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Bethnal Green Ventures

Tech for Good SEIS/EIS Fund

Risk factors

All investment and commercial activities carry risk, and you should consider whether the BGV Tech for Good SEIS and EIS Fund is a suitable investment for you in light of your personal circumstances.

Investment risk factors

Investment in the Fund is not suitable for all investors. It is the responsibility of each investor to ensure that investment in the Fund is a suitable investment in the light of the information in this document and their personal circumstances, having taken appropriate independent professional advice.

This investment is not open to retail investors. It is only available to investors who have certified as a ‘high net worth investor’ or a ‘sophisticated investor’ in accordance with the rules contained in the FCA Handbook of Rules and Guidance (“FCA Rules”) and are able to elect to be treated as professional clients (and are found appropriate to do so, having regard to your knowledge and experience of similar investments).

The tax reliefs referred to in the Information Memorandum and the Investment Management Agreement are those currently available and their value depends on the individual circumstances of investors, initially, and will continue to do so throughout the life of the investment. Certain tax reliefs which are available to individuals will not be available to Institutional Investors.

The performance of the Fund is dependent on the availability of suitable and appropriate Portfolio Companies and the ability of such companies to perform in line with their respective business plans and to achieve anticipated investor returns at the time of realisation. Portfolio Companies may fail, investments may be realised for substantially less than the acquisition cost, or they may be impossible to realise at all. Portfolio Companies may accept other equity or debt capital which ranks higher than the Fund’s investments in an insolvency situation. The value of shares can fall as well as rise and investors may not recover the full (or indeed any) of the amount of the Funds invested. Investors should only consider investing if this is a risk they can afford to bear.

The subscription for shares in the Portfolio Companies and the performance of those shares may not be covered by the Financial Services Compensation Scheme or by any other compensation scheme depending on whether the complainant is an eligible complainant under the FCA rules.

Although the Fund has target returns, there is no guarantee that these or any returns will be made. Neither the Investment Manager nor the I nvestment Advisor make any representation or warranty as to any returns which may or may not be made. You accept that any statements made in the Information Memorandum or elsewhere in respect of target or anticipated returns are aspirational and cannot be relied on.

Interests in the Fund

There is no liquid market on any public exchange, nor is there intended to be such a market, for investment via the Fund. Investments in Portfolio Companies will not be freely tradeable and there may be restrictions on transfer of shares. Investments made through the Fund will not be readily realisable investments.

Early-stage companies often require a series of investment rounds and additional investment may be required to maintain or increase the growth of the Portfolio Company. Failure to achieve these capital requirements may negatively impact the company’s ability to grow and realise returns for investors, whereas subsequent investment is likely to dilute an investor’s shareholding in a Portfolio Company.

The overall level of returns from the Fund’s investments may be less than expected including but not limited to (i) where there is delay in the proposed timescales for investment, such that all or part of the net proceeds of the Fund are held in cash for longer than expected; or (ii) if the returns obtained on individual investments are lower than originally expected; or (iii) if investments cannot be realised at the expected time and value. There can be no guarantee that suitable investment opportunities will be identified in order to meet all of the Fund’s objectives.

The timing of exits from Portfolio Companies may take longer than anticipated. An investment in the Fund should be considered a long-term investment. The Fund aims to find exit opportunities from Portfolio Companies within certain time periods, but it is probable that investments may be held much longer.

The Investment Manager and the Investment Advisor

The past performance of each of the Investment Manager and the Investment Advisor and their respective management teams from time to time, or of any investments invested in or managed by them, is not necessarily a guide to the future performance of the Fund.

Changes or disruptions to the Investment Advisor including but not limited to change of control of thefrom time to time, or of any investments invested in or managed by them, is not necessarily a guide to the future performance of the Fund.

The departure or health of any of the key employees of the Investment Advisor or the Investment Manager could have an adverse effect on the Fund’s performance.

Portfolio Companies

Investment into early stage, unquoted companies, by its nature, involves a high degree of risk. Proper information for determining the value of such investments or the risks to which such investments are exposed may not be available. Investment in such companies can offer good potential investment returns but the markets for their shares are often illiquid and uncertain. Consequently, investment in smaller and unquoted companies is likely to involve a higher degree of risk than investment in larger or quoted companies. Realisation of investments in unquoted companies can be difficult and may take considerable time. Further, technology or scientific research – related risks may be greater in unquoted companies.

There is no guarantee the Investment Advisor and Investment Manager will be able to invest all Subscriptions by March 2020.

Smaller companies may generally have limited product lines, markets or financial resources and may be more dependent on their management or key individuals than larger companies. Although the Fund will seek to receive conventional investor rights in connection with its investments, as a minority investor it may not always be in a position to fully protect its interests and the interest of its investors.

There is no guarantee that the valuation of a portfolio company will fully reflect the underlying net asset value or the ability to buy and sell the investment at that valuation.

There can be no guarantee that the development plan can be achieved or that the business will have commercial value.

The Fund will in most cases take minority holdings for ordinary shares in Portfolio Companies and only basic investor protections will be sought at the time of investment, although the Fund will ordinarily seek relatively strong information rights. The Fund will where possible reserve observer board rights on the boards of Portfolio Companies, but such board positions may be held by a representative of the Fund or Investment Advisor. The Fund may choose not nominate an observer to the board of Portfolio Companies from time to time. As such there can be no guarantee that the Fund will be ableto influence the strategy and decision making of the Portfolio Companies if other shareholders holding a larger stake take different views on the future direction of the business.

Small businesses are highly dependent on the skills of their management teams. The departure of any of a Portfolio Company’s directors or key employees could have a material adverse effect on the business of that Portfolio Company.

While any valuations will be conducted in line with the International Private Equity and Venture Capital Guidelines from time to time, no warranty is given on any valuations provided to investors that any such valuation is capable of being attained on a realisation of the investment.

Deal flow will be primarily identified from the Investment Advisor’s accelerator programme which could be advantageous in ensuring the Investment Advisor will have a steady stream of potential investments; however this also limits the pool from which investments may be identified.

Seed investments identified within the accelerator programme are likely to be very early stage and may not be proven and/or fully developed.

Future statements and changes

The investment document includes statements that are (or may be deemed to be) “forward looking statements“, which may be identified by the use of forward-looking terminology including the terms “believes”, “continues”, “expects”, “intends”, “may”, “will”, “would”, “should” or, in each case, their negative or other variations or comparable terminology. Investors should not place reliance on forward-looking statements. These forward-looking statements include all matters that are not historical facts. Forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements contained in this document, based on past trends or activities, should not be taken as a representation that such trends or activities will continue in the future.

Legal and regulatory changes could occur during the life of the Fund that may adversely affect the Fund or its investors. These may include tax, environmental, safety, labour and other regulatory and political authorities, or force majeure acts, terrorist events, or other operating risks.

Legal and regulatory changes, changes in government policies, effects on international trade, market volubility and/or fluctuations and other factors including during and following Brexit may have a significant effect on the Fund.

Taxation risk factors

Certain tax reliefs which are available to individuals will not be available to Institutional Investors.

Rates of tax, tax benefits and allowances referred to throughout this Information Memorandum are based on current legislation and HMRC practice. These may change from time to time and are not guaranteed. Changes can be retrospective.

Changes in rules, regulations and legislation relating to the SEIS and EIS legislation may affect the ability of this product to meet its objective and/or reduce the level of returns that might have otherwise been achievable.

Any tax reliefs referred to in the Information Memorandum are those currently available and their value depends on the individual circumstances of investors, initially, and will continue to do so throughout the life of the investment.

The Fund will be invested in unquoted companies which the Investment Advisor reasonably believes are Qualifying Companies at the time of investment. Investors should note that there is no guarantee that such companies are or will remain Qualifying Companies at all times thereafter and that the continued availability of SEIS/EIS qualification depends on compliance with the requirements of the SEIS/EIS legislation by both the Investor and the Portfolio Company and is further dependent upon consistency in such legislation and consistent interpretation and guidance in relation to such legislation.

Until a realisation in any Portfolio Company is achieved, the Investment Advisor will where practicable seek to ensure that the company complies with the SEIS and/or EIS rules but only to the extent that (i) it is a condition precedent to the investment that the company obtains advance assurance as a Qualifying Company (but will not necessarily conduct any review of the application for SEIS/EIS advance assurance or review of the SEIS/EIS advance assurance itself) and (ii) the Investment Advisor shall seek to ensure that the terms of the investment includes undertakings by the company (and if appropriate, its managers) to remain a Qualifying Company so long as it is reasonably practicable to do so and/or warranties from the Portfolio Company and/or managers that the company is a Qualifying Company and that the shares are capable of attracting SEIS/EIS reliefs. However, tax relief may be reduced or withdrawn in certain circumstances and none of the Investment Manager, the Investment Advisor, their Associates (as defined in the Investment Management Agreement), or any of their respective directors, employees, agents or shareholders will have any liability for any loss or damage suffered by you or any other person in consequence of such relief being withdrawn or reduced.

Where an Investor or a Portfolio Company ceases to maintain SEIS/EIS status in relation to any individual investment, it could result in reduction or withdrawal of some or all of the available reliefs and the requirement to repay any rebated tax.

The Investment Manager and Investment Advisor retain complete discretion to realise a SEIS/EIS investment at any time, including within the three-year qualifying period. In such circumstances, some or all of the SEIS/EIS reliefs relating to that particular investment will be reduced or lost. In making such a disposal, the Investment Manager is not obliged to take into account the tax position of Investors, individually or generally.

No assurance can be given that SEIS/EIS status will be maintained or granted for the three-year period that the investment needs to be held for it to benefit from SEIS/EIS reliefs.

It is not the intention of this Fund to regularly look for, or make, EIS investments, however to the extent there is any excess in the Fund which cannot be applied to SEIS investments (for instance where insufficient quality SEIS investments are available or the company requires top-up funding in addition to SEIS investment which the Investment Advisor recommends that the Fund provides) the intention is that this will be applied to EIS. Although the Fund allows for EIS investment, this is solely at the discretion of the Investment Advisor and Investment Manager.

Pooling

SEIS/EIS Funds utilise custodians to hold client money and assets. As such Investor funds and assets may be pooled with the assets of others which means that in the event of the failure of the Investment Manager or the Custodian, if there are insufficient investments to meet the claims of all persons with assets so pooled you could share in the shortfall. For so long as Mainspring Nominees Limited is Custodian:

  • the assets of each portfolio will be segregated from the assets of other portfolios;
  • any cash held will be held in accordance with the client money rules;
  • has an acknowledgement of trust with the bank which means that the bank has no recourse or right against any cash held in the client bank accounts.

Therefore so long as Mainspring Nominees Limited is Custodian, the failure of the Custodian should not impact the investor’s assets as they are segregated from the Custodian’s own assets (as set out in 8.1.6 of the Investment Management agreement together with the terms and conditions of the Custody Agreement).

Find out more and register your interest at BGV’s Tech for Good SEIS & EIS fund website

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