Information Memorandum - Foresight Group

More documents

Recommendations

Info

SUMMARY OF TAX RELIEFS TAX TREATMENT WILL DEPEND ON INVESTORS’ INDIVIDUAL CIRCUMSTANCES AND ALL POTENTIAL INVESTORS SHOULD, THEREFORE, SEEK TAX AND FINANCIAL ADVICE BEFORE INVESTING. YOU MUST HOLD EACH INVESTMENT FOR A THREE YEAR PERIOD TO RETAIN THE EIS RELIEFS SUMMARISED BELOW. EIS RELIEFS ARE ONLY AVAILABLE ON YOUR INVESTMENT IN EIS QUALIFYING SHARES. YOU SHOULD SEEK ADVICE IN RELATION TO TAX RELIEFS. A MORE DETAILED EXPLANATION OF THE TAX RELIEFS AND EIS REQUIREMENTS ARE SET OUT IN PAGES 24 TO 25. Income tax relief Eligible Investors can reduce the amount of income tax they pay by 30% of the amount invested in EIS Qualifying Investments made through the Fund. As an example, if an Investor invests £100,000 in EIS qualifying Investments through the Fund, the Investor can reduce the amount of income tax paid by £30,000. This relief is available on the first £1,000,000 of EIS qualifying investments in each tax year. If an Investor invests more than £1,000,000 through the Fund in any tax year, the reduction in their income tax bill for that year will be £300,000. The amount of income tax relief claimed cannot exceed that which an eligible Investor is due to pay. Eligible Investors can claim the relief against their income tax liability in the tax year that Foresight makes each EIS qualifying Investment or such relief can be carried back for the preceding tax year to the extent the eligible Investor has not used their annual limit in the previous tax year. EIS income tax relief in respect of investments made in the 2013/2014 tax year may be carried back into the 2012/2013 tax year up to the annual limit of £1,000,000. Capital gains tax deferral relief Eligible Investors can defer capital gains up to the amount invested in Investments made through the Fund. This applies to gains made in the three years before the effective date (see timing below) and future gains made up to one year after the effective date. Gains are deferred until the Investor sells their EIS qualifying Investments that Foresight has made for them through the Fund. Capital gains tax will apply to the deferred gain at the rate in force when the Investments are sold. Capital gains tax exemption Any capital gains realised on a disposal of Investments made through the Fund after the Three Year Period, and on which EIS relief has been given and not withdrawn, will be capital gains tax free. Any capital gains realised on a disposal within the Three Year Period will be subject to capital gains tax, at the current rate which is either 18% or 28% for individuals (the tax rate used depends on the total amount of the individual’s taxable income). Inheritance tax relief Once an Investment made through the Fund has been held for two years, eligible Investors should qualify for 100% Business Property Relief. This means that an Investment will be an exempt asset for IHT purposes, provided the Investment is held at date of death. Business Investment Relief The Finance Act 2012 includes provisions whereby nondomiciled residents can use untaxed overseas income or gains to invest in the UK in qualifying investments without making a 04 FORESIGHT SOLAR EIS FUND 3 taxable remittance under the Business Investment Relief (BIR) scheme. This major new relief offers non domiciled residents who have foreign income or gains that would be taxable on the remittance basis if brought to the UK a major opportunity to make commercial investments in the UK, into qualifying investments. Amounts remitted to the UK must be invested within 45 days of being brought to the UK. If the investment is aborted after funds have been brought to the UK, then no UK tax charge will arise providing the funds are taken overseas within 45 days of the day that they originally came to the UK. On the disposal of a qualifying investment the investor has 45 days from the date of receipt of the proceeds to take overseas the proceeds or to make another qualifying investment. Special rules apply where the investment is part sold or proceeds are below cost. EIS Qualifying Companies in which Foresight Solar EIS Fund 3 invests will be eligible companies for BIR and the Receiving Agent has an offshore bank account to hold such cash. If you are non-domiciled and wish to invest using BIR, please contact Foresight’s Sales team on 01732 471812 for a bespoke application form. Timing EIS tax reliefs become available each time that Foresight makes an Investment in EIS Qualifying Companies. For example, if Foresight makes the first Investment in October 2013 and commits 25% of the amount subscribed to the Fund to that Investment, then October 2013 is the effective date for working out the timing of eligible Investors’ tax relief on that Investment. Each Investee Company will issue EIS3 certificates as soon as practical following a period of trading of not less than four months, which will be sent to eligible Investors by Foresight for that Investment. These certificates provide the evidence required to claim income tax relief and capital gains tax deferral relief. Foresight would expect to send these EIS3 certificates to Investors towards mid 2014. Foresight intends to fully invest the fund into EIS Qualifying Companies during Q4 2013 and no later than 5 April 2014 Generally, the Fund Manager reserves the right to return uninvested funds if it concludes that the funds cannot be properly invested. Loss relief If any of the Investments were realised at a loss, Investors would be able to set the loss against their income and/or capital gains when calculating their liability to income tax and/ or CGT in the year of realisation. This means that an Investor’s maximum potential losses should not exceed 42% of their total Investment after taking the income tax and loss reliefs into account assuming that an Investor’s marginal rate of tax is 40% (if an Investor’s marginal rate is 45%, then the maximum exposure would be even lower at 38.5%).
INVESTMENT OPPORTUNITY In order to promote low-carbon energy, the UK Government has established financial incentives to encourage the development of renewable energy. Foresight Solar EIS Fund 3 aims to enable individuals to invest in this maturing sector and to benefit from the enhanced revenues possible under the Renewable Obligation Scheme (RO Scheme). In addition to income derived from selling the generated electricity, projects accredited under the RO Scheme receive income from the sale of Renewable Obligation Certificates (ROCs) which substantially increases the projects’ returns. Foresight believes that Solar Power Plants are particularly attractive for investors because the government supported FUND MANAGER The discretionary investment manager of the Investors’ Portfolios, which together comprise the Fund, will be Foresight, part of Foresight Group. Since establishing its solar power team in 2007, Foresight has invested in more than £310 million of operating Solar Power Plants in the UK, Italy and Spain, demonstrating its ability to source opportunities, arrange bank finance and complete investments. Foresight’s investment team currently manage a solar portfolio with a generating capacity of 86MW. Foresight’s team of 25 investment managers has been assembled gradually, allowing time to integrate their experience in renewable energy investing and operational management with Foresight’s proven strengths in private equity and EIS fund management. Foresight has been managing UK tax-efficient funds for more than 15 years. Since February 2013 Foresight raised a combined total of £36m for Foresight Solar EIS Fund 2 and Foresight Solar VCT “C” Shares to invest in the rapidly expanding UK solar sector. This followed the successful fund raising in 2010/11 for its first two UK focused solar funds which invested in four Solar Power Plants supported by the UK Government’s Feed-in Tariff scheme. In recent weeks, Foresight has successfully refinanced these assets, raising gross proceeds of £60 million of attractively priced, longterm debt by issuing a listed, index-linked bond. Two institutional investors, a UK pension fund and an insurance company, purchased the bond in full. This has resulted in an immediate INVESTMENT STRATEGY The Fund will invest in a portfolio of EIS Qualifying Companies that primarily will acquire Solar Power Plants (as defined on page 37) backed by the RO Scheme or any similar long-term revenue support mechanisms. Investee Companies will not generally incur risks related to applying for planning permission or other pre-construction risks, which will usually be the responsibility of the Fund’s development and construction partners. Foresight will seek to refinance and/or sell the Fund’s portfolio within three to four years to generate capital gains for Investors. Foresight also intends to enable those investors who wish to stay invested after four years, to do so (see page 8 for more information). revenue streams from projects under the RO Scheme offer enhanced returns for 20 years and the technology involved is well-proven and reliable. The RO Scheme also rewards solar electricity production above most other renewable sources, reflecting its higher capital cost and allowing for relative differences in energy yield. The rates of 2 ROCs / MWh for Solar Power Plants installed and accredited before 1st April 2013, 1.6 ROCs / MWh (ground-mounted) for those installed and accredited between 1 April 2013 and 31 March 2014 or 1.4 ROCs/MWh (ground-mounted) for those installed and accredited between 1 April 2014 and 31 March 2015 will support the Fund’s investment strategy. Whether the Fund invests in 1.4, 1.6 or 2.0 ROC projects should not affect returns to the Fund. capital uplift of c. 20% to the funds invested in the assets and is the largest bond of this type issued to date in the UK. The bond proceeds will be re-invested on behalf of the Foresight Solar EIS Fund and Foresight Solar VCT into additional UK ground-based solar power plants benefiting from the RO Scheme. As a result of the favourable differential between the yield on these new ROC based plants and the cost of the bond, investors in Foresight Solar EIS Fund and Foresight Solar VCT are expected to benefit from both higher dividends (or, in the case of those investors who selected the accumulator option, higher retained cash) and greater long-term capital appreciation. Initial expectations are for dividends to increase by 20% to 6p per share in 2013/14 and by 40% to 7p per share by 2016/17. The two Funds will retain their share of the entire remaining equity interests in the original four Solar Power Plants. In 2012 Foresight was appointed by the Green Investment Bank to manage £50 million of an initial £80 million investment fund set aside by UK Government to invest in green infrastructure across the UK. Foresight Group is the manager of the best ever performing VCT (Foresight VCT plc original ordinary shares) which has returned in excess of £1.80 to investors since launch in 1997 and has received recognition from commentators and its peers, including awards for 2009 New Energy Investor of the Year, VCT of the Year at the 2010 Investor AllStars Awards and Equity Provider of the Year at the 2011 Renewable Energy Finance Forum Awards. Foresight has over 12,000 investors and assets under management of over £650 million. The Fund might seek to optimise its portfolio by inviting other funds to co-invest in the portfolio and by using third party debt as appropriate. Foresight believes that this approach will maximise value for Investors, on the basis that the sale of a larger portfolio is likely to be more attractive to potential acquirers and should therefore generate a premium value. Investments may be made in EIS Qualifying Companies seeking to generate renewable energy from other sources where the Fund Manager considers this to be in the best interests of Investors. The majority of assets to be invested in are expected to be in the UK, though the Fund may also invest in other countries. Pending investment or distribution, any uninvested funds may be held in cash, interest bearing securities or other investments. FORESIGHT SOLAR EIS FUND 3 05
Page 1 and 2: INFORMATION MEMORANDUM WITH APPLICA
Page 3 and 4: CONTENTS PAGE n EXPECTED TIMETABLE
Page 5: LETTER OF INTRODUCTION MAY 2013 DEA
Page 9 and 10: DEALFLOW Foresight has developed an
Page 11 and 12: LIQUIDITY If Investors need to real
Page 13 and 14: INTRODUCTION TO SOLAR POWER INVESTI
Page 15 and 16: Is the equipment reliable? Solar Po
Page 17 and 18: • Feed-in Tariffs (FIT) with Cont
Page 19 and 20: AN INTRODUCTION TO SOLAR POWER INVE
Page 21 and 22: Federico Giannandrea Partner Federi
Page 23 and 24: RISK FACTORS INVESTMENT IN SMALLER,
Page 25 and 26: Changes in legislation concerning E
Page 27 and 28: Qualifying Companies and an Investo
Page 29 and 30: 2.14 The Fund Manager will comply w
Page 31 and 32: Investor shall be entitled, as a ma
Page 33 and 34: to the Investor for any profit, com
Page 35 and 36: 18.3 The Fund Manager is covered by
Page 37 and 38: Foresight will bear any legal, acco
Page 39 and 40: “Investee Companies” companies
Page 41 and 42: APPLICATION FORM PRIVATE INVESTORS
Page 43 and 44: APPLICATION FORM AUTHORISED INTERME
Page 45 and 46: APPLICATION FORM ADVISER CERTIFICAT
Page 47 and 48: DIRECTORY FUND MANAGER & PROMOTER F

Information Memorandum - Foresight Group

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?