Introduction The Downing Protected EIS Fund 5 (“the Fund”)

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Introduction The Downing Protected EIS Fund 5 (“the Fund”) Powered By Docstoc
					Introduction                                                          Objectives
The Downing Protected EIS Fund 5 (“the Fund”) provides                • Tax benefits: Obtain and maintain EIS tax benefits.
Investors with the opportunity to benefit from attractive             • Exit: Provide an exit within approximately 4 years (by
Enterprise Investment Scheme (“EIS”) tax reliefs. It will               31 July 2013).
target capital preservation and seek to provide an exit
within approximately 4 years.                                         • Lower risk: Focus on capital preservation by accepting
                                                                        lower returns on investments.
Key tax reliefs                                                       • Target returns: Assuming no growth in the
• Capital gains tax (“CGT”) deferral: The opportunity                   investment, the IRR to Investors will be up to 16% p.a.
  to defer capital gains realised since 5 October 2006. For             tax-free, which is equivalent to 27% p.a. to a 40%
  capital gains realised before 6 April 2008, the effective             taxpayer (see illustrative returns below for details).
  rate of CGT may be up to 40%. Based on current tax
  rates, these gains will be taxed at a rate of only 18%              Lower risk investment strategy
  on disposal of the Fund’s investments within                        The Fund will seek to invest in UK trading companies
  approximately 4 years. The effect of this rate                      which own substantial assets such as children’s nurseries,
  differential is a saving in CGT of up to 22%. Unlimited             health clubs, public houses, stock or work-in-progress.
  gains can be deferred in this way.                                  Investments may also be sought in companies with
                                                                      predictable revenue streams from financially sound
• Income tax relief: Income tax relief of 20% of the                  customers in sectors such as media and construction.
  amount subscribed to the Fund, provided the
  investment is held for at least 3 years. This tax relief is         The manager
  limited to the lower of £100,000 (investment of                     The Fund will be managed by Downing Corporate Finance
  £500,000) in the 2009/10 tax year and the Investor’s                Limited (“Downing”), which is authorised and regulated by
  income tax liability. Subscriptions of up to £500,000               the Financial Services Authority in the United Kingdom.
  may also be carried back for income tax purposes                    Downing’s executives are responsible for the management
  against the 2008/09 tax year.                                       of the Downing Protected VCTs, which also focus on
• Inheritance tax (“IHT”) relief: The value of                        investing in lower risk asset-backed opportunities and have
  investments held by the Fund for two years or more at               assets of over £100 million (source: Downing).
  the date of death should qualify for IHT relief. Under
  current legislation, proceeds received on exit from the             Previous EIS Funds
  Fund can be re-invested into IHT qualifying companies               Downing manages six EIS funds which together raised
  to maintain the IHT-free status.                                    £15million between February 2008 and 5 April 2009.

The value of the tax reliefs will depend on personal
circumstances and may be subject to change in the

   Assumed performance over period                                         -5%                  0%                    5%
                                                                            £                    £                     £

   Cost of investment                                   31/07/09           100,000              100,000               100,000
   Less: CGT deferred at 40%                            30/04/10           (40,000)              (40,000)             (40,000)
   Less: Income tax relief at 20%                       30/04/10           (20,000)              (20,000)             (20,000)
   Net of tax cost                                                          40,000               40,000                40,000

   Exit proceeds                                        31/07/13            95,000              100,000               105,000
   Less: CGT payable on original gain at 18%            31/01/15           (18,000)              (18,000)             (18,000)

   Net proceeds                                                             77,000               82,000                87,000

   Tax-free profit                                                          37,000               42,000                47,000

   Net tax-free return1                                                    15% p.a.              16% p.a.             18% p.a.
   Gross equivalent return² (to a 40% taxpayer)                            25% p.a.              27% p.a.             30% p.a.

 The above returns are set out for illustrative purposes only and no forecast or projection is implied or should be
 inferred. 1 The net tax-free return is the internal rate of return based on the above cashflows, dates and assumed rates of tax,
 and ignores allowances. ² The gross equivalent return is calculated by dividing the net tax-free return by 0.6.

Who is this investment suitable for?                             Offer details
This opportunity could be suitable for Investors with the        • Minimum individual subscription: £50,000
following characteristics:                                       • Minimum fund size: £0.5 million
• High net worth and sophisticated UK residents.                 • Maximum fund size: £3 million
• Investors who have realised a capital gain since 5
    October 2006 with CGT payable at, or close to, 40%.          Target timetable
• Investors who have a sufficient income tax liability to        • Launch: 2 June 2009
    reclaim income tax relief at 20% of the amount               • Close: 31 July 2009
    subscribed.                                                  • Fully invested: 5 October 2009
• Investors who will not need access to their capital for        • EIS3 tax certificates: 31 March 2010
    four years and are comfortable with higher risk              • Exit Proceeds: 31 March 2013
• Investors who are seeking to shelter assets from               The above target timetable may be subject to change.
    inheritance tax.
Risks                                                            • Initial charge: 5.5%.
• Taxation: Rates of tax, tax benefits and allowances            • Annual fees: 1.35% for up to three and a half years
  described in this Executive Summary (“Summary”) are              plus trail commission of 0.5% for three years.
  based on current legislation and HM Revenue & Customs          • Dealing charge: 0.75% on each transaction.
  practice. These may change from time to time and are           • Performance incentive: None payable until Investors
  not guaranteed. This investment will not be suitable for         receive cash proceeds equal to their subscription. The
  all investors, in particular non-resident investors.             performance incentive will be capped at the equivalent of
• Qualifying investments: There is no guarantee that               1.0% p.a. of the amount subscribed to the Fund.
  sufficient EIS qualifying investments will be made within
  the expected timetable, or at all. In addition, EIS            Standard commission terms to IFAs
  companies may subsequently cease to qualify. In such           (included within the above charges)
  cases the tax reliefs could be delayed or lost.                • Initial commission: 2.0%.
• Liquidity & Performance: Investors should not                  • Trail commission: 0.5% p.a. for three years.
  consider investing if they may require access to their
  funds within four years. Investments made through the          Next steps
  Fund will be in unquoted companies and are considered          Copies of the Information Memorandum are available from
  to be higher risk than securities listed on the London         Downing.
  Stock Exchange.
• Past Performance: Past performance is no guide to
                                                                    Contact details
  future performance and there is no guarantee that the
  Fund’s objectives will be achieved. The value of                  Downing Corporate Finance Limited
  investments and the income derived from them may go               Kings Scholars House, 230 Vauxhall Bridge Road,
  down as well as up and Investors may not get back the             London SW1V 1AU
  full amount invested.
                                                                    t:     020 7416 7780
Investors are advised to read the full list of risk
factors on pages 6 and 7 of the Memorandum and
take appropriate tax and financial advice before                    w:

Tax efficient structure                                          Important notice
• Investors have the opportunity to carry-back their             This Summary has been approved as a financial promotion
  subscription (maximum £500,000) to the 2008/09 tax             under the Financial Services and Markets Act 2000 by
  year for income tax relief purposes.                           Downing. This Summary is for information only and does
• Unlike some other EIS funds, each Investor’s entire            not form part of an offer or invitation to purchase, subscribe
  subscription to this Fund should be eligible for tax relief.   for or dispose of securities and no reliance should be placed
                                                                 on it. Investors should only invest on the basis of the
                                                                 Memorandum and only after taking appropriate advice.
                                                                 Downing does not offer investment or tax advice or make
                                                                 recommendations regarding investments.

                                                                                                                  2 June 2009

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