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SIS Ventures

SIS Ventures Impact First Fund

Investment product details

The Fund is managed by SIS Ventures Limited, a new wholly owned subsidiary of Social Investment Scotland, which is to operate with an independent board

The fund will invest in mission-driven social enterprises that are UK registered and operate or have a social impact in Scotland. Investments will be made in a mixture of EIS qualifying equity investments and SITR qualifying debt investments. Debt and equity Investments will not be made by the manager in the same investee enterprise.

The maximum aggregate investment in any one investee enterprise by the fund will be the lesser of £500,000 and 25 per cent of the aggregate value of the fund at the time the investment is made, with a minimum investment of £100,000.

In addition, the manager will have the discretion to invest 10 per cent of each investor’s subscription in social enterprises at an earlier stage of business development, potentially prior to the social enterprise generating revenues. It is expected that such investments will carry a higher degree of risk, but the potential for greater returns. The manager will only exercise this discretion in exceptional circumstances. These investments may qualify for SEIS relief.

The manager is a flexible investor and will look to co-invest alongside other mission-aligned investors.

Further details on the investment criteria and case studies are given in Section 3 of the Information Memorandum.


Who can invest?

The availability of the Information Memorandum is restricted to certified high net worth individuals, self-certified sophisticated investors, and investment professionals as defined in Article 19 of the FPO.

Investment in the fund is available to professional clients only.


Financial and social return

The target return for the Fund is 8% IRR (Net), this figure includes tax reliefs.

The fund will focus on the following outcomes areas:

  • Employment, training and education
  • Citizenship and community
  • Physical and mental health
  • Conservation of the natural environment 

Minimum initial investment amount

 £15,000


Maximum investment amount

£250,000


Target size

£5 million, with a minimum first close of £1.5 million


Closing and opening dates

The first close of the fund will be the earlier of 30 November 2018 or the Fund raising £2 million. Thereafter it is proposed that the fund will have one interim closing date each calendar year.

The fund does not have a final closing date. It will continue to accept investments from Investors until the target size is reached.


Allocation policy

Each investor will have their own portfolio of investments. At each close of the fund the manager will aggregate investors’ subscriptions in the relevant period (being the period since the launch of the fund in relation to the first closing date and the period since the previous closing date in relation to all subsequent closing dates). Following each close the manager will allocate investments among investors that have invested in the fund during the relevant period based on the proportion of each investor’s subscription to the aggregate amount raised in the relevant period.

In the event that any of an investor’s subscription remains un-invested at the close of the fund following the close in relation to which the subscription was accepted, the investor will be given the option to have the un-invested subscription returned to them or aggregated together with the subscriptions accepted in the most recent close of the fund and invested in proportion to those subscriptions.

In terms of deployment the fund is targeting to have investors fully invested in 12–18 months.


Diversification

Each investor will typically be invested in six to twelve enterprises. No more than 25% of an investor’s commitment will be allocated to any one enterprise.


Fees payable to purchase this product

Initial fee
Investors will be charged an initial fee of 3 per cent (plus VAT) of their total investment at the time their subscription is made in the fund. Therefore, an investor will receive EIS or SITR relief in relation to 96.4 per cent of the amount they invest into the fund.

Performance fee
The manager will not receive a performance fee unless or until the Investor receives a return equal to the full amount invested plus a profit of 10 pence for every 100 pence that has been invested in the fund by the investor (the performance hurdle). The manager will receive a performance fee of 15 per cent of any returns which would be paid to the investor following the performance hurdle being met. Any performance fee will be deducted from the payment of any dividend, interest, distribution or other return of capital by an investee enterprise.

All fees to be charged to Investors will be subject to any applicable VAT charges.


Getting your money back

The manager will make SITR qualifying debt investments with a maximum term of seven years. No capital repayments will be made in the first three years of the loan to allow the investee enterprise to focus on growth rather than using cash flow to service the debt. Interest payments on the loans will begin immediately and will be paid to investors in April each year. The manager will also make EIS qualifying equity investments.

The manager is targeting an exit from these investments within seven to ten years of the initial investment by the fund.

The manager intends to hold Investments for a minimum of three years in order to preserve the associated tax reliefs for investors, but the manager reserves the right to dispose of investments earlier if the manager believes it is appropriate.

An investor may not withdraw any of their investment once it has been committed.


How secure is your money?

Prospective investors should note that the fund will invest in mission-led enterprises. Such investments are likely to involve an above average level of risk. Investments may be subject to transfer restrictions and may be difficult to sell. It may be difficult to obtain information as to how much an investment is worth or how risky it is at any given time. Investing in early stage enterprises may expose an Investor to a significant risk of losing all the money invested.

In particular the EIS qualifying investments made by the fund will be made in unquoted securities. These can be more risky than investments in quoted securities or shares and may be difficult to sell.

SITR qualifying investments will be made in the form of loans made on behalf of investors to social enterprises. There are various conditions which need to be met for a loan to benefit from SITR. Included in these conditions is the requirement that the loan is unsecured and ranks below a borrower’s secured debt.

This investment is not covered by any government compensation scheme.


Keeping track of your investment

The manager will send investors a portfolio report every six months that will contain both financial and social impact performance. These reports will include details of any other Social Investment Scotland funding provided to the investees. These reports will form periodic statements for the purposes of FSMA.

The fund’s investments will be valued based on amounts due from investee enterprises at each annual reporting date.


Voting rights

Investment in the SIS Ventures Impact First Fund does not confer voting rights into the investee businesses.

Find out more at the SIS Ventures website

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