The LBA EIS Tracker Fund is an approved (by the Inland Revenue) investment fund and has been established by the fund providers for purposes of placing investments in EIS qualifying companies. The fund tracks London Seed Capital's investments.
What is a tracker fund?
The EIS tracker fund allows investors to take advantage of the EIS
tax relief and exposes them to a spread of investments but with the
same considerable tax advantages as investing in a single EIS qualifying
company. Such a spread should effectively reduce the risks associated
with investing in a single company.
Tax advantages include the following:
EIS
tax relief in the 05/06 tax period for subscribers to the fund before
5th April 2006 (investments are made by the fund
in the 2006/07 period but under the Inland Revenue rules investors
can back claim to 2005/06 reliefs)
Unlimited capital gains deferral for gains arising within
36 months prior to and 12 months following an investment in the fund.
Income tax relief at 20% on up to £200k invested
in EIS qualifying companies this tax year (2005/06) provided the
monies stay invested in those companies for at least three years.
Capital gains tax exemption in respect of capital gains made
on Investments through the fund.
Loss relief (against either income subject to income tax or
capital gains subject to CGT) on investments.
Capital gains taper relief on Investments in the fund.
Inheritance
tax exemption (under the business property relief rules) after Investments
have been held for two years. Apart from being attractive to individual
investors who are UK resident for tax purposes, the fund offers excellent
tax planning opportunities.
Investment process
The process takes in the region of three months for the average investment to complete after first making contact with LBA. The screening and due diligence procedures, which are shared by LSC and the investing business angels, aim to reduce the investment risk.
LBA screens 1000 companies per annum - a 90 minute meeting is held with companies that have the potential to present to the network.
Selected companies present to the LBA network - six companies per event.
LSC selects from the opportunities and holds meetings with management.
LSC writes a brief stage A investment paper (two to three pages) on the opportunity which is either passed or rejected by an independent advisory investment committee made up from a number of serial business angel investors.
A group of investors is formed (usually in the region of two to five investors).
A lead investor is identified and interviewed by LSC. LSC does not choose the lead investor.
LSC and the lead investor negotiate the terms of the deal with the company, including valuation and salaries of directors.
LSC writes a detailed stage B investment paper (15 to 20 pages)
for the investment committee.
An investment committee meeting is held to review the final proposal. This meeting is usually attended by the management team of the investee company and the lead angel investor.
The opportunity is rejected or an offer of investment is made to the company. The offer will often be conditional on certain events (i.e. the signing of a specific contract) LSC and the lead investor will conduct additional commercial and financial due diligence.
A solicitor acting for LSC will review the final legal documentation.
The Fund Manager of the EIS tracker fund will attend the LSC investment
committee meetings and reserves the right to accept or reject investments
for the fund. The fund manager makes the
final decision on any investments made by the fund.
LSC has made investments in sixteen early stage businesses over the past three years with three of the companies receiving follow on investments.
More information
Please contact Jason Ball if you are interested in finding out more or alternatively download the prospectus here.
