WHAT NEXT FOR EIS?

THE SENECA EIS PORTFOLIO SERVICE

The EIS Landscape Budget changes

Some changes to EIS were announced in the 2015 Budget. These are
subject to state aid approval and include:
introducing a requirement that all investments are made for the
purpose of business growth and development;
requiring that all EIS investors are independent from the company
at the time of the first share issue (excluding founder shares);
introducing new qualifying criteria to limit relief to companies
whose first commercial sale took place within the previous 12 years
unless the company has received a previous investment under
SEIS/EIS/VCT;
capping the total investment a company may receive at 20 million
for knowledge intensive companies and 15 million for other
qualifying companies; and
increasing the employee limit for knowledge intensive companies
to 499 employees.

*Source: Tax-advantaged venture capital schemes: draft legislation and explanatory notes March 2015
THE SENECA EIS PORTFOLIO SERVICE

The EIS Landscape Key definitions

Growth and development as yet undefined!!
knowledge intensive*
in at least one of the 3 years prior to investment the company
or group has spent at least 15% of operating costs on R&D or
innovation; or in each of those 3 years has spent at least 10%
on R&D or innovation; and either of the following conditions is
also met:
the innovation condition when the shares are issued,
the company or group is engaged in the creation of IP
which will form the greater part of the companys or
groups business
the skilled employee condition at least 20% of the
companys or groups FTE numbers are skilled as
defined. The definition of skilled relies on higher
educational attainments

*Source: Robertson Hare summary of changes

THE SENECA EIS PORTFOLIO SERVICE

The EIS Landscape Pre- Budget

HIGH

High risk, early

stage Investments

Seneca EIS
Portfolio Service

GROWTH
POTENTIAL

LOW

Low Risk, Capital

preservation EIS
Products
LOW

HIGH

Investment Risk

THE SENECA EIS PORTFOLIO SERVICE

The EIS Landscape Expected impact of the

changes

HIGH

LOW

Tax Risk

THE SENECA EIS PORTFOLIO SERVICE

What are the alternatives?

Traditional smaller company investing
Alternative asset backed options
SITR?

THE SENECA EIS PORTFOLIO SERVICE

Why invest in smaller companies?

Substantial capital gain smaller companies can offer growth large caps cant (e.g. Redx)
Portfolio diversification low correlation to mainstream markets
Investors market lack of capital from traditional sources has left companies starved of
capital rich pickings
It supports the UK economy:

THE SENECA EIS PORTFOLIO SERVICE

Introducing Seneca Partners Ltd

Why are we different?
Investment manager and advisory business
formed in 2010 providing funding and advisory
services to UK based SMEs
Part of the wider Seneca stable, which has
>500m invested assets and >2bn of debt under
advice
Deals with UK based companies with annual
turnover of up to 100m.
70 staff across 6 offices in the SME heartlands of
Northern England and the West Midlands
Circa 200 company meetings per year, with an
excellent proprietary deal flow & network of
intermediaries
Strong deal flow leveraging the wider Seneca
Group
Senior team with individual track records and multi
sector experience spanning over 200 years
THE SENECA EIS PORTFOLIO SERVICE

Contact
LGBR Capital

Seneca Partners

LGBR Sales Team

Seneca EIS Team

E: eis@senecapartners.co.uk

T: 020 3195 7100

E: sales@lgbrcapital.com
W. www.lgbrcapital.com

Seneca IHT Team

E: iht@senecapartners.co.uk
Seneca Corporate BPR Team
E: corporatebpr@senecapartners.co.uk

www.senecapartners.co.uk
01942 271 746
THE SENECA EIS PORTFOLIO SERVICE

Multi-manager EIS platform

KUBER VENTURES
17th June 2015

Disclaimer
For Intermediaries and client discussion purposes only
This
This Presentation
Presentation is
is an
an exempt
exempt financial
financial promotion
promotion for
for the
the purposes
purposes of
of section
section 21
21 Financial
Financial Services
Services and
and Markets
Markets Act
Act 2000,
2000, by
by
reason
reason of
of article
article 16(1)
16(1) of
of the
the Financial
Financial Services
Services and
and Markets
Markets Act
Act 2000
2000 (Financial
(Financial Promotion)
Promotion) Order
Order 2005,
2005, which
which has
has been
been issued
issued
by
by Kuber
Kuber Ventures
Ventures Limited,
Limited, an
an appointed
appointed representative
representative of
of Sturgeon
Sturgeon Ventures
Ventures LLP,
LLP, which
which is
is authorised
authorised and
and regulated
regulated by
by the
the
Financial
Financial Conduct
Conduct Authority.
Authority. The
The presentation
presentation has
has been
been approved
approved by
by Sturgeon
Sturgeon Ventures
Ventures LLP
LLP
The
The attention
attention of
of prospective
prospective investors
investors is
is drawn
drawn to
to the
the fact
fact that
that amounts
amounts invested
invested in
in Enterprise
Enterprise Investment
Investment Scheme
Scheme (EIS)
(EIS) Funds
Funds
will
will be
be committed
committed to
to investments
investments which
which are
are of
of aa long
long term
term and
and illiquid
illiquid nature
nature and
and are
are therefore
therefore not
not suitable
suitable for
for all
all investors.
investors.
Neither
Neither the
the EIS
EIS Funds
Funds nor
nor the
the companies
companies in
in which
which they
they invest
invest will
will be
be quoted
quoted on
on any
any regulated
regulated exchange
exchange or
or market
market and,
and,
accordingly,
accordingly, there
there will
will not
not be
be an
an established
established or
or ready
ready market
market in
in participations
participations in
in the
the EIS
EIS Funds
Funds or
or the
the underlying
underlying investments.
investments.
An
An investment
investment in
in the
the EIS
EIS Funds
Funds will
will therefore
therefore not
not be
be easily
easily realisable
realisable before
before maturity.
maturity.
This
This Presentation
Presentation does
does not
not constitute
constitute an
an offer
offer or
or solicitation
solicitation in
in any
any jurisdiction
jurisdiction in
in which
which such
such an
an offer
offer or
or solicitation
solicitation is
is not
not
authorised
authorised or
or in
in which
which the
the person
person making
making such
such offer
offer or
or solicitation
solicitation is
is not
not qualified
qualified to
to do
do so
so or
or to
to any
any person
person to
to whom
whom itit is
is
unlawful
unlawful to
to make
make such
such an
an offer
offer or
or solicitation.
solicitation. ItIt is
is the
the responsibility
responsibility of
of each
each recipient
recipient (including
(including those
those located
located outside
outside the
the UK)
UK) to
to
satisfy
satisfy itself
itself as
as to
to full
full compliance
compliance with
with the
the applicable
applicable laws
laws and
and regulations
regulations of
of any
any relevant
relevant territory
territory in
in connection
connection with
with any
any
application
application to
to participate
participate in
in the
the EIS
EIS Funds
Funds including
including obtaining
obtaining any
any requisite
requisite governmental
governmental or
or other
other consent
consent and
and observing
observing any
any
other
other formality
formality presented
presented in
in such
such territory.
territory.
You
You should
should be
be aware
aware that
that investment
investment values
values and
and any
any income
income from
from them
them may
may go
go down
down as
as well
well as
as up
up and
and you
you may
may not
not get
get back
back
the
the amount
amount you
you originally
originally invested.
invested. No
No person
person has
has been
been authorised
authorised to
to give
give any
any information
information or
or make
make any
any representation
representation
concerning
concerning the
the EIS
EIS Funds
Funds other
other than
than the
the information
information contained
contained in
in this
this Presentation
Presentation or
or in
in connection
connection with
with any
any material
material or
or
information
information referred
referred to
to in
in itit and,
and, ifif given
given or
or made,
made, such
such information
information or
or representation
representation must
must not
not be
be relied
relied upon.
upon. In
In accordance
accordance
with
with COBS
COBS 2.4
2.4 of
of the
the FCA
FCA Handbook
Handbook the
the information
information has
has been
been verified
verified to
to the
the best
best our
our ability.
ability. All
All statements
statements of
of opinion
opinion or
or belief
belief
contained
contained in
in this
this Presentation
Presentation and
and all
all views
views expressed
expressed and
and statements
statements made
made regarding
regarding future
future events
events represent
represent Kuber
Kuber Ventures
Ventures
Limiteds
Limiteds own
own assessment
assessment and
and interpretation
interpretation of
of information
information available
available to
to them
them as
as at
at the
the date
date of
of this
this Presentation.
Presentation.
Kuber
Kuber Ventures
Ventures Limited
Limited is
is not
not aa tax
tax adviser
adviser and
and you
you should
should independently
independently verify
verify the
the financial
financial planning
planning strategies
strategies outlined
outlined in
in this
this
presentation
presentation
MULTI-MANAGER EIS PLATFORM

Due diligence
High level review of
the whole market
No need for in
depth analysis at
this stage

Must not be
restricted by
product or provider
Panels which are
reviewed regularly
and sufficiently
broad are OK

Consider all
investment
solutions
which could
meet the
clients
needs

Delivering
Independent
Advice
You will need to
consider EIS in
certain
circumstances
HNW clients with
100k or more
income or 250k in
investible assets

Due diligence process

Kuber negotiates
commercial terms

Ongoing annual
review

Market Screened to
identify the universe of
suitable portfolio
managers

Kuber Investment
Committee
approves managers
for inclusion on the
Kuber Platform

Managers
complete due
diligence
questionnaire

Kuber completes
internal due
diligence process

Key risks

Liquidity risk

Tax risk

No Secondary market
Exit dependant on corporate
event
Delay due to additional
funding rounds
Zombie companies

Business ceases to qualify for

EIS relief because it changes
business strategy
Investors Personal
circumstances
Change in tax rate
N.b. tax credit on dividends
Change in law
Early exit
Advanced Assurance

Investment
performance
Valuation at time of entry
Dilution risks
Business risks
Sales performance
Supply chain risks
Operational risks
Macro economic risks

Historical complaints handled by

FOS

Main issues
Very few upheld
complaints relating to
EIS

Increase in risk with no

justification
Poor financial planning
Recommended for BPR but
estate not liable to IHT
No secondary financial
planning
Recommended EIS as a
strategy for IHT mitigation
but wills not reviewed

When to invest income tax timetable

CGT and IHT not date
sensitive
Invest now to
reduce July
payment on
account

Months

Invest now to mop

up previous years
tax capacity

Dec

Jan

Feb

Mar

Offerings
starting to
become
scarce

Apr

May

Invest now to
reduce
January tax
payment

Jun

July

Aug

Sep
t

Invest
now for
clients
seeking to
carry back
Oct

Nov

Dec

Commit funds now to secure

widest choice of investment
Busy period for EIS3s

Note: This timetable is indicative only; the timing of receipt of EIS 3 certificates will vary for
each EIS company depending on time required to allot shares and the production timetable
for the companys first programme.

Power of Loss Relief Portfolio example

10 investments - 100 each
Total investment 1,000

Initial
investment

Net
profit
(loss)

Total return
post tax

1 investment fails

100

(38.5)

61.50

2 lose 30% of initial

investment

200

200

4 break even

400

120

520

2 return 1.3 x investment

200

120

320

1 returns 5 x money

100

430

530

Total return

1000

631.50

1,631.50

Assumptions:

45% income tax rate

30% income tax relief

Loss Relief:

If shares are disposed at a loss, the amount

of the loss, less any income tax relief given
can be set against income of the year
they where disposed of, or any
the previous year, instead of
against any capital gain.

in which
income of
being set off

MULTI-MANAGER EIS PLATFORM

PORTFOLIO CONSTRUCTIONS

Investment
Tax relief
Loss amount
Tax relief (@45%)
Net loss

100.00
(30.00)
70.00
(31.50)
(38.5)

Types of EIS investment

Existing
companies
raising money

2 broad
investment
categories

MULTI-MANAGER EIS PLATFORM

Companies
specifically
structured for EIS
with an asset or
income underpin

PORTFOLIO CONSTRUCTIONS

Numbers game
with some
losses

Limited upside
but exit timing
more
predictable

Profits tax free

hopefully gains
make up for
losses
Losses offset
against tax
worst case 60p
per 1 investment
Risks exist in
the exit

Other risks
operational, tax,
counterparty etc.

Growth style EIS

Seed mentors
Boundary Home Run
Rockpool exciting growth
Blackfinch Music
Deepbridge Technology
Seneca EIS
Guinness
AIM
up to 250 employees
16m assets post
investment
Failures will be less
likely but still possible
Dilution less of a risk
but could happen in
distressed situation

Mature companies
including AIM

Profitable companies
looking to raise funds
for growth capital
Dilution risk reduced
but still material
Failures will be less than
with seed but still
common
Loss relief means that
impact of losses are
reduced
Potential returns are
low but 2x 5x
achievable

A round funding

Seed stage

Start up companies
Less than 25 employees
Less than 2 years old
Small companies are
like young children
easily hurt by
unexpected events
Investors should be
weary of dilution risks
Likely to see high
number of failures in
this sector
High returns (> 5x )
from successes coupled
with loss relief and
other tax boosters will
help reduce risks and
boost returns

Ease of diversification
Kuber portfolios

Minimum
allocation
25,000

MULTI-MANAGER EIS PLATFORM

Minimum
allocation
25,000

HOW KUBER WORKS

Minimum
allocation
30,000

Generalist
Music

Seed EIS

Companies
where there
should be
tangible asset
such as revenue
stream or bricks
and mortar

Asset Focused

Designed for
people who do
not want
investment to
be sold in 4th or
5th year

Long Term Investment

Strategy

Minimum
allocation
15,000,
20,000 or
35,000

Provides access
to Film, TV and
Music
companies
Tend to be
project based
Dilution risk less
relevant

Media

Private Equity Strategies

Early Stage
Growth Strategy
Mature Growth
Strategy
Diversified
Growth Strategy

Minimum
allocation
10,000

Kuber Ventures
Multi-Manager EIS Platform

WHY A PLATFORM FOR

EIS?

Operational efficiency - diversification

Your contribution

Held as cash by independent custodian until

fund manager is ready to invest

EIS Portfolio
EIS
1
Portfolio 2

EIS
EIS Portfolio
EIS
Portfolio 3
4
Portfolio 5

Nominee holds EIS shares on your behalf

MULTI-MANAGER EIS PLATFORM

HOW KUBER WORKS

KuberView

KuberView
provides online
access for
Investors, advisers
and managers

Contact details
Dermot Campbell
Managing Director, Kuber Ventures
dc@Kuber.uk.com
020 7952 6686

Katie Fox-Lambert
020 7952 6688
kfl@Kuber.uk.com

Russell Fryer
020 7952 6689
07733 268112
rf@kuber.uk.com

Dont just invest in AIM to mitigate

Inheritance Tax
Christopher Boxall
www.fundamentalasset.com
28

About
Fundamental
Specialist Investment Manager.
Established 2004 by Christopher Boxall and Stephen
Drabwell
Highly experienced investors in AIM for IHT planning
purposes
Authorised and Regulated by the Financial Conduct
Authority in the United Kingdom.
Conduct own research and support associated business
Investors Champion (www.investorschampion.com)

29

Investing in AIM for IHT planning

the rules

Business Property Relief (BPR) available for assets qualifying as relevant

business property which have been held for a minimum period of 2
years.

Inheritance Tax Act 1984: 100% relief from Inheritance Tax (IHT) for
ordinary shares in companies not listed on a recognised stock exchange
(unquoted) - qualifies as relevant business property.

Includes shares traded on Alternative Investment Market (AIM) or ISDX.

Qualifying AIM companies considered business assets.

Shares can be traded i.e. you dont have to hold the same shares for 2
years.
(Replacement property rules)

For IHT purposes shares in overseas companies also qualify.

From 5th August 2013 ISAs may also hold AIM shares (we see increasing
activity)

What qualifies *

- 740 qualify
- 25 Dual listed qualifying
- 79 part qualify or unclear
* Investors Champion AIMsearch Sept 2014 data

Investing in AIM for IHT planning

the rules

What doesnt qualify?

- Business or company is engaged wholly or mainly in dealing in

securities, stocks or shares, land or buildings, or in making or holding

investments
- Business is not carried on for gain
- Business is subject to a contract for sale, unless that sale is to a
company which will carry on the business, and the sale is made wholly or
mainly in consideration of shares in the company buying the business.
- Shares in the company are subject to a contract for sale or the company
is being wound up, unless the sale or winding up is part of a
reconstruction or amalgamation to enable the business of the company to
be carried on

Fundamental philosophy:
- Avoid the controversial.
- Avoid partial qualification
- If in doubt.get out!

What happens if Co moves to Main Market or obtains another listing on a

recognised exchange?
sell and reinvest before it moves or the listing is secured!

HMRC officials confirm that their staff are trained to carefully monitor the
position.

What is
AIM?
AIM is the junior market of the London Stock Exchange

Generally a market for smaller growing companies

No min size, no financial history, no public holding restrictions - Light touch
regulation

Celebrating 20 years
May 2015, 1,074 companies (as many as 1,694 in 2007) but
improving quality

Main market approx. 940 companies, market value c2.0 million

million (US trillion a big number!)

Total market value of AIM c75bn (May 2015)

Majority of AIM companies by value 10m - 250m (625 companies)
Largest ASOS approx 3bn qualifies for IHT!

Average daily value of shares traded 2014 c169m (2013:117m)

Increasing number of mature, better established companies.
AIM is a market for the smaller investor
32

Some of our current AIM for IHT

Companies
Company
Description
Abcam PLC

Production and distribution of research-grade antibodies

Advanced Medical Solutions

PLC

High performance polymers for woundcare

Alternative Networks PLC

Independent telecommunications provider

CVS Group PLC

Animal veterinary practices, pet crematoria and an

online pharmacy.

Flowtech FluidpowerPLC

Distributor of technical fluid power products.

James Halstead PLC

Manufacture of commercial flooring

James Latham Plc

Import and distribution of wood based materials (Hemel)

KBC Advanced Technologies

PLC

Consultancy and software solutions to energy industries.

Nichols PLC

Soft drinks supply (Vimto)

Pressure Technologies PLC

Manufacturer of engineering solutions for high pressure

systems.

Restore PLC

Records management, doc scanning, and secure

shredding.

RWS Holdings PLC

Patent translation and searches.

Sanderson Group PLC

Software and IT to multi-channel retail and

manufacturing sectors.

Solid State PLC

Manufacturing and distribution of electronic equipment 33

Tracsis PLC

Resource management technologies in the

How we structure AIM portfolios

Balanced portfolio (not fund) of AIM stocks across sectors and
industries.
Well diversified.some might consider over diversified
The objective is to offer Capital Growth, Dividend Yield and
Save tax.
Limited trading long term and buy and hold, subject to
Supports our philosophy of patient investing avoid short term
noise
Obliged to be fully invested at all times

34

Platforms
The Fundamental AIM Portfolio Service can be accessed via
the following platforms:
Transact
AXA Elevate
Fundamentals own custody arrangement

No additional charge to clients

Quarterly valuations provided

35

Assumed Risks of investing in

AIM!
March 2007, U.S. securities regulator Roel Campos suggested that AIM was like a

"casino". Campos: "I'm concerned that 30% of issuers that list on AIM are gone
in a year. That feels like a casino to me"

Fewer than 2% of Companies on AIM fail each year and the vast majority of
these are very small (2013, x99 joined, raising 1.18bn).
Many are taken over go on to greater things

Smaller companies and shares less liquid (wide bid/offer spreads)

Stick to larger AIM companies
Diversify
More relevant to large institutions

Lack of track record

Some very old companies on AIM

Lack of research and limited broker coverage

Plenty of research and comment out there and DYOR!

Number of scandals so what, huge winners!

Change in tax legislation only positive!

Government has recently expanded AIM acceptance to ISAs and from 6 th
April 2014 zero stamp duty on AIM stocks

36

Risk of holding Blue chips,

Bonds, Unit Trusts, ISAs, etc
Risk of capital loss
40% potential IHT bill
Main stock market has changed dramatically (ETFs,
computer driven trading, derivatives etc)
Some blue chips are now trading like small caps of old
Bond yields low
Fund problems (Lack of transparency, lock-ups, costs)
Current market stock specific matters irrelevant
(Small/Micro caps continue to trade on fundamentals)
Reminder: PEPs and ISAs are subject to IHT and ISAs can
now hold AIM shares
37

Compelling benefits of AIM for IHT

planning
Non-contentious, simple tax planning solution.
Cost effective compared to trusts.
Investor retains control over assets.
AIM for IHT planning has proved an excellent investment
strategy for patient long term investors.
ISA investment from August 2013.

38

Disclai
mer
The investments referred to in this presentation may not be suitable for all investors. Nothing in this presentation should be
construed as, investment or tax advice. Potential investors are recommended to seek specialist independent tax and
financial advice before investing in any of our products. It is not intended that anything stated in this presentation should be
construed as an offer, or invitation to treat, or inducement for you to engage in any investment activity. The information in
this presentation relating to portfolios managed by Fundamental is directed at United Kingdom residents only.
Please remember that past performance is no guide to future performance and may not be repeated. The value
ofinvestments and the income derived from them may go down as well as up and you may not get back the amount
originally invested. Tax rules and regulations are subject to change.
An investment into any of our products may only be made on the basis of the information set out in the respective
prospectus or account opening documentation. Any information is not an offer or invitation to buy or sell shares. Opinions
expressed in this presentation represent the views of Fundamental at the time of publication. These are subject to change,
and should not be interpreted as investment advice.
Investments in unquoted and AIM-quoted companies tend to carry a higher risk than investments in most securities listed on
the main market of the London Stock Exchange and may be more difficult to sell. The inheritance tax relief applies to
holdings in qualifying unquoted and AIM-quoted companies if they have been held for more than two years at the time of
death and is based on current tax rules and regulations. Money that is withdrawn from qualifying holdings, or that has not
been invested in qualifying unquoted or AIM-quoted companies for at least two years, will not generally be exempt from UK
inheritance tax. We will invest in companies that we reasonably believe to be qualifying investments based on our
understanding of HMRC's current interpretation of the rules and regulations, but we cannot guarantee this, nor can we
guarantee that any changes in legislation will not have a retrospective effect. Please remember that tax rules and
regulations are subject to change and depend on personal circumstances.
Fundamental Asset Management Ltd is authorized and regulated by the Financial Conduct Authority

39