teams to assist in sourcing, evaluating and closing suitable transactions Your Investment IEP Classic Real Estate Lending on residential development projects that are backed by full security over the properties Clean Energy Acquisition, operation and lending to renewable energy assets backed by strong cash flows and index-linked returns Media Asset-backed lending on media projects 4 The Manager may from time to time (upon notice to an investor) adjust the investment strategy to reflect the range of trading strategies best suited to the investment objectives of the Service. 5 Any decisions or action required in relation to an investor s rights and interests in the BR companies will be taken by the Manager acting at its sole discretion. Each BR company will be able to borrow on commercial terms. 6 Currently, IEP Care. 7
BROCHURE Investment objectives The Manager s target annual growth rate for an investor s BR portfolio (net of applicable fees) is between 3% and 5%. The return delivered from your investment in IEP Classic will depend upon a number of factors including the trading performance of the BR companies. The chart below illustrates the relative value to your estate on death (after deducting any applicable IHT) of a 250,000 investment in IEP Classic and an equivalent cash deposit at various points after investment 7. 400,000 350,000 300,000 250,000 Value 200,000 150,000 100,000 50,000 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 At End of Year IHT Cash Deposit (Net Value) IEP Classic (Net Value) The actual value of your investment will be determined by a number of factors including the performance of the investment, the volume of withdrawals you make, and the tax treatment of your investment. The value of your investment will fluctuate over time and may go up or down. You or your beneficiaries may not get back the full amount invested and may, therefore, lose some or all of the investment. Assumptions, projections, intentions, illustrations or targets included in this illustration and in the target annual growth rate do not constitute a definitive forecast of how the investments will perform but have been prepared upon assumptions that the Manager considers reasonable. 7 The illustration is based upon the following assumptions: The investment in the Service is held for two years and is still held at the date of death The spouse s nil rate band for IHT is already fully used The value of investment is net of all charges including the dealing fee charged on realisation of the investment The investment in the Service delivers an average annual growth rate of 4%, net of applicable fees The cash deposit delivers an annual return of 2% 8
abc ESTATE PLANNING - IEP CLASSIC CHARGES Fees payable to your financial adviser are not included in the costs and charges tables below. Please consult your financial adviser for further details about these costs. The costs and charges table below illustrates the aggregate value of costs and charges, payable to the Manager and Custodian, on an upfront investment of 50,000 in IEP Classic. An investor for IEP Classic will be subject to the following costs, which are aggregated over a two-year period*: Investment services and ancillary services costs 4.90% 2,597.10 Total costs 4.90% 2,597.10 * The figures shown above are estimates and assume that the IEP Classic minimum target return of 3% growth per annum is achieved. Specifically, the following provides a breakdown of the service costs that are payable to the Manager (inclusive of the aggregated costs): 89 Service cost items to be disclosed Costs One-off charges related to the provision of an investment service Ongoing charges related to the provision of an investment service Investment fee, which is based on the investment in the Service. The investment fee is paid to the Manager. Dealing fee, which is based on the investment in the Service, charged upon investment. The dealing fee is paid to the Manager. Annual management fee which is the value of your investment in the Service per annum (as calculated by reference to the net asset valuation (NAV) of your BR portfolio, prior to the deduction of this fee and the administration fee). The annual management fee will be accrued quarterly and is payable at the end of each year but only from any returns/growth generated when the minimum target return of 3% per annum has been achieved. The annual management fee is paid to an associate of the Manager. Administration fee which is the value of your investment in the Service per annum (as calculated by reference to the NAV of your BR portfolio, prior to the deduction of any applicable fees in that period) to cover the internal administration costs and expenses of the Manager and associates of the Manager in relation to the Service. 1.5% of your investment in the 8 Service. 9 An amount equal to 1% of your investment in the Service, charged upon investment and 1% of the value of shares sold upon any withdrawal or redemption you make from the Service. Annual management fee of 1%. Annual administration fee of 0.25%. 8 It is anticipated that levels of commission agreed by the investor will be payable to certain authorised financial advisers in connection with investments in the Service from advised professional clients and introduced investors who have completed the application form for introduced clients. In such cases, the Manager will be entitled to charge up to 4% of the amount of the investment as an investment fee, paying these commissions from its fees. Further details can be found in the application form for introduced clients and are available on request from the Manager. Commission can be rebated to reduce an investor s overall cost of investment. Any investment returned to an investor will be returned net of any commission paid by the Manager to the investor s financial adviser. 9 Dealing fee includes stamp duty of 0.5% which is paid by the Manager.
BROCHURE All costs related to transactions initiated in the course of the provision of an investment service Any charges that are related to ancillary services Exit dealing fee which is based on the value of shares sold upon any withdrawal or redemption you make from the Service. Approximately 0.1% of the investment in the Service is paid to the custodian, for custodial and nominee services. The custodial fee is charged at a fixed monetary amount, on a quarterly basis, of an equal value, for groups of investors in the Service, subject to the terms of the Custodian Agreement. Exit dealing fee of 1% for redemption of BR shares. Annual custodial and nominee services fees. A further breakdown of the respective service costs can be provided upon request. All fees and charges will be subject to any applicable VAT. The Manager and/or any affiliated company may provide or procure certain administration, management and other services, including any custodian, nominee or similar services (as applicable) 10, to or on behalf of the investor and/ or some or all of the BR companies (as applicable), including for example legal, accounting, company secretarial, taxation, audit, administration and transactional services, and assistance in the sourcing of opportunities, due diligence, monitoring and day-to-day trading operations, in consideration of which such companies shall be entitled to charge or recover (as the case may be) their reasonable costs and/or fees (save for those that are otherwise paid for from the administration fee). The Manager maintains, and regularly reviews, conflict of interest management policies which are designed to ensure that the fee payment arrangements should not create any potential conflict of interest in respect of its obligations to investors in providing discretionary management services and arranging related custody services for their BR portfolios. The investor is given the opportunity to modify their strategy once every three years without incurring the fees upon sale and subsequent re-purchasing of BR shares. Any costs associated with this transaction that do not relate to the Service (for example, stamp duty) will be payable by the investor. 10 Details of applicable custodian fees are available on request. 10
abc ESTATE PLANNING - IEP CLASSIC THE FINE PRINT Full details of the terms and conditions of an investment in IEP Classic are contained in the investor agreement. However, please note the following important information: IEP Classic By entering into an investor agreement, an investor will enter in an individual discretionary management arrangement with the Manager. The custodian will receive and hold each investor s investment. Thereafter, the Manager will seek to make investments into suitable BR companies on behalf of the investor within 21 days of receipt of cleared funds and a valid application form. The Manager will be responsible for discretionary decisions in relation to the selection of, and the exercise of rights in relation to, investments, but the investor will acquire and retain beneficial ownership of the BR shares in his or her BR portfolio. The Manager may, at its discretion, facilitate any requests made to it by an investor to dispose of any individual shareholdings in the BR companies. The process for requesting and making payments is set out in more detail below. Investments The minimum individual investment in the Service is 25,000 (subject to the Manager s discretion to accept a smaller amount). There is no restriction on the maximum investment by an individual. An investor can make further investments in the Service of no less than 10,000 for each further investment (subject to the Manager s discretion to accept a smaller amount). Realisations 11 Please note the following in relation to realisations and payment requests: (a) (b) (c) (d) The Manager will seek to satisfy all payment requests made by an investor from his or her BR portfolio by facilitating a transfer of shares or through a reduction of capital of the applicable BR company(ies). The Manager s ability to facilitate payment requests will always be subject to liquidity constraints, the Manager s discretion and the terms of the investor agreement. It may not be possible to facilitate prompt payment in all cases. Investments made by the Manager are in unquoted companies and are therefore likely to have less liquidity than listed shares. In particular, if there are a number of unusually large payment requests, the timing and process for realisation of investments may take considerably longer than targeted. In the event of a change of law impacting BR, the timing and process for all realisations will be determined at the Manager s discretion. All payments will be executed by reference to the latest published NAV on the date the relevant payment request is processed. The Manager will endeavour to facilitate requested payments such that growth in the value of the investment will be afforded capital treatment in the hands of the investor for tax purposes. However, in some cases, the growth in value may be taxed as an income distribution. Until a final redemption is requested, an investor must retain a minimum of 10,000 invested in his or her BR portfolio at all times. 11 Payment of any ongoing fees payable to your adviser will be facilitated by realising a portion of your investment. Any funds withdrawn during your lifetime may give rise to tax charges. 11
BROCHURE Reporting and valuations The Manager will calculate the NAV for each BR company to each quarter end date. Each NAV will be published on the Ingenious Investor Portal within a month of the applicable quarter end date. All share issues, transfers and capital reductions in respect of an investor will be executed with reference to the most recently published NAV for each BR company at the last quarter end date. Where an investor has requested an emergency payment, the Manager may realise value from BR shares by transferring them at a discount to NAV. The Manager will send each investor quarterly statements made up to 31 March, 30 June, 30 September and 31 December in each year containing a valuation of the BR shares held by that investor in his or her BR portfolio, based upon the latest published NAV for those shares. How to apply After reading this brochure and the investor agreement, please complete the relevant application form and return it to Client Services Centre, Ingenious Capital Management Limited, 15 Golden Square, London, W1F 9JG; together with (i) any supporting documentation requested therein and (ii) payment (instructions for which are in Section 5 of the application form). Right of cancellation An investor may exercise a right to cancel his or her investment in the Service and terminate the investor agreement by notification in writing to the Manager within 14 days of the Manager accepting the investor s application form. This should be done by a cancellation notice sent to the Manager s registered office as set out in this brochure. For convenience, a cancellation notice form is provided at the end of this brochure. Please note that the Manager expects to issue or transfer BR shares to an investor within 21 days of receipt of cleared funds and a valid application form. On exercise of the investor s right to cancel, the Manager will refund any monies paid by the investor, less any charges the Manager has already incurred for any services undertaken in accordance with the investor agreement and less any commission paid to advisers and introducers (if applicable and as appropriate). Monies will only be returned to the investor after satisfactory completion of checks by the Manager under the Money Laundering Regulations 2007 (as amended). The investor will not be entitled to interest on monies refunded following cancellation for the period between receipt in the custodian s client bank account and the day upon which the monies are refunded. The right to cancel under the FCA rules does not give the investor the right to cancel or terminate or reverse any particular investment transaction executed for the account of the investor before cancellation takes effect. The Manager reserves the right to treat as valid and binding any application not complying fully with the terms and conditions set out in this brochure. In particular, but without limitation, the Manager may accept applications made otherwise than by completion of an application form where the investor has agreed in some other manner acceptable to the Manager to apply in accordance with this brochure and the investor agreement. 12
abc ESTATE PLANNING - IEP CLASSIC RISK FACTORS A potential investor should carefully consider all of the information set out in this brochure and whether an investment in the Service constitutes a suitable investment in light of his or her personal circumstances, tax position and the financial resources available to him or her. An investment in the Service involves a degree of risk and may not be suitable for all potential investors. A potential investor should, therefore, seek advice from a stockbroker, accountant, fund manager or other financial adviser before making any decision to invest. A potential investor is also recommended to consult a professional adviser regarding his or her personal tax position. This section contains the material risk factors that the Manager believes to be associated with an investment in the Service. If any of the following events or circumstances arise the value of the investor s BR shares and/or results of the Service could be materially and adversely affected; as could the availability of tax reliefs to an investor. In such circumstances, an investor may lose all or part of his or her investment. Additional risks and uncertainties not presently known, or that are deemed to be immaterial, may also have an adverse effect on the investor s funds and the risks described below do not necessarily include all the risks associated with an investment in the Service. For the avoidance of doubt, the Service is intended for those clients who are classified as Retail Clients. Risks relating to returns The value of BR shares may go up or down. An investor or their beneficiaries may not get back the full amount invested and some or all of the investment may be lost. Assumptions, projections, intentions, illustrations or targets included within this brochure cannot and do not constitute a definitive forecast of how an investor s BR portfolio will perform but have been prepared upon assumptions which the Manager considers reasonable The BR-qualifying status of investments made by the Manager is dependent on the Manager being able to identify appropriate BR companies which carry on, and continue to carry on, a permitted activity for BR purposes. There is no guarantee that a sufficient number of suitable BR companies will be identified or that the BR companies will perform as anticipated The BR companies will be operating in competitive industries where commercial risks exist. The past performance of the Manager is not a guide to the future performance of the investments made through the Service The Manager intends to invest in BR companies deploying capital across a range of projects. This approach is intended to help mitigate the performance risk exposure for the investor on an individual project or counterparty and to increase the chances of the BR companies generating growth for the investor. If the availability of suitable deployment opportunities, appropriate to the investment strategy, for BR companies to deploy their capital is limited, the opportunities for diversification may be reduced Each investor should note that it is possible that other taxes or costs may be suffered by the investor in connection with his or her investments that are not paid via, or imposed by, the Manager The level of return to an investor will be a function of the economic performance of each BR company, including for example the value of any contracts obtained as collateral or entered into by a BR company, the financial performance and position of the obligors under any such contracts, and the level of base interest rates from time to time. There is no guarantee that the target returns for an investor s BR portfolio illustrated in this brochure will be achieved It may be difficult to realise value from BR shares or to obtain specific information as to their current value, as it is unlikely that there will be a ready market for them, therefore it may not be possible to facilitate a payment immediately after a payment request form has been submitted or at the desired time Where there is insufficient liquidity within BR companies or limited opportunities for the transfer of BR shares, the process for providing liquidity to an investor could take several months. An investor s access to funds invested will be according to the Manager s policy on acceptable payment requests and is always subject to the Manager s discretion An investor may be the holder of minority interests in BR companies and may, therefore, have little or no influence upon how the business is conducted. In any event, the Manager exercises the shareholder rights of each investor pursuant to the investor agreement 13
BROCHURE To the extent that a BR company is capitalised with limited funds, there will be less opportunity for it to diversify its trading activities, which may adversely impair returns for an investor s BR portfolio The BR companies are exposed to a number of risk factors that may impact their financial performance. These factors include but are not limited to commercial risk, counterparty credit risk, project risk and interest rate risk Risks relating to taxation This brochure is prepared in accordance with the Manager s interpretation of current legislation, rules and practice. Such interpretation may not be correct and it is always possible that legislation, rules and practice may change. Any such changes, and in particular any changes to the bases of taxation, tax reliefs, rates of tax or the investor s tax position, may affect the return an investor receives from his or her BR portfolio The tax benefits described are personal to an investor and their value is dependent on the investor s personal circumstances. Therefore, these tax benefits may not be available to all investors and/or may be lost by an investor in certain circumstances Tax relief may be withdrawn in certain circumstances and neither the Manager, nor the custodian accepts any liability for any loss or damage suffered by any investor or other person in consequence of such relief being withdrawn or reduced. Tax law is complex and an investor should seek independent tax advice Risks relating to BR If a BR company ceases to carry on an appropriate activity for BR purposes, the qualifying status of the BR shares may be adversely affected. While the Manager will require various safeguards to be provided against this risk, it cannot guarantee that all shares in BR companies will continue to qualify for BR throughout the life of the investment It cannot be guaranteed that BR will be available or will continue to be available, in respect of each investment made by the Manager nor whether each BR company will meet the BR qualifying requirements in advance of any investment being made by the Manager If a transfer of BR shares takes place at a time when the BR company fails to meet the BR qualification requirements, a liability to IHT may arise in respect of that transfer If, at the time BR shares are transferred, a BR company owns assets which are not required for use in the trade, the value of these assets (excepted assets) may be excluded from the value eligible for BR. While the Manager will require that the business of each BR company is carried on in such a way that no excepted assets are held by such company at any time, it cannot be guaranteed that the full value of all BR shares will be eligible for BR Risks relating to foreign exchange It is anticipated that each BR company will ensure that receipts will either be paid in sterling or that suitable hedging arrangements will be put in place Financial Services Compensation Scheme Although the Manager and the custodian are covered by the Financial Services Compensation Scheme (FSCS), the FSCS is only available when an authorised firm goes into default and is unable or is likely to be unable to pay claims made against it by clients. An investor s access to the scheme depends on the type of business and the circumstances of the claim, and compensation is limited to a maximum of 50,000. Further information about compensation arrangements is available on request from the Manager, or from the FSCS Forward-looking statements You should not place undue reliance on forward looking statements, which speak only as of the date of this brochure This brochure includes statements that are (or may be deemed to be) forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, continues, expects, intends, may, will, would or should or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts If a BR company fails to meet the BR qualification requirements, a liability to IHT may arise on the subsequent transfer of the relevant BR shares 14
abc ESTATE PLANNING - IEP CLASSIC Forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements contained in this brochure based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future Subject to any requirement under applicable laws and regulations, the Manager gives no undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise 15
BROCHURE TAXATION This summary is based upon current UK tax law and practice and is intended as a guide only. It is not intended to constitute legal or tax advice and a prospective investor is recommended to consult his or her own professional advisers concerning the possible tax consequences of investing for, purchasing, holding, selling or otherwise disposing of BR shares. The value of any tax reliefs will depend on the individual circumstances of an investor and may be subject to change in the future. The Service has been structured to allow an investor to claim relief from IHT on the value of his or her BR portfolio, as described below. Taxation of payments A realisation in value from the BR portfolio may be facilitated by the Manager by way of either a sale of the BR shares or a reduction in capital. Any return from the BR portfolio will be subject to either income or capital gains tax, and will be dependent on the form of the transaction. If a realisation is achieved by way of transfer of shares, any gain will be subject to capital gains tax. If a capital reduction is undertaken, income tax charges may apply to any returns. The form of the transaction will depend on the liquidity available at the time of the request, and the Manager cannot guarantee that payments will attract capital treatment in all cases. Where payments are subject to income tax, exit fees will not be deductible from the profits for tax purposes. IHT business relief The BR shares should constitute relevant business property (as defined at s105 IHTA). Accordingly, once such BR shares have been held for a period of two years, they should qualify for 100% business relief, which would reduce the IHT liability on a transfer of the BR shares to nil. Where an investment in relevant business property is made from the proceeds of a disposal of other relevant business property, the new investment should qualify when the combined ownership period over the last five years reaches two years. Stamp duty Share acquisitions undertaken by the Manager on behalf of an investor may be subject to stamp duty at the prevailing rate (currently 0.5%). This will be a liability of the Manager and will be paid from the Manager s dealing fee, except in cases where the dealing fee is not applicable, where the cost of stamp duty will be borne by the investor. The Manager reserves the right, in the event of an increase in the applicable rate of stamp duty, to increase the dealing fee by an equivalent amount. Where relevant business property is inherited from a spouse, the ownership period of the transferee spouse includes the ownership period of the transferor spouse. The ownership period commences on the date the investor acquires beneficial ownership of the underlying BR shares, and not from the date of investment in the Service. There may be a period of time between the investor making an investment in the Service and the Manager acquiring BR shares on the investor s behalf. The process for claiming BR To obtain BR the executors of the estate will need to complete a copy of probate return form IHT412 and return this to HMRC. The relief is assessed by HMRC and cannot be guaranteed. The estate may need to provide additional information if requested. 16
abc ESTATE PLANNING - IEP CLASSIC OPERATION OF THE SERVICE Client accounts Prior to investment in BR companies, and following the realisation of investments in BR companies prior to the distribution of proceeds, an investor s funds will be held by the custodian in one or more client accounts. These accounts will be non-interest bearing, therefore no interest will become payable on these balances. BR shares will be issued in the name of the nominee and will be treated as if they were subscribed for or acquired and issued to the investor who will acquire and hold beneficial ownership over them. Any dividends received by the nominee from BR companies will be forwarded directly to the investor and will be taxable as appropriate in the hands of the investor. Both investors funds and BR shares, which are held in the name of the nominee, are subject to the solvency of the external party. However, they are held entirely separate from the money and assets that belong to the nominee. In the unlikely event of default by the external party+, they will be returned to the investors rather than being treated as a recoverable asset by general creditors of the custodian. Allocations The Manager will arrange for the maintenance of accounts which will be open to inspection by each investor (upon reasonable notice) showing the amounts invested and yet to be invested on that investor s behalf. Should an investor die before his or her investment is fully invested, all uninvested sums subscribed by him or her will be repaid by the Manager upon receipt of notice from the investor s personal representatives. The custodian and nominee By completing the application form, a prospective investor will, inter alia, be deemed to have irrevocably agreed to the Manager having appointed the custodian and nominee on behalf of the investor, to exercise the powers, and to carry out duties, on behalf of the investor in accordance with the provisions of the custodian agreement and nominee agreement, certain provisions of which are summarised below. An investor should note that the following does not summarise all the provisions of the custodian agreement and nominee agreement and an investor may request a copy of either agreement from the Manager. Function The function of the custodian will be to perform (or procure the performance of) custodian and associated administrative services, which are conferred upon it by the terms of the custodian agreement. The custodian will also procure that the nominee will perform the nominee service and the nominee will accept the appointment by the terms of the nominee agreement. Custodian s and nominee s obligations and powers The custodian will: Hold cash invested by an investor in the Service in a designated bank account(s), deploy funds on the instructions of the Manager acting in accordance with the investor agreement, appoint the nominee to acquire BR shares and hold the corresponding shares and share certificates in its name, and act on the instructions of the Manager to realise investments for the investor; and Be authorised to: -- buy, sell, retain, convert, exchange or otherwise deal in the investor s BR shares upon the instructions of the Manager; -- exercise voting and other shareholder rights in relation to the investor s BR shares upon the instructions of the Manager; and -- carry out such other acts and deeds which are in its reasonable opinion necessary or reasonably incidental to its appointment as a custodian, acting in compliance with ITA, IHTA, FSMA and the FCA rules as applicable. The nominee will acquire and hold BR shares and share certificates and maintain the register of each investor s holding as nominee of such investor. An investor will retain the beneficial ownership of BR shares throughout. Liability The custodian will act in good faith and with reasonable care and diligence in the performance of its functions. The custodian will not be liable to an investor in the event of any loss in value of funds invested or any insolvency of any bank with which funds are deposited in accordance with the custodian agreement, nor in the event of any restriction on the custodian s ability to withdraw funds from such bank for reasons reasonably beyond the control of the custodian. 17
BROCHURE Termination The custodian agreement may be terminated if either the custodian or the Manager fails to remedy a material breach of the custodian agreement within 30 days of notice of the same. Where the custodian is to be replaced, the custodian will co-operate with the Manager and any replacement custodian to ensure an effective transfer of responsibilities. The nominee agreement may be terminated at any time on prior notice in writing. Conflicts policy The Manager may, on behalf of an investor, approve an investment in a BR company in which members or clients of the Ingenious Group have a commercial interest. The Manager will take steps necessary to ensure that such decisions are taken fairly and without reference to that commercial interest. The Manager and associates of the Manager act and will continue to act as the investment manager, operator, agent and/or investment adviser to various other new and existing clients which are involved in the financing or management of opportunities in, amongst others, the sectors covered by the investment strategies. Projects may therefore arise that are suitable for the BR companies, or one or more other clients of the Ingenious Group (both current and future). The Manager and any relevant associates of the Manager will seek in their absolute discretion to ensure that any suitable projects are allocated fairly between such other clients of the Ingenious Group in accordance with the conflicts policies of the Ingenious Group from time to time and without prejudice to the Manager s obligations to the investor. A summary of the Manager s policy for managing conflicts of interest can be found in the investor agreement. Further details of the Conflicts of Interest Policy can be found on the website of The Ingenious Group at www. theingeniousgroup.co.uk. The Ingenious Group is, and will continue to be, an active investor in, and adviser to, entities and individuals in, amongst others, the sectors covered by the investment strategies. There may be circumstances in the future, therefore, where Ingenious and/or managed funds might enter (or propose to enter) into contracts, transactions or investments in connection with BR companies invested in by the Manager or may otherwise be directly or indirectly interested in contracts, transactions with, or investments by, the same. Such circumstances (if they occur) will be managed in accordance with any requirements under applicable laws and regulations. 18
abc ESTATE PLANNING - IEP CLASSIC DEFINITIONS TERMS ADVISED PROFESSIONAL CLIENT ADVISED RETAIL CLIENT DEFINITIONS An investor in the Service who has been categorised as a professional client by their adviser for the purposes of their investment in the Service in accordance with the FCA s Conduct of Business Sourcebook (COBS) Any investor in the Service who is NOT: ANNUAL MANAGEMENT FEE APPLICATION FORM ASSOCIATE(S) OF THE MANAGER an advised professional client; an introduced investor (non-advised execution only); or a direct investor (non-advised execution only) Has the meaning given to it on page 9 of this brochure An application form provided by the Manager to invest in the Service completed by the investor and (where applicable) their adviser or introducer Any entity that is the ultimate parent of the Manager and/or Ingenious Media Holdings plc from time to time or any of their direct or indirect subsidiary undertakings from time to time BR Business relief as defined in s104 IHTA 1984 BR COMPANY BR PORTFOLIO BR SHARES BROCHURE COBS CUSTODIAN CUSTODIAN AGREEMENT DEALING FEE DIRECT INVESTOR (NON-ADVISED EXECUTION ONLY) An unquoted company of which a proportion of the ordinary share capital is beneficially acquired by an investor under the Service, and the shares in which are intended to qualify for BR In respect of an individual investor, his or her portfolio of BR shares acquired and managed for the investor on a segregated basis by the Manager in accordance with the terms of his or her investor agreement Shares in a BR company This brochure The FCA s Conduct of Business Sourcebook Such person as the Manager may appoint to provide, and with which the Manager has agreed terms for, safe custody, custodial and nominee services in respect of the Service and at the date of this brochure is Woodside Corporate Services Limited The agreement between the custodian and the Manager setting out the agreed terms for safe custody, custodial nominee and administrative services to be provided by the custodian in respect of the Service Has the meaning given to it on page 9 of this brochure An investor in the Service who: applies directly to the Manager himself or herself; and in addition has not received a personal recommendation in respect of his or her investment in the Service from any person 19