Accredited by:
enterprise investment scheme
Industry Update
HOW THE BUDGET AFFECTS EIS WHAT THE MANAGERS THINK DEEP DIVE INTO VALUATIONS FEES AND CHARGES
FIND INSIDE
INTRODUCTION
1
MARKET UPDATE
2
CONSIDERATIONS FOR INVESTMENT
3
INDUSTRY ANALYSIS
4
MANAGERS IN FOCUS
5
WHAT'S ON THE HORIZON
6
FURTHER LEARNING
7
QUARTER 1 2020
The latest news, updates and statistics on everything EIS
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
1. Introduction
CONTENTS
Foreword Opening Statement Update Overview Key Findings
Foreword Opening statement Update overview Key findings
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’m delighted to present our first Enterprise Investment Scheme Quarterly Update, bringing you all the latest news and metrics from the EIS world. After six years of our hugely popular annual EIS Industry Report, we have changed the way we bring you the latest data on the market, by introducing Quarterly Updates that are designed to help you build a clear picture of the EIS market over time, instead of a once-a-year snapshot. As if to prove the value of publishing more regularly, the past few months have seen plenty of activity. The unprecedented nature of the coronavirus Covid-19 outbreak and its consequences have seen our realities shifting from day to day. The pandemic is clearly a serious threat to the world’s physical and economic wellbeing, but the medium to long-term outlook of EIS investments does give them the potential to ride out the storm. The EIS market has been continuing to develop and show good strength, with managers and investors alike adapting well to the 2018 changes that established the risk to capital condition and ushered in a reshaped approach to investing via EIS. We begin 2020 with a newly elected government - the first in a decade to have a strong majority - giving certainty to both investors and businesses over the country’s direction of travel. And we have also finally achieved Brexit - albeit the first (and once considered ‘easy') bit of the process, with the detailed trade talks still to come. In this environment, it’s great to see the numbers underlining a flourishing market. As we begin a new decade, there are 66 open offers and 2019 saw 21 new launches, compared to just 10 the previous year. This is significant, suggesting that managers are not only getting comfortable with the risk to capital requirement, but also see plenty of appetite from potential investee companies. Our new format allows us to explore and track these figures more closely than ever before, bringing you greater detail and analysis of how the market is evolving. If you're new to EIS, you might be interested in the first edition of our Adviser’s Guide to the Enterprise Investment Scheme, designed to provide a reference for the rules and regulations around this market. I hope you enjoy reading this Update. I welcome any feedback and please do share this edition with your fellow professionals. We have also recently published our first Quarterly Update for the Venture Capital Trust market, so please do take a look at that, too, if that is an area of interest.
FOREWORD
Managing Director, Intelligent Partnership
Guy Tolhurst
I
The EIS market is continuing to develop and show good strength.
1. INTRODUCTION / FOREWORD
e are now faced with the biggest threat to the UK economy since the Second World War and for many small businesses this threat is existential. Firstly please remain vigilant, safe and follow the government's advice. Secondly, here at EISA, we are doing everything humanly possible to work with members, government, investors and small businesses to ensure the funding taps aren’t turned off completely and that businesses get the support and funding they deserve. History tells us that there is a direct correlation between the amount of EIS funds raised and the rate of income tax and whilst it might seem perverse at a time of national crisis for the government to hand out tax giveaways to already wealthy individuals, I strongly believe this is the time for those individuals to really show their support and dig deep for young, entrepreneurial, growth-orientated businesses and the wider economy. I urge them to hold their nerve and back British businesses now more than ever. Fortunately, EIS and SEIS seem to be very much in favour, with the Conservative manifesto stating: “Some of our work has been spectacularly successful - such as the SEIS & EIS, which we will continue in the next parliament,” and the March 2020 Budget also giving EIS and SEIS the green light to continue in their current format. As the trade body for our industry, it’s our job to keep Boris true to this word. As we told MPs at a parliamentary reception we held in March, EIS has been an instrumental policy intervention in developing and funding a thriving UK start-up and scale-up community. Over £20 billion has been raised from retail investors through the schemes and they have played an important role in providing early stage funding for a wide range of innovative, productive companies who, without the schemes, would not have been able to start and scale their business. The intention behind both schemes is to address an ongoing market failure where growing UK businesses are unable to access the capital they require to scale up. Whilst this has been acknowledged by the European Commission in its 2015 amendment to the State Aid clearance decision for EIS schemes, the full extent of this lack of capital continues to be underestimated, and growing UK businesses still struggle to secure investments of between £5 million and £20 million. If the UK wishes to further strengthen its position as the best place to start and grow a business, as stated in all the major political party manifestos at the 2019 election, particular focus needs to be given to not only funding early stage business start-up businesses but also the transformational development of some of these start-ups into large-scale businesses. Opportunities exist for improving access to funding across the ecosystem and EIS and SEIS already play and can further play a vital role in helping small businesses to start, build and grow and bridge the gap between start-up and scale-up. Our primary recommendations for expanding and improving the schemes can be read later in this Update. Finally, it’s great to witness the Intelligent Partnership EIS Update develop into a quarterly publication. Our industry is moving faster than ever so it feels right to be presented with information and education on a more regular basis. Financial planners and advisers are often time poor so a more concise, online approach should give you the information you need on this market quickly and comprehensively.
W
EIS is very much in favour
Opening statement
mark brownridge, director-general, eisa
I urge investors to hold their nerve and back British businesses now more than ever.
mark brownridge, eisa
1. INTRODUCTION / OPENING STATEMENT
e couldn’t do this without the help and support of a number of third parties who have contributed to writing this report. Their contributions range from inputting into the scope, sharing data, giving us their insights on the market, providing copy, and peer reviewing drafts. So, a big thanks to: Andrew Aldridge, Dan Bowyer, Mark Brownridge, Mads Jensen, Jasper Smith and Ian Warwick. Their input is invaluable, but needless to say any errors or omissions are down to us. We have relied upon MICAP for most of the data that we have based the report upon. MICAP is part of the same group of companies as Intelligent Partnership. We also carried out our own extensive desk research and interviews to verify their data. The report is made possible by our sponsors, who have contributed copy to the report and supported us by helping to meet production and printing costs. So, a big thanks to: Deepbridge Capital, SuperSeed, Vala Capital and Velocity.
ACKNOWLEDGEMENTS AND THANKS
Be able to benchmark current products and providers against each other on key investment criteria.
Understand the types of open EIS offers available on the market.
Recognise the various factors that will affect the EIS market in the coming months.
Be aware of the key fees and charges applied by EIS managers.
Understand the developing impact of rule changes to EIS.
Identify the main developments and news in the EIS market.
Readers can claim up to 2 hours’ CPD (excluding breaks). By the end of the report readers will be able to:
LEARNING OBJECTIVES FOR CPD ACCREDITATION
UPDATE OVERVIEW
Find out more at MANAGERS IN FOCUS
1. INTRODUCTION / UPDATE OVERVIEW
Find out more about claiming your CPD
68%
Offer biannual portfolio valuations
of fund managers
232%
The average returns targeted by open offers
target returns
£8.8
The average target raise of open offers
million target raise
8%
Now a fast-shrinking sector of EIS
Media & Entertainment offers
7.6
The average target investment of open offers
target companies
42%
The sector continues to dominate
Technology offers
21
Over the course of 2019
new offers launched
The highest in over four years
open offers
66
KEY FINDINGS
1. INTRODUCTION / KEY FINDINGS
2. Market update
The Political Landscape Budget 2020 coronavirus impact Brexit Thought Leadership HMRC’s New Guidance New Caselaw What the Managers Say
The Political Landscape Budget 2020 Coronavirus Impact Brexit Thought Leadership HMRC’s New Guidance New Caselaw What the Managers Say
egardless of where your political loyalties might lie, Prime Minister Boris Johnson’s success gave the country a clear winner and a strong mandate for the governing party for the first time since Tony Blair’s final election win in 2005. That provided certainty for investors for the first time in over a decade, while also in effect confirming that the UK would leave the EU by the end of January 2020. And in a further boost for the EIS market, the Conservative manifesto promised to continue using the model in the future. A week after the election, the Queen returned to open Parliament, where she read out the priorities of the new government. While EIS was not mentioned directly, there were indications of how the scheme might be used, with the speech referencing life sciences and research & development as areas of focus for the government. Given the party’s clear support for EIS in its manifesto, it seems likely that if anything, there will be a further push to focus EIS investments on these areas in the future. “The government is beholden to what they said in their manifesto,” Mark Brownridge, director-general of the EIS Association (EISA) told us in February. “We know that people in government do recognise the benefit of EIS and we are looking to work with them.”
R
The Political Landscape
what's been happening in the EIS world
The comprehensive victory for the Conservative Party in the December General Election provided some positive news for the investment community.
Some of our work has been spectacularly successful – such as the SEIS and EIS, which we will continue in the next Parliament.
— conservative manifesto
On 11 March, Chancellor Rishi Sunak delivered his first Budget - less than a month after being installed in post following Sajid Javid’s resignation.
e paved the way for the new ‘approved knowledge- intensive fund’ to be established from 6 April 2020. Although this won’t change the rules regarding EIS investment, it will give approved funds a number of advantages (see section 4, Industry Analysis). The announcement effectively revives - though does not change - the legislation that was in place before December’s General Election. The only difference is that, because of the delay caused by the election, this will now come into force from 2021 instead of 2020 as originally planned. The government hopes the new fund will create a renewed impetus for investment into knowledge-intensive companies (KICs), which have more generous rules attached to them. There is a feeling, however, that the new fund may be something of a missed opportunity. “I think the best option for the new fund would have been for the reliefs to be available up-front, but the second best is the carry back option, which is what the government has chosen,” explained Brownridge. “Anything we can do to make the process less administratively burdensome would have been good. My personal view is that I don’t feel [the approved fund] is enough to incentivise anyone who is not in EIS already but we will wait and see.” the benefit of EIS and we are looking to work with them.”
H
Budget 2020
Setting the financial landscape
We will ensure that 2020 is a year of growth and opportunity.
— Prime Minister Boris Johnson
Refresher: What is the ‘approved knowledge-intensive fund’?
refresher: What is the ‘approved knowledge-intensive fund’?
require the funds to focus on investments in knowledge-intensive companies
give approved funds a longer period over which to invest fund capital (requiring 50% investment within one year of the fund closing and 90% within two years, compared to the current requirement of 90% within one year)
allow investors in an approved fund to set their income tax relief against liabilities in the tax year, or against their liability of the previous tax year, before the fund closes (previously, it was impossible to carry back income tax relief to the previous tax year under an ‘approved’ fund)
The existing EIS rules will be amended to create an approved knowledge-intensive fund that will:
The fund manager must provide HMRC information relating to their fund.
After the furore caused last year when it emerged that some top doctors and clinicians were refusing to take on overtime for fear of going over their annual pension contribution allowance, the government promised to reform this system. In the Budget, Sunak raised the ‘adjusted net income’ threshold from £150,000 to £240,000, which he said would take around 98% of consultants and 96% of GPs out of the taper altogether. This will also reduce the number of people in the wider population affected by the allowance, which will likely have an impact on EIS investments. That’s because many people who find themselves going over their limit often choose to put their additional money into tax-advantaged investments such as EIS, rather than it being taxed at the full rate. While it should never be considered an alternative to a pension, for some EIS has proved a useful investment opportunity for earnings that would otherwise have been taxed at the full rate. However, Brownridge suggested the impact would be small, explaining: “The level of investment into EIS shouldn’t be dependent upon changes to the pension regime. EIS is a fantastic investment opportunity in its own right but only for investors who have the appropriate attitude to risk and capacity to loss.” While both the KI fund and pension changes were due to come into force for the 2020/21 tax year, Parliament has been suspended following the coronavirus Covid-19 pandemic, so it remains unclear when the Finance Bill containing these measures will come into force.
Pensions
yes
no
Will the ‘approved knowledge-intensive fund’ increase income tax relief for knowledge-intensive companies to 50%?
Wrong The level of tax reliefs remain the same, but approved funds will have longer to invest their fund capital.
Correct The level of tax reliefs remain the same.
2. Market update / the political landscape
Test your knowledge
arkets around the world have plunged since the outbreak spread beyond China, with the UK’s FTSE 100 suffering the second worst day ever in March, falling 10.9% - only beaten by the 12% fall suffered on Black Monday in 1987. However, it’s important to remember that EIS is a long-term investment and while the coronavirus outbreak has caused panic across the world, over the coming years the markets should recover. As a result, investments in EIS - where there is no defined exit and money should be expected to be tied up for at least three years but more likely five or more - are unlikely to be as affected by the current crisis as short-term investments. Smaller firms are more nimble than larger organisations and may therefore be able to survive during the economic downturn caused by the coronavirus by changing or even pausing some of their activities. On the other hand, smaller companies will have less cash reserves on which to rely should the downturn last for any notable length of time. As a result, the current crisis may force small businesses to seek follow-on funding rounds sooner than they would otherwise have planned. Investee companies might also face delayed exits, as the market volatility makes it difficult for a proposed route to be found.
M
Coronavirus Impact
With the world in the midst of the coronavirus Covid-19 pandemic, it is difficult to accurately predict what might happen next and how this will affect not only the EIS community, but global finances as a whole.
Fall in FTSE 100 on a single day in March 2020
10.9%
On the one hand, this is nothing new, as the EIS rules mean there can be no pre-agreed exit when money is deployed into a company. However, the nature of the current crisis could mean that, instead of seeing exits take place sporadically over the course of the year, there may be no exits for a prolonged period of months. While this might put strain on the short-term financial plans of EIS managers and portfolios, it must again be reiterated that EIS should always be considered a long-term play, so the delay of several months should not be a limiting factor for investors. Nonetheless, as schools shut and businesses ground to a halt, the EIS Association issued a plea to the government to relax a number of the rules around EIS and SEIS investments to help shore up small businesses that might be struggling to survive “through no fault of their own”. It called on the government to temporarily increase the amounts that can be invested into EIS and SEIS companies, as well as raise the income tax relief available to 60% for both EIS (normally 30%) and SEIS (normally 50%) investments. The organisation said such efforts would “facilitate faster and increased deployment of capital to entrepreneurial businesses”.
2. Market update / coronavirus impact
part from MEPs coming back from Brussels and UK ministers no longer being eligible to attend EU meetings, very little has changed, with the UK having promised to remain aligned to EU rules until the end of the year. As a result, we might still see market sentiment adversely affected in the event that no deal has been agreed in good time before that deadline approaches. However, there is a growing sense of confidence among many EIS managers that the businesses they are investing in are more concerned with the wider world, meaning European relations will have less of an impact. A number believe that companies will look more towards the US and Asia. The question will be much more around whether the companies are able to attract the skilled individuals to work in their businesses as the government plans a new points-based immigration system set to take effect from 1 January 2021. Meanwhile, the EISA has set out four “key calls” for the government to relax the rules around EIS and Seed EIS (SEIS) once the UK is no longer bound by European regulations. These are:
A
Brexit
On 31 January, the UK duly left the European Union, as Johnson had promised, although in practice this made little difference to the UK economy.
The UK cannot expect high-quality access to our Single Market if it insists on competing on State Aid, social or environmental standards.
— Michel Barnier, EU chief Brexit negotiator [2]
1. https://www.consilium.europa.eu/media/42736/ st05870-ad01re03-en20.pdf 2. https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_20_133 3. https://blogs.spectator.co.uk/2020/02/full-text-top-uk-brexit-negotiator-david-frost-on-his-plans-for-an-eu-trade-deal/ 4. https://www.ft.com/content/9623b8a2-4c3a-11ea-95a0-43d18ec715f5
Looser rules around State Aid and Risk Finance Guidelines limits (as governed by the EU) “as soon as practically possible”.
Raise the scheme’s profile with both businesses and potential investors. The EISA wants this to cover a “far wider range of business support agencies such as LEPs [local enterprise partnerships], universities and the Institute of Directors and to potential investors”.
Improve the way SEIS and EIS companies are “authorised” and the process for granting tax relief to investors. The EISA believes this would “potentially see more businesses and investors using them”.
Increase (or even remove) the threshold for EIS and SEIS investment to encourage follow-on investments.
Do you think the UK will leave the EU without a deal at the end of 2020?
2. Market update / brexit
TELL US YOUR VIEW
Some of these demands may prove more difficult than others. State Aid, for example, is considered by both sides as a major issue in the trade negotiations, with the EU seeing the maintenance of some alignment of State Aid rules as vital to the conclusion of any agreement. The EU Council’s mandate for negotiations[1], published in February 2020, states: “The envisaged partnership should ensure the application of Union State Aid rules to and in the United Kingdom.” UK Prime Minister Boris Johnson, on the other hand, is keen to free the UK from State Aid rules, in the belief that they are among the main barriers to growth that have been imposed on the UK by European law. This was underlined by the UK’s top Brexit negotiator, David Frost, in a speech in February 2020: “At the end of this year, we would recover our political and economic independence in full,” he said. “That is the point of Brexit.” [3] Nonetheless, a document being carried into Downing Street in February (before the change of Chancellor) that was photographed by a long lens camera [4] suggested the government’s “opening position” in negotiations would be for a “permanent equivalence” regime for financial services, lasting for “decades to come”. That might suggest sticking more closely to State Aid and other rules. Whether, or to what extent, these rules may be relaxed or abolished in the final trade settlement remains to be seen and will impact any hopes for changes to or relaxation of the laws relating to EIS. It’s also worth bearing in mind that the UK government has spent a lot of time and effort tailoring the current EIS rules to ensure that they have a laser-like focus on businesses with growth potential. It might therefore be counterintuitive to undermine that work by suddenly expanding the size and types of companies that can be invested in, and the amounts that they could receive. Nevertheless, some see the restrictions imposed as overly complicated, nonsensical and damaging for growth aspirations.
itizens are broadly aware that prophets of economic doom have turned out to be quite wrong and rather the UK has been the best performing European economy. In particular, Britain has had a surprisingly strong SME sector for the last three years. While we suffer from regulatory cancer affecting particularly larger businesses, we have managed to keep the SME sector relatively open. The UK is by far the easiest economy in Europe in which to set up a new business. One of the good things which the John Major administration did was to introduce the EIS, providing effective and valuable tax incentives to investors in small companies. This has underpinned the growth and success of the SME sector. There are now some 70,000 SMEs in the UK. Interestingly, some 80% of graduates leaving Russell Group Universities go to work for SMEs. Where EIS has been so important is in providing a successful tax incentive to invest in new small companies and, recently, even more in knowledge-intensive companies. Here, the EU has made the rules more complicated than are needed or appropriate for the scale of the markets they address. The EIS primary legislation is long, highly detailed and contains many restrictions which are uncommercial and are not justified. The legislation needs streamlining to enable faster deployment of EIS funds to provide greater support for SMEs. The EIS legislation is intended to be enabling but has become too much like anti-avoidance legislation. HMRC is in some cases placing restrictions on investments which are not contained in the legislation. Much of this has been caused by the UK being under the EU Treaty obligations where we need to meet the requirements of the Risk Finance guidelines. A lot of damage has been done by the EU in ruling that EIS is deemed to represent State Aid. It is to meet the State Aid Risk guidelines that EIS primary legislation is so long and detailed. Out of the EU there is now the scope to make considerable improvements to EIS, in particular making it much less demanding for SMEs seeking risk finance. There is scope for larger amounts of EIS investment. In the tax year 2017/18, 37,350 individuals invested in EIS, where there are estimated to be a quarter of a million taxpayers earning in excess of £250,000 per annum. HMRC has taken a greater interest in EIS and has commissioned its own independent research. This found that three-quarters of investees had sought EIS investment, largely to start their business or to develop new products. 58% of investee companies said productivity had increased due to their EIS investment and 38% said funding was raised for working capital and cash flow. Not surprisingly, they found that smaller companies have a harder time securing EIS investment, but only 11% felt their investment would have gone ahead without EIS support. 90% of investee companies said their company had grown by a third since they first sought EIS investment. 90% of companies attributed at least part of their growth to EIS investment. My biggest task as Chairman of the EIS Association has been to limit and find a way of managing extra requirements which have come from the EU; and to counter arguments for closing down EIS, which have been advocated by both HMRC and the Treasury. The complaint is that the EIS tax incentives cost tax revenue. From the studies that have been done the reverse appears to be the case - EIS investment in SMEs creates more follow-on tax revenue than the original cost of the tax incentive. Fortunately, the recent Conservative General Election manifesto contained both a recognition of how effective EIS has been in supporting SMEs and the commitment for it to continue.
C
Brexit offers a clear opportunity
thought leadership
Lord Howard Flight, Chairman, The EIS Association
Out of the EU there is now the scope to make considerable improvements.
Lord Howard Flight, The EIS Association
2. MARKET UPDATE / THOUGHT LEADERSHIP
HMRC’s NEW GUIDANCE
Strengthening the rules
On 30 December 2019, HMRC published new guidance on Advance Subscription Agreements (ASAs) for EIS and SEIS investments [5].
5. https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm12025
What is an ASA?
Advance subscription agreements (ASAs) are sometimes used to raise funds for a company quickly, at a time when the value of shares cannot be easily ascertained. An ASA enables investors to pay subscription funds into a company at an early stage, with the shares to be issued at a later date.
The ASA must not function as an investment instrument that offers other benefits, such as investor protection. The subscription payment must not be in effect a loan.
—HMRC Venture Capital Schemes Manual
he guidance underlines HMRC’s position that an ASA must not be used as an investment instrument offering other benefits, such as investor protection.
T
HMRC will not consider ASAs suitable for EIS unless the agreement: • Does not permit the subscription payment to be refunded under any circumstances • Cannot be varied, cancelled, or assigned • Bears no interest charge • Has a longstop date (expected to be no more than 6 months from the date of the agreement) The guidance establishes that if a company wishes to apply for advance assurance, it should do so before the ASA is entered into. This forms part of HMRC’s efforts to streamline the advance assurance process and prevent a company from raising EIS funds until it is fully ready: it cannot accept funds up front under the auspices of EIS and in the meantime, make interest payments or give other assurances that the investor will get their money back in the event of the company not qualifying for EIS.
2. Market update / HMRC’s new guidance
New caselaw
What is a ‘trading company’?
In January 2020, the First Tier Tribunal Tax Chamber considered the Allam v HMRC case [6].
6. http://www.bailii.org/uk/cases/UKFTT/TC/2020/TC07532.html
We can understand that it is useful for HMRC staff to have some practical guidance to assist them in the application of the legislation, but there is no sanction in the legislation for the application of a strict numerical threshold.
—First Tier Tribunal Tax Chamber
lthough the case related to a claim for entrepreneur’s relief, it centred on the test for what constitutes a “trading company” and a similar test is applied when determining companies’ qualification for EIS and VCT tax reliefs. The outcome, therefore, could have implications for potential investee companies under these schemes. The claimant was appealing to overturn HMRC’s original denial of entrepreneur’s relief, which had held that the company in question had failed to meet the qualification of a “trading company” because its non-trading activities were considered to be “substantial”. HMRC’s internal guidance suggests that non-trading activities should be taken to be “substantial” if they amount to 20% or more of the activities of the company. However, the tribunal dismissed HMRC’s guidance on the 20% threshold as “not helpful”, adding: “The legislation itself does not elaborate further on the meaning of the phrase ‘to a substantial extent’. We must apply those words giving them their ordinary and natural meaning in their statutory context.” It added: “In our view, ‘substantial’ should be taken to mean of material or real importance in the context of the activities of the company as a whole.” In this case, the tribunal ruled in favour of HMRC, on the basis that the company in question let out a large proportion of its properties (which amounts to investment activity, a non-trading activity), even though the company argued that it was working on obtaining planning permission and that its main business was in property development. However, the tribunal’s view of the meaning of “substantial” and its dismissal of the 20% threshold as having “no sanction in the legislation” raises significant questions for the way in which the test might be applied to advance assurance applications for EIS and VCT investment in the future. Will it now assess this on the basis of the ‘real importance’ of the activities to the company as a whole?
2. Market update / new caselaw
What the managers say
We’ve asked our partners to give their views on the market:
Any reduction in perceived uncertainty must be seen as a positive.
Andrew Aldridge
Partner, Head of Marketing, Deepbridge Capital
What are the big opportunities you’ve been seeing in the market in the past year? From an adviser perspective, I think they should take reassurance in the knowledge that the managers in the market are now acting in line with how the government wants EIS to be utilised. There should no longer be a consideration as to whether EIS products are in line with the ‘spirit of EIS’. That should now be taken for granted. How do you feel about the political landscape and Brexit? Any reduction in perceived uncertainty, caused by Brexit or a General Election, must be seen as a positive. However, the economic impact of the Covid-19 coronavirus has ultimately shown how the Brexit indecision and uncertainty only had a marginal economic effect – despite the headlines at the time! What has been a big highlight for you over the past year? Securing our second exit from the Deepbridge Technology Growth EIS, with investors receiving up to 3x, was a natural highlight. Exits of course represent evidence that our approach to looking after investors’ investments is working.
AI is becoming exceptionally exciting.
James Sore
Principal, SuperSeed
AI is bec
What are the big opportunities you’ve been seeing in the market in the past year? How do you feel about the political landscape and Brexit? What has been a big highlight for you over the past year?
2. Market update / what the managers say
These views were compiled before the full impact of the coronavirus Covid-19 epidemic was felt in the UK
What are the big opportunities you’ve been seeing in the market in the past year? AI is becoming exceptionally exciting, it’s maturing and has moved away from being an answer looking for a problem. It’s now highly targeted and generating some truly impressive applications such as SeeQuestor, who are able to trawl millions of hours of CCTV footage to automatically detect potential suspects. How do you feel about the political landscape and Brexit? The Budget reconfirmed the government’s commitment to supporting small and knowledge-intensive companies which aligns perfectly with our investment focus on early-stage B2B SaaS and AI companies. So far early-stage investing has remained pretty uncorrelated to Brexit other than market sentiment seeping into the investor psyche. We are long horizon investors. What has been a big highlight for you over the past year? It’s the brilliant ingenuity of our entrepreneurs. Dopay - helping the unbanked in developing markets get bank accounts while reducing corruption; MetadataWorks - improving the efficiency of medical research; Grakn - helping intelligence services effectively map terrorist networks; and SeeQuestor - facilitating the apprehension of terrorists. These are all incredibly smart ways to use technology.
Jasper Smith
chairman, Vala Capital
What are the big opportunities you’ve been seeing in the market in the past year? A lot of promising companies have emerged through our networks and the incubators and accelerators we’re involved with, across a wide range of market sectors. As a result, we’ve been able to offer our clients a fantastic level of diversification, with a portfolio that includes disruptive tech businesses as well as companies making tangible physical products in sectors like engineering or food & beverages. We’ve also been using our extensive network of industry experts to facilitate strategic collaboration between our portfolio companies. How do you feel about the political landscape and Brexit? The smaller companies we invest in have the agility and resilience to deal with political uncertainty. And time has moved on – we’re commonly investing in companies founded after the referendum, with business plans that have always had Brexit baked in. That said, the continued move towards a more certain business environment can only be a good thing for our portfolio. What has been a big highlight for you over the past year? I’ve really enjoyed welcoming a number of exceptional new colleagues to our team. To support our continued growth, we’ve significantly added to our investment, operational and business development teams, and our platform for sourcing and executing great investments is stronger than ever. The Vala EIS Portfolio completed four separate investment tranches, and we’ve also been developing new investment products that are set for launch in the near future. The Growth Investor Awards, where we were recognised in three categories, was also a big highlight for us.
Rajeev Saxena
founder & managing director, Velocity Capital Advisors
What are the big opportunities you’ve been seeing in the market in the past year? Whilst fintech continues to be an area which rightfully has been attracting headlines in part due to the perceived strength of expertise in the UK and consequential valuations, there are a number of other sectors and businesses that have been producing some exciting opportunities. The impact of business models from Deliveroo to Just Eat has led to an increase in variations on that theme, including different types of meal kits and other in-house dining experiences. We continue to see interest and innovation in SVOD, ed tech and recruitment tech. How do you feel about the political landscape and Brexit? Whilst we’re clearly living in unprecedented and bizarre times, at least the decisive outcome to the recent election was welcomed, with the government continuing to recognise the importance of innovation and technology for UK businesses. Velocity looks to invest in businesses that have a genuinely useful product or service and are capable of scaling beyond the UK. What has been a big highlight for you over the past year? The expansion of Velocity has had three significant consequences: (i) We have been able to invest in a larger number of exciting young businesses; (ii) our portfolio companies now employ in excess of 250 people; and (iii) we continue to see the progress of the UK as a burgeoning centre of innovation for national and international consumption.
3. Considerations for investment
Market composition Thought Leadership Fees and Charges
3. considerations for investments
MARKET COMPOSITION Thought Leadership Fees and Charges
MARKET COMPOSITION
A strong start to the year
In this section we will dive into the EIS market to consider how it is progressing as we start the new decade and what fees and charges are being applied. For this we use MICAP.
It’s good to see new entrants; that indicates a buoyant market.
—Mark Brownridge, director-general, EISA
How we use MICAP
Unless otherwise stated, the analysis is based on data obtained from the MICAP platform and is correct as of 5 February 2020.
number of open offers
Q1 2020
63
2019
3. Considerations for Investment / market composition
Since our last Industry Report was published in the autumn, the EIS market has continued to show signs that it is adapting well to the introduction of the risk to capital condition.
54
2018
65
2017
open offers Q1 2020
new launches in 2019
Over 2019, there were 21 new launches, with 10 in the first half of the year and 11 in the second half. This is significantly higher than in 2018, when only 10 new offers were launched across the year. It is comfortably the highest number of new launches since long before the risk to capital condition was revealed in the 2017 Autumn Budget. This suggests that providers are not only comfortable with the new rules, but see the current climate as ripe for EIS investment opportunities. “We are now seeing both late and early stage VCs who have been actively investing in this sector for years but now realise that EIS and VCT are exceptionally good ways of raising funding,” said Mark Brownridge, director-general of the EISA. However, there were no new launches in the first two months of 2020, compared to eight during the same period in 2019. Existing providers had got comfortable with the new EIS environment by the start of 2019 and had adjusted and reopened their offerings. We are seeing more totally new entrants to the market now, that have perhaps, until now, been monitoring the new EIS landscape before launching their own offerings. The political uncertainty that shrouded much of 2019 may also account for the slow start to 2020, as managers waited to see the outcome of the General Election and whether the UK would indeed leave the EU, before considering new launches. Of the open offers, 60 are evergreen, meaning that they have no closing date and will accept investment until they have reached their target investment raise, or alternatively may keep on raising new funds as they see new opportunities for deployment into investee businesses.
As we suggested when analysing figures from the start of September, it appears that those EIS providers that had been repositioning themselves following the changes have largely completed that task and as a result are now raising funds once more. There are now 66 open offers, the highest seen in the past four years (although the previous years’ data was compiled each autumn).
Refresher: What is the Risk to Capital Condition?
02. Whether there is a significant risk that there could be a loss of capital to the investor of an amount greater than the net return.
01. Whether the company has objectives to grow and develop over the long term (which broadly mirrors an existing test with the schemes); and
The Autumn Budget 2017 introduced a new ‘principles based approach’ to identify lower risk activities that should not benefit from the tax reliefs [1]. This crystallised in the risk to capital condition, which has applied since March 2018 and is intended to exclude tax-motivated investments, where the tax relief provides most of the return for an investor or where there is a limited risk to the original investment (i.e. a ‘wealth preservation’ approach). The condition depends on HMRC taking a ’reasonable view’ as to whether an investment has been structured to provide a low risk return for investors. There are two parts to the condition: The condition requires all relevant factors about the investment to be considered in the round. These rules apply to all VCTs, as well as investments through the Enterprise Investment Scheme and Seed Enterprise Investment Scheme. However, the condition is not black and white, and therefore has proved potentially difficult for VCT investment managers. The list of risk factors that may suggest a company is not eligible for VCT funding is not exhaustive, while the existence of one or more of those factors does not immediately bar a company from VCT funding. This has left a level of uncertainty over what sorts of investments are likely to receive advance assurance from HMRC and therefore what does and does not qualify.
Refresher: What’s the risk to capital conditiON?
Did the number of open offers increase in 2020 compared to the previous year?
Correct There were 66 offers in February 2020, compared to 63 in September 2019.
Wrong There were 66 offers in February 2020, compared to 63 in September 2019.
* https://www.gov.uk/government/publications/income-tax-venture-capital-schemes-risk-to-capital-condition/income-tax-venture-capital-schemes-risk-to-capital-condition
The Autumn Budget 2017 introduced a new ‘principles based approach’ to identify lower risk activities that should not benefit from the tax reliefs [*]. This crystallised in the risk to capital condition, which has applied since March 2018 and is intended to exclude tax-motivated investments, where the tax relief provides most of the return for an investor or where there is a limited risk to the original investment (i.e. a ‘wealth preservation’ approach). The condition depends on HMRC taking a ’reasonable view’ as to whether an investment has been structured to provide a low risk return for investors. There are two parts to the condition: The condition requires all relevant factors about the investment to be considered in the round. These rules apply to all VCTs, as well as investments through the Enterprise Investment Scheme and Seed Enterprise Investment Scheme. However, the condition is not black and white, and therefore has proved potentially difficult for VCT investment managers. The list of risk factors that may suggest a company is not eligible for VCT funding is not exhaustive, while the existence of one or more of those factors does not immediately bar a company from VCT funding. This has left a level of uncertainty over what sorts of investments are likely to receive advance assurance from HMRC and therefore what does and does not qualify.
Refresher: What’s the risk to capital condition?
he analysis in this section was carried out before the rapid escalation of measures to curb the spread of the coronavirus Covid-19 pandemic in the UK. Some sectors will be more affected by the outbreak than others.
offers by sector
The growth of Technology as a target for EIS funds continues unabated, with the sector now comprising 42% of the market, up one percentage point on September’s figures. Bearing in mind that a significant proportion of managers with funds focused on ‘General Enterprise’ will also have a strong focus on technology, it is clear that the sector is now dominant in the EIS market. This is only likely to be increased by the continued rhetoric from the government. In the Queen’s Speech just before Christmas, the newly elected Conservative government cited the life sciences sector as an area it is keen to support, as well as research and development (R&D) initiatives more generally. The 2020 Budget backed up the rhetoric with strong support for these areas. Technology companies fit well into these areas and the extra limits granted to knowledge-intensive companies (KICs) means EIS is fertile ground for investment into R&D-focused companies. On the other side of the coin, the Media & Entertainment sector continues to dwindle, dropping its share once again to 7.6% of the market, from 9% last autumn. There are, however, some examples of where Media & Entertainment offers can still succeed, most notably the Creative Content Fund backed by the British Film Institute, which made its first investment in December 2019. That was into Wonderhood Studios, a creative business that had already won commissions for several programmes for the BBC and Channel 4.
Offers by sector
1%
43%
food & drink
38%
geneRAL ENTERPRISE
4%
technology
3%
INDUSTRY & INFRASTRUCTURE
PHARMACEUTICALS
blend
7%
MEDIA & ENTERTAINMENT
During Intelligent Partnership’s EIS Showcase round in November 2019, there were insights into the virtues of investing into media businesses through EIS, with examples demonstrating that there remain opportunities in this field - even if many providers are now reluctant to venture into the sector following the rule changes. There is a re-entry for the Food & Drink sector, with one offer falling into that category. This sector has traditionally been based around property assets such as restaurants and pubs and therefore often considered not risky enough to qualify under the new rules, so it is perhaps surprising to see this sector make a return at all. However, like Media & Entertainment, there will be some areas from time to time where an offer will be able to meet the rules, albeit more rarely than in the past. The current offer, for example, is targeting just five investments and will want to choose these with care to ensure they fall within the scope of the rules.
Media & Entertainment’s market share continues to fall
7.6%
We use the target number of investee companies stated by the managers as a measure of diversification. We consider an offer with a larger number of investee companies as more diversified than an offer that holds fewer portfolio companies. Again, the number is creeping up, with the average target number of investee companies now reaching 7.6, up from 7.5 in the autumn. The median number has also ticked over from 7 to 8, showing that EIS managers are slowly increasing the diversification within their portfolios. Underlining the wide range of investment opportunities within EIS portfolios, the spread of companies can cover things such as comic books and music scores, through biopharmaceuticals, to companies focused on robotics and “disruptive innovation”. However, as more and more EIS offers place themselves in the Technology sector, it is important for advisers and their clients to think carefully about diversification and consider whether investments may be better spread across different providers - and if so, whether those providers are offering sufficiently distinct opportunities, even if they remain under the broad banner of ‘technology’.
Diversification
average
8
median
20
max
target number of investee companies
min
The expected investment duration of open offers refers to the length of time the EIS managers expect an offer to run for until it returns its investment to investors. In both February 2020 and September 2019, the majority of offers expect to complete their investments and return money to investors after three or four years. This obviously fits with the three-year timeline required for investors to qualify for income tax relief, but there is often a disparity between expectation and reality here. Anecdotally, EIS investments are often for five years or more. This is because by their very nature, EIS investments are usually illiquid, with the only routes for investors to get their money out being through an Initial Public Offering (IPO), trade sale or management buyout of the investee firm, or a voluntary liquidation by shareholders. None of these can be pre-agreed before the EIS investment (otherwise the investment would not be sufficiently risky to meet the risk to capital requirements), meaning investors should expect to be locked into EIS investments for a length of time that could be significantly longer than the minimum holding period for EIS qualification.
Expected duration
Regardless of the C-word, Brexit or Trump, SuperSeed invests in companies targeting long-term problems who adapt and thrive in times of uncertainty.
—Dan Bowyer, SuperSeed
expected investment duration of open EIS offers
february 2020
september 2019
9
0.5
10
mode
target dividend
There continues to be plenty of appetite from EIS providers to raise money for investment, with an average target fundraising of £8.8 million across the 66 open offers, although it should be noted that many EIS offers do not provide a target fundraising figure. One offer with a target raise of £500,000 is an outlier, with the next lowest target being £2 million. If this lowest offer is taken out of the equation, the average jumps to £9.3 million, with two offers hitting the £20 million mark. These figures are similar to 2019, while the average has come down from £9.3 million in 2018. This suggests that the risk to capital condition, pushing investments into smaller companies, has now bedded in and has introduced at least some providers who are seeking to raise smaller amounts of money for investee companies that will likely be at an earlier stage of their development than many pre-2018 investments.
Target raise
The average target return on investments has slightly increased since September 2019, reaching 232% in February 2020. While the maximum continues to be a target of 500%, the minimum target is now 120%. This trend is likely to continue as more and more EIS providers get to grips with the risk to capital condition and seek to tempt investors with higher returns as reward for taking on the higher risk levels now required for EIS. It is worth pointing out, of course, that simply because an offer targets a certain return for investors does not mean it will necessarily reach that level.
Target return
target return
227%
500%
120%
112%
EIS offers investors not just the potential for significant returns, but the chance to back the inspirational entrepreneurs who are so crucial to UK Plc.
— Jasper Smith, Vala Capital
hen contemplating tax-efficient investments it is important to understand the similarities and, indeed, the variances between delivering advice on mainstream investing and issuing client recommendations to utilise unquoted early-stage stocks. One of the key differences to contemplate, and a key understanding that should be imparted by any good manager in the tax-efficient space, is that of the investment process. For example, how does the manager identify investment opportunities, what are those opportunities and what timescales are likely when it comes to deploying funds into those investments? Most managers in this space will likely source investee companies from a myriad of places, possibly including academia, corporate advisers, accountants, professional introducers, incubators, etc. Describing this source of deal-flow, and how the initial relationship with the introducer was born, is easy but advisers and investors should be able to look beyond that and be provided with real-life examples of where investees have originated from. For example, can the manager talk through which academic institution each company came via? What has been the process in terms of forging those relationships with the introducer, and for each investee company, how did that progress through to investment? Over the past couple of years, we have seen a number of new entrants enter the EIS space. We have also seen a number of historically large players in this market having to dramatically pivot their approach. This has been primarily due to legislative changes designed to ensure that EIS funding is only really going to the types of companies that need it and that the investment supports the sectors which government wants it to. This change in tack might seem simple but, in reality, unless a manager is immersed in a sector in which they are investing, how can they really know the quality of investment opportunities and how can they support those companies going forward? Indeed, it may be that the manager takes a passive approach to the investment and therefore doesn’t need to know a sector. This would be entirely at odds with the approach we, for example, take but I’m sure some will argue it has its own validity and that certain investees want to be able to get on with their business without any such external support. We would however respectfully disagree with a hands-off approach. Since incarnation, our ethos has been that of a sector-focused investment manager giving proactive, hands-on support to investee companies. This support can manifest itself in many ways depending on the wants and needs of the investee company – for example, from our perspective as the investment manager, it could simply mean acting as a sounding board and speaking regularly with founders/CEO. Or it could be helping the company recruit the right individuals to help the company grow. It could be assisting with their initial marketing plans, or it could be dictating the commercial path a company should be taking. In a very true sense, managing and supporting early-stage companies is fundamentally different to managing a portfolio of listed stocks and we believe young companies benefit best when they have partners around them to assist them through their journey, rather than merely being handed a cheque and being left to it. If a manager can tick the above boxes, then they are likely to be going a long way to providing the confidence and certainty all advisers and their clients are looking for, especially given these investments are higher-risk than normal.
Understanding the investment process
Andrew Aldridge, partner, head of marketing, Deepbridge Capital
Managing and supporting early-stage companies is fundamentally different to managing a portfolio of listed stocks.
Andrew Aldridge, Deepbridge Capital
www.deepbridgecapital.com 01244 746000 info@deepbridgecapital.com
3. Considerations for Investment / thought leadership
Fees and charges
Inching Up
alf of all open EIS offers include an annual management charge (AMC). Since September 2019, the average AMC has increased slightly, from 1.7% to 1.8%. This continues the upward trajectory seen for the AMC, having risen from 1.3% in 2018. Part of this may be down to the increased costs to managers of managing their investments, given that they are now required to be at the higher end of the risk spectrum. The investee company is bearing the brunt of this rise, with AMC charges to investee companies reaching 1.1%, compared to 0.6% for investors.
Has the risk to capital condition had any impact on the way managers charge fees?
Correct Both the average AMC and Initial Charge have increased as managers are faced with greater work.
Wrong Both the average AMC and Initial Charge have increased since the rule changes. See the Risk to Capital Refresher in this page.
increase in total average AMC since 2017
50%
1.2
1.8
2020
1.3
1.7
AVERAGE TOTAL AMC
4.75
0
total amc february 2020
It is a similar story for the initial charge, which has also slightly increased since September, from 3.3% to 3.6%. As has previously been the case, there is a continued rise in the initial charge to the investee company, from 2.6% to 2.7%, which is considerably higher than the 1.5% seen in October 2018. Just one provider has an initial charge of 10% to the investee company, although a number have charges of 5% and 6% to the investee company. Perhaps one reason for the increase in charges to the investee company can be explained by the fact that many of the managers charging the higher fees do not charge any other fees. So while a 6% charge to the investee company may seem high, over the course of, say, seven years, with no other fees being levied, this initial charge may prove to be a cheaper alternative than some other offers that have ongoing AMCs and other charges. This focus on charging the investee company rather than the manager may also be down to the risk to capital condition, with managers perhaps seeking to entice investors into this higher risk sector through offering low or no fees. The higher levels of due diligence required by managers as they invest in smaller, less established companies seems to be resulting in those investee companies paying for that through higher fees placed upon them.
Initial charge
3.6
total initial charge february 2020 (%)
The minimum subscription is the lowest amount that an investor can put into a particular EIS offer. At present, the lowest offer is £5,000, while there are three offers that require £50,000 as a minimum subscription. This represents a change at both ends of the minimum subscription level spectrum compared to September 2019, when the lowest threshold was £10,000, while one offer required an investment of at least £100,000. As a result, the average minimum subscription is now down to a shade over £18,000, compared to £20,000 in the autumn. Given that the risk to capital requirement means EIS investments today are more likely to be into smaller companies, it seems unlikely that the minimum subscription level will rise significantly in the coming years. Instead, it may continue to fall slightly as managers find they don’t necessarily need to deploy as much money into their investee companies as in the past. This is because, if the companies are younger and smaller (to meet the risk to capital requirement), they may not require as much money during this phase of their growth as the types of companies targeted before the risk to capital condition was introduced. However, if the new ’approved’ knowledge-intensive fund proves a hit, this could change the figure here by increasing the number of EIS offers targeting the higher amounts that can be invested into knowledge-intensive companies.
Minimum subscription
£18,182
£50,000
£5,000
£10,000
£17,500
Minimum subscription February 2020
3. Considerations for Investment / fees and charges
4. Industry analysis
Knowledge-Intensive Companies Key Information Documents Revaluations Policies Geographical Split
4. industry analysis
Knowledge-intensive companies
Knowledge-intensive companies (KICs) are expected to become a key focus for investment through EIS in the future, thanks to the 2018 legislation creating more generous rules.
y July 2019, 199 companies had been approved by HMRC as KICs since the rule changes were introduced in April 2018. We made a Freedom of Information request in February 2020 to discover how many KICs have now been approved by the government. However, despite having previously divulged this information through such requests, HMRC this time refused to give the number. This is on the basis that there is an intention to publish data “on the number of companies who have successfully raised money as Knowledge-Intensive Companies (KICs) under the Enterprise Investment Scheme in its May 2020 publication”. While this will answer a slightly different question to the one asked (there are likely to be more approved KICs that have not yet raised money and are therefore not included in the official figures), it will be the first time that this data has been published in HMRC’s annual figures. This reflects the importance now being placed on KICs, that the government is including it in its annual reports. What we can say is that the number of newly approved KICs is likely to continue to rise. Of the 199 approved KICs between April 2018 and July 2019, the majority of those received their approval in the final six months of that period. The government’s introduction of an approved knowledge-intensive fund is likely to increase market interest even further.
B
Some sectors, such as life sciences, should only be considered if the manager really understands the sector.
—Ian Warwick, Managing Partner, Deepbridge Capital
What are knowledge-intensive companies?
refresher: What are knowledge-intensive companies?
10 year age limit
£20m lifetime cap on tax-advantaged VC
499 employee limit
Knowledge-intensive companies (KICs) are firms with a clear focus on research & development or ‘innovation, with at least 20% of their employees considered to be ‘skilled’ and directly involved in the research & development activities. There are more generous rules for KICs:
£10m 12-month risk capital funding limit
refresher: What are Key Information Documents?
Although not specifically mentioned in the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, EIS funds fall under the definition of venture capital investments, which would classify EIS funds as PRIIPs. This means that the EIS manager must issue a Key Information Document (KID), designed to help investors to better understand and compare the key features, risk, rewards and costs of different PRIIPs. These have been controversial, however, with many in the industry warning that the requirements of the KIDs can lead to some perverse outcomes, with the performance scenarios required to be included potentially giving overly optimistic outcomes for many products. This has led to fears that use of the KIDs could lead to a mis-selling scandal in the future [1].
4. industry analysis / Knowledge-intensive companies
Key Information Documents
lthough the UK has now left the European Union, the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, which contains rules on the use of Key Information Documents (KIDs), will remain in force until at least the end of 2020 due to the transition agreement that is in place as the two sides try to negotiate a lasting trade deal. Therefore, the ongoing review of PRIIPs - and of KIDs in particular - remains an important consideration for the EIS market. In January, a consultation by the European Securities and Markets Authority (ESAs) on planned changes came to an end, while the review as a whole is due to complete at the end of the first quarter of 2020. Final proposals will be submitted to the European Commission “shortly afterwards”.
What are Key Information Documents?
Although not specifically mentioned in the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, EIS funds fall under the definition of venture capital investments, which would classify EIS funds as PRIIPs. This means that the EIS manager must issue a Key Information Document (KID), designed to help investors to better understand and compare the key features, risk, rewards and costs of different PRIIPs. These have been controversial, however, with many in the industry warning that the requirements of the KIDs can lead to some perverse outcomes, with the performance scenarios required to be included potentially giving overly optimistic outcomes for many products. This has led to fears that use of the KIDs could lead to a mis-selling scandal in the future [7].
A new methodology for future performance scenarios based on the use of dividend rates or yields according to which the expected growth rate for a particular asset will be the sum of a reference rate common to all assets and an asset specific risk premium Illustrative performance scenarios would include the past performance for category 2 and category 4 PRIIPs only (AIFs, UCITS and unit linked insurance-based investment products). This would be presented in addition to the future performance scenarios
The proposals are going from bad to worse.
—Insurance Europe
However, the response to the consultation suggests that the proposals have not gone far enough. According to FT Adviser, Baillie Gifford was among those to raise concerns, suggesting that the proposals “do not go sufficiently far in terms of adequately addressing the following concerns: forecast future performance, understated risks and unreliable transaction costs” [8]. Meanwhile, the European insurance and reinsurance federation, Insure Europe argued [9] the proposals would increase complexity and make it harder for consumers to understand KIDs, as well as resulting in misleading figures being presented to consumers. It’s possible that after the transition period ends, the UK might be able to diverge from the PRIIPs regulation if it chooses to, in which case the KIDs may no longer apply, or may be reintroduced in a new form. Until that becomes clear, however, EIS providers will have to continue using the current KIDs - and advisers will need to be careful in how they rely on them.
7. https://www.ftadviser.com/investments/2018/09/27/city-of-london-trust-joins-chorus-of-warning-about-kids/ 8. https://www.ftadviser.com/investments/2020/01/16/regulator-response-to-priips-rules-branded-inadequate/?page=1 9. https://www.insuranceeurope.eu/esas-proposals-priips-going-bad-worse
ESAs’ KID Proposals
The consultation paper issued by ESAs includes several amendments designed to improve the accuracy and reliability of KIDs, including:
Substantial amendments to the cost tables to improve the compatibility with MiFID disclosure requirements and to require more specific details or descriptions of the main cost types to be disclosed Introducing a proportionality threshold whereby the PRIIP manufacturer would be able to use a simplified approach where there is a low number of transactions or a low portfolio turnover
4. industry analysis / key information documents
Revaluations policies
s the vast majority of EIS investee companies are not quoted on any stock exchange, getting an accurate and reliable value of such companies can be difficult. EIS managers will generally review the valuations of the companies they are invested in periodically and the frequency with which this is done will vary from manager to manager. However, in the wider investment industry, concerns over valuations emerged in 2019, with questions being raised over how companies are valued in the wake of troubles such as those suffered by the Woodford Patient Capital Trust (now renamed the Schroder UK Public Private Trust). As a result, advisers looking for EIS investments should be looking at the valuations policy of managers, seeing when revaluation can take place and looking at the checks and balances in place to prevent over or under valuation. Under the FCA’s handbook, fund managers are required to issue reports every six months, and most EIS managers take this opportunity to publish the latest valuations of all their investee companies. Analysis of data contained within MICAP reveals the vast majority of open offers for which data is available use this approach, although just under a quarter choose to publish valuation information on a quarterly basis. While the vast majority are using the FCA’s reporting requirements as the opportunity to publish valuation data, many will also be seeing changes to investee company valuations at other intervals, due to events such as a new fundraising by an investee company, either involving or not involving the EIS manager, or a sale of shares. Both of these events give good indications of what a third party is happy to pay for the shares and therefore their current valuation. Fund managers may therefore have a more up-to-date picture of their investee companies’ valuations than they publish. However, given the growing clamour for greater transparency across the investment market, particularly in the unlisted shares sphere, managers may be encouraged to increase the regularity with which they publish data on their portfolio’s underlying valuations. The figures also show that almost all of the fund managers who state that they follow external guidelines on undertaking valuations follow the International Private Equity and Venture Capital Valuation (IPEV) Guidelines. These have been adopted by the British Private Equity & Venture Capital Association (BVCA) as containing best practice when undertaking company valuations.
Due to the short-term nature of investment within the Woodford funds, liquidity became a major issue. EIS however, is a long-term, buy and hold investment and liquidity comes through company exits which is a process EIS fund managers manage.“ It is about managing expectation levels: IFAs have an important role in explaining to clients how a portfolio will develop,” he added. “It’s good to be prepared for a five to eight-year journey and to remember that in our world, the lemons ripen before the plums.” When it comes to valuations, there are a number of questions that advisers need to be asking themselves when looking at offers. For example, who is valuing the underlying assets: is there an evaluation committee and if so is it independent from the investment committee? Furthermore, what valuation methodology is used? In recent years, the discounted cashflow model has become popular, but the adviser will want to consider whether all the assumptions applied are reasonable and up to date. Advisers should also remember that independent auditors are generally not experts in EIS or the underlying trades that EIS managers invest in. Rather, they simply review the figures that are provided to them to make sure they make sense. Therefore, they are unlikely to fully understand, for example, the intricacies of a biotechnology or artificial intelligence company, or what a reasonable valuation of those companies’ shares might be.
25
biannually
quarterly
other
Managers' valuations frequency
EIS is a long-term, buy and hold investment.
Are fund managers required by the FCA to publish valuation data on a quarterly basis?
Wrong Although almost a quarter of managers do choose to publish this frequently.
Correct The FCA only requires this to be published biannually. Although managers may collect data more frequently without publishing it.
Source: MICAP
4. industry analysis / revaluations policies
Geographical split
igures from HMRC [10] in 2019 highlighted the disparity in the location of EIS investments, with London and the South East accounting for £1.28 billion - while the rest of the country put together saw less than £650 million invested via EIS. This significant difference was underlined in February 2020 by the British Business Bank, in its Small Business Finance Markets 2019-20 report [11], which looked at the wider small business finance market. It found the rate of awareness of both venture capital and business angels among small businesses as options for equity finance was almost 10 percentage points higher in London and the South East than in the rest of the UK (66% compared to 57% for venture capital, 39% and 30% for business angels). Furthermore, the report found that a reluctance to give up control was cited as a barrier to any form of equity finance by 76% of businesses outside London and the South East, compared to 63% in that region. On EIS specifically, the British Business Bank revealed that London also hosts the largest share of investors using the scheme. With the exception of London, Scotland and the North West, all other regions of the UK have larger shares of EIS investors than of EIS deals - suggesting a lack of knowledge among small companies in these areas about the potential offered by EIS.
F
Source: British Business Bank analysis of HMRC EIS and SEIS data, and ONS Business Demography
SHARE OF EIS/SEIS DEALS, INVESTORS AND SMEs BY REGION (and devolved nation for the 2017/18 Tax year)
SMEs (2019)
EIS and SEIS Deals (2017-18)
EIS and SEIS Value (2017-18)
EIS and SEIS Investors (2017-18)
10. https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/804455/May_2019_ Commentary_EIS_SEIS_SITR_National_Statistics.pdf 11. https://www.british-business-bank.co.uk/wp-content/uploads/2020/02/Small-Business-Finance-Markets-2019-20-report-1.pdf
4. industry analysis / geographical split
5. Managers in focus
Deepbridge Superseed Vala Velocity Comparison table
deepbridge SUPERSEED VALA VELOCITY COMPARISON TABLE
EIS Showcase 2019 interview
Andrew Aldridge of Deepbridge Capital looks into the potential offered by Deepbridge’s SEIS funds:
5. Managers in focus / deepbridge
Find us on
Life Sciences EIS
Technology Growth EIS
5. Managers in focus / Deepbridge
about the manager
ess than 10% of UK VCs have ever actually worked in a start-up. SuperSeed is different, it delivers an opportunity to invest alongside experienced entrepreneurs who have already successfully built, invested and more importantly sold eight businesses, with 25% exiting for significant eight-figure amounts. We:
L
www.superseed.com 020 3405 3060 james@superseed.com
OUR OFFER
SuperSeed is one of the few UK VCs that has an in-house sales & marketing team directly supporting our portfolio companies, further accelerating the revenue growth potential and investor ROI of our startups. Our 2019/2020 portfolio consists of seven investments with another two likey before the tax year ends.
INVESTMENT CASE STUDY
SuperSeed invested in SeeQuestor in February 2020. SeeQuestor provides radically faster real-time video surveillance analytics software. With over 1.5 trillion hours of video captured in 2019 alone, virtually all is wasted. SeeQuestor, a multi-award winning AI company, is able to deliver post-event and real-time advanced video analytics for smart cities, public safety, and business intelligence clients. This $100bn market is ripe for disruption and SeeQuestor is poised to capitalise. This is a great example of our investment sweetspot. They are a brilliant team, solving a highly complex and difficult problem within a very large but targetable market. They have also already proven product/market fit through enterprise sales and they are delivering something that genuinely helps positively impact society. SuperSeed was part of the £3m investment round, co-investing alongside a range of leading UK business angels.
Dr Reuben Wilcock, of Blackfinch, discusses the potential for investing in technology
Select companies that have what it takes to grow rapidly on a pathway to exit. Prove market demand before investment, often actually selling the prospective investee’s products before investment. Select investments at seed stage based on deep sector expertise and first-hand B2B AI and SaaS experience, rather than over paying for revenue at Series A.
SuperSeed is an early-stage B2B SaaS and AI evergreen EIS fund providing investors year round access to invest, while also benefiting investors via generous government-backed EIS tax reliefs. The SuperSeed EIS fund has a target raise of £3 million but our deal flow affords a much larger fund.
Target Portfolio Size for 2020/2021: 8-12 individual companies per fund investment. Target Return: >3x capital invested over a 5-7 year period, which is equivalent to a return in excess of 20% per annum NOT including tax relief, which would further increase investor returns. Advised clients benefit from up to 2% discount on initial fees. Our current pipeline of investments is very strong with 15 successfully passing stage 1 due diligence and four in their final stages of negotiations.
5. Managers in focus / superseed
he team behind Vala Capital has been founding and investing in early-stage businesses for years. With a personal track record of investing in more than 50 companies and realising 35 exits so far, they have generated an overall return of 3x on capital invested. Vala was founded to provide investors with the opportunity to invest alongside this team, backing companies with high growth potential that have been hand-picked by investors, for investors. Vala’s focus is to back entrepreneurial businesses in the sectors that the investment team knows best; including technology, engineering, fintech, media & entertainment, lifestyle brands and food & beverages. Often Vala will have helped create, incubate, and accelerate the companies before investing - this means there is a real understanding of the businesses before they are introduced to the Vala EIS portfolio, and that the team should be in a good position to help these companies grow.
www.valacap.com 0203 951 0590 / 07872 009069 james@valacap.com
The Vala EIS Portfolio is an evergreen fund:
Arksen is developing semi-autonomous yachts that offer safe, comfortable travel to remote locations. We were attracted to the company by its potential to achieve significant scale combined with its focus on responsible ownership and sustainability. Arksen owners will pledge to make their boats available to scientists working on marine research and conservation projects. We have invested £1m in Arksen to date. This has allowed the company to make significant progress, including hiring a highly experienced COO, launching its brand at the Düsseldorf Boat Show in 2019, and commissioning a shipyard to build its first prototype vessel. We have also helped Arksen develop a strategic collaboration with another portfolio company, Cetus, to create a range of smaller power boats (pictured). These will be quicker to build than the larger vessels, helping Arksen to become revenue-generating more quickly. Follow-on investments are planned, subject to Arksen’s continued progress.
5. Managers in focus / vala
Target return 2x net of fees and before tax relief Diverse portfolio of 6-10 companies pre- and post-revenue; often already selling products or services Simple fee structure Tranches close regularly, with allotments every three to six months Rapid deployment of funds; rapid EIS3 turnaround Management team has first-hand experience of setting up and exiting businesses and will mentor portfolio companies
Jasper Smith reflects on the potential of small businesses to deliver strong growth:
introducing vala
Founder Jasper Smith introduces Vala and some of its investments:
elocity was set up in 2015 as a vehicle to facilitate participation in exciting companies, which have technology at the core of their offering. We look to work with companies that are innovative, can scale quickly and provide a product or service that is genuinely useful to their customers, whether B2C or B2B. The Velocity Capital Advisors founders come from entrepreneurial backgrounds, which we believe is a real asset to our business and the investee companies. Since its inception, Velocity has been seeking to make investments that offer investors capital appreciation opportunities. Velocity has been operating for over four years, and in those years the SEIS and EIS funds achieved an investee company cash exit of 6.5x, and the overall current performance of the funds is estimated to be 3.5x to 1.3x.
V
www.velocity.co.com +44 (0)20 7139 4450 ash@velocity.co.com
Velocity intends to present opportunities for investment that combine traditional business qualities of strong management, robust operations and risk management with attributes associated with the digital economy and technology environment: innovation, usefulness, scalability, and speed to market. Furthermore, each potential investee company must have HMRC Advanced Assurance. Velocity’s EIS portfolio will comprise no less than 12 companies across a number of sectors and stages of development. Our prudent allocation strategy combines a minority of pre-revenue businesses, with the majority of funds directed at those businesses generating revenue of £300,000 per year or more. Taking an active, not passive management approach, Velocity’s multidisciplinary team works with management teams to realise their, our and your ambitions.
SonicJobs is the UK’s leading blue-collar recruitment app that uses Artificial Intelligence and a Chatbot named Julie to help candidates in sectors such as retail, healthcare, warehouse, and logistics to build their career. In just two years since Velocity’s investment, SonicJobs has brought on over 200,000 candidates, is unit profitable, and has been ranked as high as #2 on the Apple App and Play Stores. Every 80 seconds a candidate in the UK applies for a job through them. Velocity invested in SonicJobs in 2017 on a SEIS basis. They followed up that investment in a larger 2018 EIS round and are now backing the business further as it takes on its next challenge to accelerate growth further in the UK and launch in the US. Already the investment has made Velocity a 4X return. SonicJobs won the National Online Recruitment Awards - Best Innovation 2019 prize.
5. Managers in focus / velocity
velocity Is...
Take a look at some of Velocity’s investee companies:
EIS SOLUTIONS COMPARISON
5. MANAGERS IN FOCUS / COMPARISON TABLE
6. What's on the horizon
Tax Reform ESG Targets Continuing Growth? What the managers say
Tax Reform ESG Targets a new normal WHAT THE MANAGERS SAY
Tax reform
A big change that garnered speculation ahead of this year’s Budget was for the government to reform inheritance tax (IHT) and the tax reliefs that accompany it.
Wider tax reform
hile this did not take place in the end - perhaps not least because Chancellor Rishi Sunak only came into post less than a month before the Budget - there has been growing pressure on the government to tackle this area. Reforming IHT and its accompanying reliefs could potentially have a significant impact on Business Relief (BR), which offers 100% inheritance tax mitigation on qualifying investments and is available on the majority of EIS investments after two years. However, even if BR was removed completely, it is unlikely to have a material effect on the EIS market, as most investors consider BR to be an additional benefit, after the other EIS reliefs such as the income tax and capital gains tax reductions. Furthermore, an investor looking particularly for inheritance tax mitigation is more likely to favour an investment targeting wealth preservation, rather than the more risky growth focus of EIS investments.
In February 2020, the National Audit Office (NAO) published a review into the management of tax reliefs by the government [12]. While it concluded that the government needs to make “substantial progress” in how these are managed and urged a “systematic review” of the whole tax relief system, it had a broadly positive message for the EIS and VCT regimes. The NAO carried out evaluations on 13 tax expenditures and found seven of these were having positive impacts on behaviour, including the income tax and capital gains tax reliefs available through EIS and VCTs. It concluded the schemes “were generally working as intended in terms of how investments were used (for example, bridging finance gaps)”. It added that 60% of investors would either definitely or probably not have invested without the EIS or VCT schemes. Given that these schemes have also been reformed in recent years to focus on higher risk investments, it would appear that they are likely to be seen as positive examples of how to create effective outcomes through tax reliefs and therefore less likely to be changed in any review or reform of the entire tax system.
Positive.
—NAO’s view of the impact of EIS and VCT tax reliefs on behaviours
Inheritance tax
12. https://www.nao.org.uk/wp-content/uploads/2020/02/The-management-of-tax-expenditure.pdf
6. What's on the horizon / tax reform
Tax Reform ESG Targets A new normal What the managers say
Difference the EISA believes its changes could make to the EIS market during the crisis
£200m
The amounts held in ESG/green funds have grown in recent years, particularly driven by younger investors.
—FCA Sector Views 2020
In its Sector Views 2020 document published in February [13], the FCA flagged the planned introduction of the EU Sustainable Finance Action Plan over the course of the year.
ESG targets
his regulation will require asset managers, financial advisers, insurance companies and pension funds to disclose how they integrate environmental, social and governance (ESG) factors into their investment decision-making and advisory processes. As the UK is continuing to follow EU law until the end of 2020 (or until a trade deal is agreed, if sooner), it is likely that this Action Plan will affect the UK market. The Action Plan is designed to tackle what the FCA refers to as the “high risk of greenwashing”, where companies attempt to make their investments appear to fit into certain standards of ESG. This has become a major issue for ESG because there are currently no recognised industry-wide standards on what constitutes an ‘ESG compatible’ investment, and therefore many firms will have their own definitions, which may vary from company to company. Many EIS managers may not be particularly concerned by the Action Plan, as they look for innovative companies with solutions to current societal issues such as those related to the environment. Nonetheless, it will be important for EIS managers to consider all their investments in light of the new rules to ensure that the standards they have for their investee companies meet the standards required by the Action Plan.
13. https://www.fca.org.uk/publication/corporate/sector-views-2020.pdf
The reaction of the EIS market to current events is difficult to predict, but there is certain to be a significant impact playing out in the next tax year.
he sweeping and unprecedented measures taken to stem the rise of the coronavirus Covid-19 pandemic across the globe have seen much of the economy in the UK and other countries come to a standstill. Some in the EIS industry believe the moves will reduce fundraising by as much as 70% year-on-year.[14] However, the good news is that there is still some money flowing into EIS companies, and the work of the EIS Association in urging for greater freedoms to encourage more capital to flow into small businesses could prove vital if it is taken up by the government. The government has already ploughed huge sums into British businesses, on a scale never before seen in the UK, but there remain concerns that many small companies may not be able to ride out this storm. Like any investment, those qualifying for EIS can make no guarantees of success and investors should understand the risks - even if they have taken a turn that none of us could have expected. However, there can be some comfort from the fact that managers carefully select their stocks, and EIS investments are of course based on a medium to long-term hold. Even as small businesses struggle, many are nimble enough to change direction if necessary, and many in popular sectors such as life sciences will be a vital part of the efforts against coronavirus. Furthermore, small business will be the engine of the economy and the backbone of the UK’s economic recovery once things begin to return to normal, meaning supporting them will be critical to the future growth of the country.
6. What's on the horizon / esg targets
a new normal
14. http://about.beauhurst.com/wp-content/uploads/2020/02/The-Deal-2019_WEB.pdf
£200
In its Sector Views 2020 document published in February [1], the FCA flagged the planned introduction of the EU Sustainable Finance Action Plan over the course of the year.
1. https://www.fca.org.uk/publication/corporate/sector-views-2020.pdf
Our next Update will be published after the end of the tax year, when we will get an indication of how much money the EIS market raised.
The sweeping and unprecedented measures taken to stem the rise of the coronavirus Covid-19 pandemic across the globe have seen much of the economy in the UK and other countries come to a standstill. Some in the EIS industry believe the moves will reduce fundraising by as much as 70% year-on-year. However, the good news is that there is still some money flowing into EIS companies, and the work of the EIS Association in urging for greater freedoms to encourage more capital to flow into small businesses could prove vital if it is taken up by the government. The government has already ploughed huge sums into British businesses, on a scale never before seen in the UK, but there remain concerns that many small companies may not be able to ride out this storm. Like any investment, those qualifying for EIS can make no guarantees of success and investors should understand the risks - even if they have taken a turn that none of us could have expected. However, there can be some comfort from the fact that managers carefully select their stocks, and EIS investments are of course based on a medium to long-term hold. Even as small businesses struggle, many are nimble enough to change direction if necessary, and many in popular sectors such as life sciences will be a vital part of the efforts against coronavirus. Furthermore, small business will be the engine of the economy and the backbone of the UK’s economic recovery once things begin to return to normal, meaning supporting them will be critical to the future growth of the country.
We expect to see continued innovation thrive in the UK.
What are you hoping to see in the coming months? Although the Budget had to materially relate to short-term economic stability as a result of the coronavirus pandemic, we expect the Enterprise Investment Scheme to be a major government tool in supporting long-term economic growth. How do you see the knowledge-intensive sector developing in 2020? Having always been involved in the tech and life sciences sectors, and with our EISs reflecting these sector specialisms, it has been great to witness first-hand the UK’s continued excellent reputation in these sectors. We expect to see continued innovation thrive in the UK, which is seen internationally as one of the best places to start such companies. Where could the market develop or improve? EIS still has significant growth opportunities. Investors and entrepreneurs around the world are highly envious of the generous tax reliefs on offer in the UK to encourage investment in early-stage companies. Many financial advisers and investors still don’t appear to appreciate what they have access to.
I see the AI sector undergoing significant and continued growth.
What are you hoping to see in the coming months? With the end of the tax year fast approaching, it’s a busy time for us as we welcome new and repeat investors to the fund. We will also continue discovering and investing in exceptional early-stage companies. I also hope that people take the Government’s advice to help reduce coronavirus’s hold. How do you see the knowledge-intensive sector developing in 2020? Continued investment in technology supported by government backing, combined with the creation of KI funds, all overlaid on a general drive towards digitisation and technology, I see the AI sector undergoing significant and continued growth. There may well be some unintended consequences in areas such as social impact investing reducing. Where could the market develop or improve? We’re focused on profitability and scalability, other investors seem not to be, overpaying for vanity metrics like user growth. Selling £5 notes for £3 secures customers but also bankruptcy. We’re “ROI First” investors, only investing in things with great unit economics. That approach remains in both prosperous and challenging times.
6. What's on the horizon / what the managers say
We’d like to see further improvements to the administration of tax reliefs.
What are you hoping to see in the coming months? Small and medium-sized companies have a crucial role to play as the UK economy adapts to a new relationship with the EU and our changing global role. As such, we expect to see continued support from the government for small companies in general and EIS in particular. How do you see the knowledge-intensive sector developing in 2020? We expect to see the launch of some new knowledge-intensive funds, after the Budget confirmed the ‘approved’ fund structure will go ahead as planned. It’s great to see the government getting behind research and development; we don’t require the companies we back to be knowledge-intensive, but many of them meet the definition and funds like ours have an important role to play in their financing. Where could the market develop or improve? Like most EIS providers, we’d like to see further improvements to the administration of tax reliefs, making things easier for investors and their advisers. We also think the EIS market still suffers from a lack of transparency on fees and performance. We’re doing our bit to improve this and build trust with investors.
There is greater understanding among founders of the advantages of being categorised as a KIC.
What are you hoping to see in the coming months? We will be looking for an increasing number of our portfolio companies to enter international markets and continue to develop and refine their products and services with a knock-on positive effect on valuations. How do you see the knowledge-intensive sector developing in 2020? There is greater understanding among founders we are seeing of the advantages of being categorised as a KIC. Whilst not all the companies are able to meet the criteria, there is a significant proportion of EIS businesses for which this is highly advantageous in the context of fundraising and we would expect an increased number of businesses to be looking to obtain this over 2020 and beyond. Where could the market develop or improve? The market can develop and improve in a number of ways. There remains too great a focus on start-ups in and around London and the South East and increased digitisation should make the application, investment and reporting processes more efficient and transparent.
7. Further learning
Learning objectives
About Intelligent Partnership
LEARNING OBJECTIVES ABOUT INTELLIGENT PARTNERSHIP
LEARNING OBJECTIVES
Identify the main developments and news in the EIS market
Covered in section 2. The impact of the General Election and leaving the European Union, plus new guidance from HMRC
HOW DID YOU DO?
ntelligent Partnership has achieved accredited status from the CISI, CII and PFS. Members of these professional organisations represent the majority of the insurance, investment and financial services industry. Readers of the EIS Quarterly Update can claim up to two structured CPD hours towards their CISI, CII or PFS member CPD scheme for the time spent reading this Update (excluding breaks). The review process included an assessment of the technical accuracy and quality of the material against CPD Accreditation standards. Achieving the recognised industry standard afforded by these organisations for this Update, and our training, demonstrates our commitment to delivering only balanced, informative and high quality content to the financial services and investment community. In order to obtain CPD and meet accreditation standards, readers must complete a short questionnaire and provide feedback on the report. This includes 10 multiple choice questions to demonstrate learning and a feedback form to assist in the compilation and improvement of future reports. To claim your CPD please visit:
Understand the developing impact of rule changes to EIS
Covered in Sections 3 and 4. Changes to the composition of the market and the rise of knowledge-intensive companies
Be aware of the key fees and charges applied by EIS managers
Covered in Section 3 using data from the MICAP platform
Recognise the various factors that will affect the EIS market in the coming months
Covered in Section 6. The continuing impact of Brexit and the run towards the end of the tax year
Understand the types of open EIS offers available in the market
Be able to benchmark current products and providers against each other on key investment criteria
Covered in Section 5 using data and expertise provided by our partners
Claim your cpd
intelligent-partnership.com/cpd
intelligent-partnership.com/e-learning
e-learning
ntelligent Partnership has created a series of accredited e-learning courses for regulated advisers, paraplanners, accountants, and solicitors that require a recognised level of knowledge and understanding in all areas of tax-advantaged investments. Our e-learning programme covers courses on EIS, VCTs, Business Relief, with new courses on Gifts and Trusts expected this year. These are designed to further your knowledge in these complex areas. Containing an engaging mix of written and interactive content, videos, and infographics to enhance the learning experience, our programme provides learners with access to a suite of resources, including case studies, calculators, document templates, process flowcharts and decision making trees. Our EIS course has been accredited by CISI, CII, and PFS. It is eligible for four hours of Structured CPD. On completion, the learner will receive the relevant Certificate of Knowledge and Understanding. To find out more, please visit:
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feedback
ntelligent Partnership actively welcomes feedback, thoughts and comments to help shape the development of these Quarterly Industry Updates, with a particular interest in the topics readers would like to be covered in more detail in future. This Update has been compiled through the conducting of research and surveys with providers, promoters and practitioners within the tax-advantaged investment industry. Greater participation, transparency and fuller disclosure from industry participants should help foster best practice and drive out poor practice. To give your feedback please email: Participation and feedback are gratefully received.
7. FURTHER LEARNING / LEARNING OBJECTIVES
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Editorial Paul Jarvis Creative Estela Alcay Sub-editing Lisa Best Research Paul Jarvis Marketing Carlo Nassetti
