Tax Efficient Review. EIS Service targeting lower risk renewable investments with track record. Ingenious Renewable Energy EIS 2.

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1 February 2014 Tax Efficient Review Editor Martin Churchill BSc (Econ) FCA EIS Service targeting lower risk renewable investments with track record Ingenious Renewable Energy EIS 2 Reprinted for the use of Ingenious Investments Tax Efficient Review reviews are completely independent and providers do not pay for inclusion in Tax Efficient Review Providers who wish to distribute their review as part of their marketing can do so for a standard fee

2 RISK WARNINGS AND DISCLAIMERS GENERAL RISK WARNINGS Fluctuations in Value of-investments Suitability EIS RISK WARNINGS The information and opinions expressed and contained in Tax Efficient Review ( TER ) are proprietary to TER and are not intended to represent investment advice or recommendation to buy or sell any security. TER is not responsible for any damages or losses arising from any use of this information. Your attention is drawn to the following risk warnings which identify some of the risks associated with the investments which are mentioned in the Review: The value of investments and the income from them can go down as well as up and you may not get back the amount invested. The investments may not be suitable for all investors and you should only invest if you understand the nature of and risks inherent in such investments and, if in doubt, you should seek professional advice before effecting any such investment. Past performance Legislation Past performance is not a guide to future performance. Changes in legislation may adversely affect the value of the investments. Taxation ADDITIONAL RISK WARNINGS The levels and the bases of the reliefs from taxation may change in the future. You should seek your own professional advice on the taxation consequences of any investment. Enterprise Investment Schemes 1. EIS companies are unquoted 2. The value of EIS Shares can fluctuate and Investors may not get back their investment; 3. There is no market for EIS Shares and Shareholders may not be able to realise their shareholding unless the EIS company is sold or floated on a recognised Stock Exchange. Dividends may not be paid. 4. Potential Investors should consider that past performance of the EIS Manager is no indication of future performance and there can be no guarantees that the EIS Company will meet its objectives. 5. Investment in unquoted companies can offer good investment returns, but, by its uncertain nature involves a much higher degree of risk than investment in a quoted portfolio. 6. Whilst it is the intention of the EIS Directors that the EIS company will be managed so as to qualify as an EIS, there can be no guarantee that it will maintain such status. A failure to qualify could result in the Company losing the tax reliefs previously obtained, resulting in adverse tax consequences for Investors, including a requirement to repay the 30 per cent. income tax relief. 7. Levels and bases of, and relief from, taxation are subject to change. Such changes could be retrospective. 8. Fees charged by the EIS. Usually there is an initial cost of around 5%-10% to cover issuing the prospectus and paying a commission to introducers. This is paid out of the initial investment paid by the investor and the effect is that the EIS company receives around 90%-95%. Thereafter annual running costs of about 3%-3.5% are incurred by the EIS and met out of EIS income. On top of these, the EIS management usually have a performance incentive which pays a proportion of the return made usually after meeting some hurdle. A typical incentive might be that the management receives 20% of any uplift in net asset value over a return of original capital. Tax Efficient Review is published by Tax Efficient Review Ltd 35 The Park London NW11 7ST Tel: +44 (0) Copyright 2014 Tax Efficient Review Ltd. All Rights Reserved. The information, data and opinions ( Information ) expressed and contained herein: (1) are proprietary to Tax Efficient Review Ltd and/or its content providers and are not intended to represent investment advice or recommendation to buy or sell any security; (2) may not normally be copied or distributed without express license to do so; and (3) are not warranted to be accurate, complete or timely. Tax Efficient Review Ltd reserves its rights to charge for access to these reports. Tax Efficient Review Ltd is not responsible for any damages or losses arising from any use of the reports or the Information contained therein. The copyright in this publication belongs to Martin Churchill, all rights reserved and for a fee the author has granted Ingenious Investments an unlimited non-exclusive and royalty free licence to use the publication 2 Tax Efficient Review Reprinted for Ingenious Investments February 2014

3 Ingenious Renewable Energy EIS 2 Existence of track record Classification Not a UCIS Type Ingenious Renewable Energy EIS 2 (the Service) is a discretionary managed portfolio service invested into EIS qualifying companies (Investee Companies) operating renewable energy generation facilities. Size 30 million (maximum 5 million per Company) Promoter Ingenious Media Investments Limited (Ingenious Investments) Provider Ingenious Ventures, a trading name of Ingenious Capital Management Limited (Ingenious Ventures) Solicitors Internal Custodian Woodside Corporate Services Limited Tax Advisers Internal Minimum subscription 10,000 Closing Date 1 April 2014 Commission 3% upfront or 2.5%, plus annual trail of 1% over 2 or 4 years (not applicable for advised retail clients) We currently review business opportunities offering potential EIS benefits split between those with a track record and those without a relevant track record. This offer, in our view, does have a track record. We classify this offering as "EIS Service targeting lower risk renewable investments with track record". This offering is classified by the provider as a non-ucis discretionary managed investment service. Section 1 of the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 states in summary that individual investment management arrangements do not amount to a collective investment scheme. Table 1: Ingenious products with renewable assets managed by Ingenious Ventures as at 31 December 2013 Source Ingenious Company/Product Name Investee Company capital allocated to renewables Latest unaudited valuation of Investee Company assets Still to be invested in renewables m allocated to renewables m m Ingenious Solar UK EIS raised 19m before 5 April Investee Companies acquired a portfolio of residential rooftop solar installations before 30 June 2012 Pepys Power nil Tellington nil Sampton Energy nil Barnfield Energy nil Shawley Energy nil Greshdown Energy nil Boyd Energy nil Joply Power nil Flintly Power nil Browning Power nil TOTAL Ingenious Renewable Energy EIS Fund raised 31.4m. Investee Companies have acquired ground mounted solar assets, wind assets and AD assets. Weslinton Energy nil Wilberfoss Power nil Slapton Power Low C Developments nil New Horizons Generation nil Nexus Renewables nil Meuse Energy nil TOTAL TOTAL 50.4m Tax Efficient Review Reprinted for Ingenious Investments February

4 HMRC Advanced Assurance Structure of offer Companies seeking to attract subscriptions under EIS can request an assurance from HMRC, in advance of inviting applications for shares (an Advance Assurance ). The response to a request for an Advance Assurance will take the form of a statement as to whether, on the basis of the information provided, HMRC would be able to authorise the company to issue certificates under ITA/S204 in respect of the shares to be issued, following receipt of a form EIS 1 satisfactorily completed. In the event an EIS 1 is satisfactorily completed, HMRC will authorise the issue of EIS 3 certificates to investors who can then make their claim for tax relief. Seven potential investee companies that Ingenious Ventures have been in discussion with, the details of which remain confidential, have received Advance Assurance. Ingenious Ventures tell us that they have a consistent track record of ensuring that all money raised from investors is deployed into Investee Companies that have Advance Assurance from HMRC prior to share allotment. Ingenious Ventures maintains its position that no investor will be put at risk until an Advance Assurance is in place mitigating the risk that an investor could be committed and find that no EIS 3 was forthcoming. In the event that no investee companies with Advance Assurance are sourced in a timely manner, the investor is refunded for their investment and can make another EIS investment in another Service or Company. The EIS companies applying for and receiving permission to issue EIS3 certificates is key to investors claiming EIS relief and in terms of funds raised for the precursors to this offering and Advance Assurance, Ingenious tell us the situation is reflected in Table 2. In summary this shows investors who invested on or before 5 April 2013 have not received many EIS 3 certificates. The bulk of the funds ( 18.8m) is in four companies which Ingenious tell us have submitted EIS 1 certificates to HMRC 4 months after commencing trade before October Ingenious are anticipating receipt of EIS 3 certificates before 5 April 2014 however at date of publication these had not been issued. Ingenious Renewable Energy EIS 2 refers to a discretionary managed portfolio service invested into a portfolio of Investee Companies which will each build/acquire and operate a number of renewable energy generation installations. Ingenious Investments will raise capital for the Service and it is expected that between 7-9 investments will be made. Each Investee Company will separately acquire and operate distinct operating solar installations, wind farms and biomass projects in the UK. Investors in the Service will have a pro-rata share of each Investee Company and will therefore take on a diversified exposure to the performance of a portfolio of assets. The Service has a target raise of 30 million to invest in Investee Companies. Capital raised will be held with Woodside Corporate Services until the specific investment into each Investee Company is closed and the shares in the underlying Investee Companies are issued and allotted. Post allotment of shares, Ingenious Ventures will apply for EIS 3 certificates for investors once the relevant Investee Company has traded for 4 months. It is expected that each Investee Company will commence trading shortly after capitalisation. Consequently it is envisaged that the EIS 3 certificates will be issued within 12 months of the Service closing. Ingenious has previously raised over 500m for 260 EIS companies and has a strong track record of receiving EIS 3 certificates for investors on a timely basis. Ingenious Clean Energy Services Limited ("ICESL") is active in the renewable infrastructure market and has access to a wide range of opportunities to acquire assets. ICESL is wholly owned by the Ingenious Group and provides services to Ingenious Ventures in the purchase of underlying renewable energy installations for Investee Companies. ICESL will in arrange additional finance for Investee Companies for working capital during asset construction and term financing post construction if required. ICESL will take responsibility procuring exits for mature assets for Investee Companies at the appropriate time. Since inception ICESL has sourced operating assets for 20 qualifying EIS investee companies, deploying in excess of 70m of capital. These assets are available for acquisition to a number of operators and developers in Ingenious s network including companies invested in by the Service managed by Ingenious Ventures. Table 1 shows which EIS investee companies have acquired these assets. 4 Tax Efficient Review Reprinted for Ingenious Investments February 2014

5 Table 2: Ingenious Renewable Energy EIS opportunities with assets managed by same team as at 31 December 2013 Raised before 5 April 2012 Funds raised 19m (10 investee companies) Raised before 5 April m (7 investee companies) Funds not yet deployed into companies nil nil Funds deployed in companies where trade has commenced but has not reached four month point at which EIS1 certificate can be applied for Funds deployed in companies where Ingenious has submitted EIS1 and is awaiting permission to issues EIS3 certificates Funds deployed in EIS companies where investor has received EIS3 certificates nil 9.9 nil Target raise before 5 April m (6 potential investee companies) In summary funds raised so far by Ingenious Investments in Clean Energy are: EIS Opportunity 1 - Ingenious Solar UK EIS 19m raised before 5 April Underlying Investee Companies each of which acquired a portfolio of residential roof top solar installations from 2 installation companies. The vendors of the portfolios remain confidential but are well known reputable firms with proven track records. All assets were acquired on an attractive initial yield designed to drive a target return to shareholders of 1.10p. The performance of these assets is tracking business plan in terms of energy production and financial yield. EIS opportunity 2 Ingenious Renewable Energy EIS Fund 31.4m raised before 5 April Seven underlying Investee Companies were invested in. Five Investee Companies have purchased large scale ground mounted solar parks from two reputable developer/epc contractors. One company has acquired an on shore wind farm and one company is targeted to acquire an agricultural scale AD plant. Ingenious tell us that it is too early to tell the performance of the underlying assets as the majority are completing their fixed price construction contracts. n/a Business model The Service will invest in Investee Companies pursuing similar business models of acquisition and operation of solar PV installations, wind turbines and biomass projects which benefit from the sale of electricity, heat and Renewable Obligation Certificates (ROCs). The Service will only invest in Investee Companies which plan to acquire either completed operational assets or assets where construction is in progress. All operating costs are anticipated to be met out of operating cash flows. No investment will be made into an Investee Company where there are outstanding permits, authorities, planning and grid connection offers. As such Ingenious Ventures is looking for relative predictability in the returns from Investee Companies. Generation of electricity from renewable sources is a maturing activity in the UK, with the renewable energy market estimated currently to be in excess of 100bn. Given the political, environmental and economic drivers, the market is expected to grow at over 10% per annum, reaching 150bn by A combination of key factors makes the electrical output from renewable energy sources relatively predictable on an annual basis: Non volatile Energy Input. There are relatively low levels of annual volatility in wind energy and solar irradiation in the UK which can be supported by high quality meteorological data. If long term feedstock contracts can be obtained, biomass projects can obtain an equally stable energy input source. Predictable Equipment Performance. Renewable energy generation equipment is well developed with both wind and solar equipment having been available in the UK for more than 10 years. Reputable equipment manufacturers are prepared to provide minimum performance guarantees underpinning electrical output estimates. If biomass projects are acquired by Investee Companies it is likely that the underlying equipment will be supported Tax Efficient Review Reprinted for Ingenious Investments February

6 EIS SERVICE Figure 1: Structure Flow Chart by similar minimum performance guarantees. The pricing model for the renewable energy electricity output in the UK is supported by Renewable Obligation Certificates ( ROCs ). ROCs were introduced in the UK in 2002 and represent a mature and compelling price support mechanism for generators of renewable electricity. ROCs are tradable certificates with a guaranteed floor price ( Buy Out ). The Buy-Out value of a ROC is fixed, index-linked and mandatorily payable by regulated electricity suppliers to the holders of the ROC certificates. Ultimately ROCs are acquired at auction on an annual cycle by regulated electricity supply companies. The Recycle Value of a ROC is an incremental payment to the holder of a ROC certificate over and above the Buy-Out value. The demand for ROCs and hence the ROC Value, is predetermined in a regulated industry and is set at a level above the expected supply to ensure a preservation of value above the Buy-Out value. This revenue stream from the sale of ROCs is in addition to the commercial wholesaling of the electricity generated. The project operator will enter into a long term contract with a licensed electricity supplier or local user to take the supply of electricity generated and often to acquire the ROCs. This provides a commercially attractive, stable pricing model, which combined with stable output from the renewable energy installations should result in predictable long term index-linked cash flows for investee companies. Different technologies attract different numbers of ROCs for every unit of electrical output. Investee Companies will have the option of being advised by ICESL, on the acquisition of assets on the basis of their economic yield for a given level of predictable income. Given that different technologies have different energy generation profiles it does not follow that 3.5 MW solar plant which if accredited before 1 April 2014 attracts 1.6 ROCs per kwh is a more attractive asset to invest in than a 2.4MW wind farm which only attracts 0.9 ROC per kwh of electricity produced. Both energy plants will actually end up producing approximately 350, ,000 of profit before tax because the wind installation, despite lower capacity and lower number of ROCs, will generate commensurately more energy than the higher capacity solar farm. This is partly explained by the fact that wind can blow 24 hours per day while a solar plant by definition will not operate at night. The point being that, the Investee Company will acquire or build the installation at a price which reflects the cash yield of the asset and hence provide the target return for investors and as such investors should not get distracted by lower apparent price support mechanism. The Ingenious Renewable Energy EIS 2, employing the services of ICESL, will prepare for making investments in Investee Companies by developing exclusive access to a pipeline of renewable energy generation installations. 6 Tax Efficient Review Reprinted for Ingenious Investments February 2014

7 Each Investee Company will have the option to buy installations that are: Either fully operational with ROC accreditation and with all necessary planning documentation, leases, power purchase agreements and operations and maintenance contracts in place. This will ensure that the Companies take no development or ROC accreditation risk. Or are in construction. Construction of renewable energy assets in general and wind and solar specifically is a tried and tested process. The work is outsourced to a dedicated Engineering, Procurement and Construction (EPC) company, who will provide a fixed price contract. The Directors of each Investee Company supported by ICESL, will have experience in negotiating the acquisition of assets in construction and ensuring that the risk of non-performance or late delivery is borne by the EPC contractor. In some circumstances, especially in respect of purchasing solar assets, certain attractive assets may require the Investee Company to use debt finance in addition to equity finance for the purchase consideration. No investment will be made into a company that has a gearing ratio of more than 67% after equity funding. Typical structure Returns and risks Management A typical structure of a project is shown in Figure 1. The objective of the Service is to provide investors with investments in Investee Companies operating a portfolio of renewable energy generation installations. The target for investors is to return 1.12 for each 70p invested ( 1.00 subscribed less 30% income tax relief), which if achieved should provide a return of 17.1% per annum, or gross equivalent to an additional rate taxpayer of 31.1% per annum. Ingenious Ventures says that the target returns are supported by well researched assumptions in the models for asset acquisition, yield assumptions and exit values. Ingenious Ventures believes there is potential for delivering returns in excess of the target (for example if inflation exceeds the assumed rates) and have structured their performance fees to enable investors to benefit from the majority of over-performance. No prediction is made or implied. In addition to long term index-linked income streams backed by UK Government legislation, Ingenious Ventures will only invest in Investee Companies that are looking to minimise the risk to investors by: Acquiring, if possible, fully operational renewable energy generation facilities with accreditation that are already generating revenues from electricity. In any event the Investee Companies will take no planning, or development risk. Having between 40%-67% of the income supported from the sale of ROCs which are guaranteed by the UK Government for 20 years at a pre-set index-linked price. Ingenious Ventures believes that the risk of retrospective legislation is low as it is very unlikely that the UK Government will take steps which will act as such a serious deterrent to further renewable energy generation investment in the UK. Having operational risk mitigated by warranties from the EPC contractors, or equipment manufacturers that will mean that equipment is repaired or replaced in the event of system failure or excessive system degradation. Having insurance contracts in place to safeguard the Investee Companies from revenue loss through vandalism or material weather damage. Agreeing a fixed purchasing cost of the renewable energy generation installations (variable by reference to specific yield) prior to acquisition helps to underpin the modelled returns. Arranging asset acquisitions with high degree of performance based consideration ensuring that the Investee Company only pays for what is delivered. Arranging asset acquisitions with low to zero levels of gearing and conservative debt service coverage ratios. Each Investee Company is managed by its own board comprising independent directors and directors appointed by ICESL to look after the interests of investors. The boards will be assisted by the ICESL team who will provide operational, financial control and oversight to protect the interests of investors. ICESL is a trading subsidiary of the Ingenious Group which was formed in 1998 and has raised over 8 billion of assets. The management team operating in ICESL has been formed in the last 3 years and comprises of a mixture of private equity investment experience, EIS investment management, clean energy financing and operational experience. Tax Efficient Review Reprinted for Ingenious Investments February

8 Analysis of potential investment returns The analysis below is based on an illustrative acquisition of a renewable energy installation by an Investee Company. The analysis makes an assumption that there will be an exit of the asset after 3.5 years and the Investee Company will return to cash. It is a matter for the shareholders of the Investee Company as to whether cash is returned to shareholders which will be voted on at a shareholder meeting at the appropriate time. The actual return in Investee Companies will depend on the ability of ICESL to deploy funds raised in a timely fashion as investee companies sitting in cash will drag down the return for investors. The early preparation and sourcing of underwritten projects whilst funds are being raised helps with the timely deployment of capital and is an attractive aspect of the offer. The yield at which investee companies purchase assets is crucial. Too low a yield (in effect overpaying for the cash flow) means that there may not be enough annual revenue left after fees and charges to give investors an adequate return. Over payment for assets will give rise to capital losses at exit if the market requires a higher yield than paid by investee companies on entry. The table below provides a reconciliation of the expected yields of the underlying assets and the returns to investors. There is no implied prediction in these figures, actual results will be different. Subscription capital 100,000 Less initial fees and provision for transaction costs 8,000 Net capital invested 92,000 Target initial asset yield at 8.7% 8,010 Cash flow generated over 3.5 years index linked 30,752 Less provision for annual running costs over 3.5 years 7,437 Estimated value of asset at exit 91,684 Gross return 115,000 Less performance fee 3,000 Target net return 112,000 It should be noted that not all subscription funds raised get invested in revenue earning projects and the analysis above shows how this impacts the offering. 3.5% of capital raised is paid by the EIS companies to Ingenious Investments for initial fees Provisions for third party due diligence costs are around 1.83%. If asset acquisition is negotiated and structured by ICESL, there is a provision for 2.67% Corporate Finance Fees payable to ICESL. At the most conservative level, around 92,000 of every 100,000 subscribed is invested in the yielding asset. Ingenious Ventures indicate from their experience no further working capital is needed for each investee company. Annual returns from the underlying asset are reduced by annual running costs as shown in the analysis above. There is a 1.5% Annual Management fee of the gross amount invested into each EIS company payable to Ingenious Ventures out of which any annual trail is paid to introducers. EIS running costs (custodian fees, directors, audit etc..) are provided for at around 0.625% per annum. Corporation Tax will not be payable in the first three years due to excess capital allowances so will not impact on net cash generation. So how much needs to be earned by the projects to deliver the target return of 1.12 after three and a half years (no prediction is made or implied)? From the analysis above, to go from 0.92 to 1.15 requires a growth requirement of 6.6% per annum. That is coming from zero capital growth per annum and net cash income generation of 6.6% per annum. The gross asset income generation is 8.7% per annum and that is reduced by charges costs and performance fees to a net 6.6% per annum. In summary projects need to earn a return of 6.6% per annum through income and growth to produce a 3.4% return for investors on their gross investment. 8 Tax Efficient Review Reprinted for Ingenious Investments February 2014

9 Table 3 (1 of 2): Ingenious Clean Energy Services Team Names of Team members Duncan James Neil Forster John Sebastian Matthew Patrick Reid Clayton Boyton Speight Bugden Bradley Role Director Director Director Director Director Director Director Ingenious Clean Energy related work Deal Origination % General Enquiries % New Deal doing % Investee board seats No Sitting on boards/monitoring % Fund raising % Internal issues % Exits % Non Ingenious Clean Energy work Non Ingenious Clean Energy work % Total 100% 100% 100% 100% 100% 100% Years in private equity/clean energy sector Years involved with Ingenious Years with current team Table 3 (2 of 2): Ingenious Clean Energy Services Team Names of Team members Sebastian Speight Jeremy Milne James Axtell Baiju Devani Lisa Andronova Simon Colver Role Managing Director Investment Director Investment Director Investment Manager Investment Manager Investment Associate Ingenious Clean Energy related work Deal Origination % General Enquiries % New Deal doing % Investee board seats No Sitting on boards/monitoring % Fund raising % Internal issues % Exits % Non Ingenious Clean Energy work Non Ingenious Clean Energy work % Total 100% 100% 100% 100% 100% 100% Years in private equity/clean energy sector Years involved with Ingenious Years with current team Tax Efficient Review Reprinted for Ingenious Investments February

10 On exit, to return the target, requires no uplift on asset value over entry value. Overall we think that the above example, and there is no implied prediction in the figures, shows how even a modestly small annual return for investors requires quite a high starting yield due to the effect of costs and reductions in the amount invested. This is not unusual for this type of Service where high professional costs have to be spread across relatively small amounts of capital. The protection of NAV is entirely dependent upon purchasing or investing in assets and disposing of them over time at yields that are not too far apart. Higher yields required by purchasers will depress capital values for investors, although experience of the development of the market for this type of assets has indicated a steady compression in the yields that investors demand. We believe that investors setting their expectation levels at a return of 100p after four years are probably more likely to avoid disappointment. Key personnel Key personnel are: Sebastian Speight initiated Ingenious move into the clean energy sector and has been the Managing Director of the Clean Energy team since Sebastian has ultimate responsibility for all of the Clean Energy team s activities. He joined the Ingenious Group in 2003 and was appointed to the board of Ingenious Investments in 2009, having worked across the investment Funds operated by the Ingenious Group. He sits on a number of investment committees for Venture Capital Trusts managed by Ingenious and holds the relevant investment management permissions from the FSA. Prior to joining the Ingenious Group, Sebastian was a finance lawyer at city firm Allen & Overy where he specialised in international banking and capital markets restructurings. He qualified as a solicitor in 1996 and holds a degree in Classics from the University of Oxford. James Axtell joined the Clean Energy Team as an Investment Director in James manages the Clean Energy Strategy of the Ingenious Estate Planning Service and Ingenious Sustainable Resources LLP, investing private investors capital in renewable energy infrastructure assets. He has overall responsibility for Fund. In addition he leads the Ingenious Energy Efficiency EIS Funds and has overall responsibility for both Fund-raising and deployment. Since 2009 James has focused on the UK clean energy market having founded a UK-based solar energy business to provide free photovoltaic systems to social landlords. James started his career at strategy consultants Bain & Company where he was involved in multiple projects across numerous industries in both Europe and Africa. These included Mergers & Acquisitions, due diligence, operational improvement and strategy projects in sectors ranging from banking to electronics, IT, telecoms, automotive parts and building products. James then moved into private equity where he focused on the European real estate market, working closely with management teams in the car parking, self-storage, rented residential and office sectors to optimise the performance of the businesses post-investment by the Fund. Subsequently, James spent over 10 years in senior roles at start-ups including the Nectar loyalty programme. Whilst at Nectar he led both Business Development (signing clients worth over 100 million in revenue) and Client Services, where he was responsible for annual client revenues of over 150 million. James holds a Masters degree in Materials Science, Economics and Management from the University of Oxford. Jeremy Milne joined Ingenious in 2010 as an Investment Director in the Client Relationship team. In 2011 he joined the Clean Energy team as an Investment Director where he manages the Ingenious Solar EIS and also the Renewable Energy EIS Fund, deploying retail investors Funds in a portfolio of Companies operating renewable energy infrastructure assets. He has overall responsibility for both fund raising and deployment within these two products. Prior to joining Ingenious, Jeremy was Business Development Director at Matrix Group, specialising in alternative asset product development. He led the setting up of a mid-market private equity investment team, the acquisition of a public investment company and the acquisition of a boutique hedge Fund manager. From 1998 to 2007 Jeremy developed his expertise in the VCT sector with Quester where he was part of the team that raised in excess of 150 million for investment in the technology and clean energy sectors through VCTs. Lisa Andronova joined Ingenious in 2010 as an Investment Associate in the Clean Energy team. She has subsequently been promoted to Investment Manager and works closely with James Axtell on the Ingenious Energy Efficiency EIS Services and on the Clean Energy 10 Tax Efficient Review Reprinted for Ingenious Investments February 2014

11 Table 4: Ingenious Investments Products and Investment teams Source: Ingenious Investments, January 2014 Ingenious Media Members Patrick McKenna Group Chief Executive Duncan Reid Director Peter Shawyer Chairman John Boyton Director Neil Forster Group Chief Fin Officer and Chief Op Officer Sarah Cruikshank Company Secretary Ingenious Capital Management Members James Clayton Chief Executive Officer Nik Bower Director Sebastian Speight Director Matthew Bugden Director Patrick Bradley Director Ian Anderson Director Neil Forster Chief Financial Officer Ingenious Investments Ingenious Ventures Ingenious Investments provides access to an extensive selection of innovative tax efficient, alternative investment opportunities targeting attractive returns with a focus on reducing risk. Ingenious Ventures is the private equity division of Ingenious Media investing in growing companies throughout the media and entertainment industry. Unquoted capital Quoted capital Unquoted capital Quoted capital TV production and exploitation Film production and exploitation Music, live entertainment and premium content Clean Energy opportunities in the areas of wind, solar and biomass Seed EIS investment activity A series of Ingenious managed VCTs offering access to investors wanting to participate in the growing UK live events and premium content market (previously recorded Music too) Earlier iterations of the VCT include: Ingenious Music VCT Ingenious Live VCT Ingenious Entertainment Ord, C,D,E,F and G Share classes Ventures LP Media Opportunities Fund Seed EIS investment activity Ingenious Media Active Capital (IMAC) is an AIM listed investment vehicle. Between 2006 and 2010 IMAC invested with a remit of development capital of between 2m and 15m (per investment) into portfolio companies across the media and creative sectors. Ingenious Ventures continues to manage this portfolio through to exit Ingenious Investments Media Clean Energy Divisional Managing Director Nik Bower Sebastian Speight Current Opportunities Non EIS EIS Other legacy opportunities [that remain actively managed] Direct Fund Team Personnel Ingenious Estate Planning Media Strategy Ingenious Broadcasting LLPs Big Screen Productions Oriel Productions Senior Film Fund Ingenious Entertainment VCT H Share Ingenious Broadcasting EIS 4 Shelley Media EIS 9 Media Opportunities Fund 3 Film Sale and Leaseback Auburn CVS Ingenious Broadcasting companies Shelley Media Funds 1-8 Impressario plc Ingenious Pathe EIS Film Fund Inside Track Productions Inside Track 1, 2 and 3 Ingenious Film Partners Ingenious Film Partners 2 Ingenious Games Phoenix Film Partners Vindemia EIS Fund Vindemia EIS Fund 2 Stephen Fuss Tim O Shea Avni Thakrar Michael Shyjka Harry Eastwood Simon Cox Kate Bennetts Laura Macara Andrea Scarso Charles Auty Eleanor Windo Simon Williams Maxime Cottray Robin Duncan Uri Stramer Alexandros Van Blanken Laura White Ingenious Estate Planning Clean Energy Strategy Ingenious Sustainable Resources Ingenious Clean Energy Income Trust Plc Renewable Energy EIS 2 African Solar EIS Ingenious Solar EIS Renewable Energy EIS Fund Energy Efficiency EIS Fund James Axtell Jeremy Milne William Watts Lisa Andronova Richard Holland Simon Colver Helen Walsh Baiju Devani Angus Higham Roberto Castiglioni Tax Efficient Review Reprinted for Ingenious Investments February

12 Deal flow Exit Costs Strategy of the Ingenious Estate Planning Service and Ingenious Sustainable Resources LLP. In this role Lisa has gained a wide range of experience, particularly in financial modelling and valuation, investor relations, Service strategy and associated legal and regulatory documentation. Prior to joining Ingenious, Lisa worked for strategic sustainability consultancy Beyond Green, where she worked to develop clean energy financing and delivery strategies for a number of complex projects, including the London Olympics Masterplan Legacy Framework. She has four years experience in sustainability strategy and finance and an honours degree in Business Management from King s College, London. Baiju Devani joined Ingenious in 2013 as an Investment Manager. Prior to joining Ingenious, Baiju worked in the commercial team at Renewable Energy Systems Limited, a global renewable energy developer. During this time, Baiju gained a wealth of experience in the wind, solar and biomass sectors. Simon Colver joined Ingenious in 2014 as an Investment Associate. Prior to joining Ingenious Simon worked as an analyst at Mercer Associates undertaking research and analysis to support the investment advisory work for Mercer s institutional clients. Simon has a first class honours degree in Engineering from Oxford. ICESL, in preparation for their role as advisor to potential Investee Companies, will identify portfolios of renewable energy generation installations for Investee Companies to acquire. The Investee Companies have the option to acquire these assets subject to satisfactory due diligence, once they are secured by Ingenious. The assets will be ROC accredited, have planning in place, may be operating and have received all permits and authorities. There will be limited number of assets which means that there is limited capacity for raising investment (approximately 16m). A key issue for all EIS offerings is the ease and feasibility of realising the assets and returning cash to shareholders. The market conditions applicable at the relevant time will affect all renewable energy offerings to a large extent. Most providers are anticipating that there will be aggregators and financial buyers of these assets once the cash flows have been established. The EIS Companies into which the Ingenious Renewable Energy Service invests will anticipate providing a liquidity event for shareholders before three and a half years from date of investment. The companies will seek a liquidity event for shareholders at the date at which the directors of the Company, with the approval of Shareholders, deem to be appropriate. ICESL acting in its capacity as adviser, will assist the of each Investee Company in marketing the portfolio of assets in the Investee Companies in 2015 and will look to a financial buyer to acquire the years of residual index linked cash flow. Given the likely value of the portfolio at c 5-7m for each wind, solar or biomass asset, the sale will likely take place to an aggregating private equity buyer or emerging energy generation company. As a knowledgeable adviser ICESL is aware of the other buyers of the assets and has already had a number of discussions with buyers and investors in the sector to ascertain exit demand. The modelled exit yields of c.10% (pre tax, 8.5% post tax, all equity) is undemanding given the quality of covenant after 3 years of proven cash flows. Following the sale of each Investee Company s assets, it is expected that each Investee Company will be wound-up and the capital proceeds paid to investors. The investors may then (assuming that there has been no change to the legislation and subject to personal circumstances) have the opportunity to re-invest the proceeds in a new EIS opportunity which should ensure that any capital gains continue to be deferred, the inheritance tax exemption should remain and further income tax relief of 30%, or the applicable income tax relief available at this time, should become available. Initial costs are fixed at 3.5% of investors capital payable to Ingenious Ventures. Investee Companies, if accepting finance from the Service, will pay ICESL an annual fee of 1.5% of the capital invested in respect of the operational and advisory services provided to the Investee Companies boards and Ingenious Ventures will also be incentivised with a performance fee of 30% on all distributions to investors over All fees are payable by the Investee Companies out of their capital. This will enable investors to claim tax relief on the full amount of their subscriptions. If an Investee Company is invested in by the Service and acquires an asset from the pipeline prepared by ICESL, the Investee Company will pay a corporate finance of up to 3% of the value of the asset acquired. This will be included in the cost of asset acquisition by the Investee Companies. 12 Tax Efficient Review Reprinted for Ingenious Investments February 2014

13 Conclusion Excluding the corporate finance fees, which we consider a cost of asset acquisition, we calculate that Ingenious will be paid 11.75p in fees over 3.5 years to deliver 1.12p to investors. The Service is looking to raise a total of 30m to invest in a portfolio of EIS qualifying Investee Companies that will acquire and operate a number of operating renewable energy installations. The combination of predictable electricity output and long term index-linked pricing from the ROC scheme could make renewable energy an attractive asset class. The added benefits of the EIS tax reliefs are likely to give the asset class a greater appeal and could help to provide a relatively low risk EIS investment. Ingenious target a return of at least 1.12 net of all costs for each 70p invested ( 1.00 subscribed less 30% income tax relief) which provides tax free returns of 17.1% per annum (gross equivalent to an additional rate taxpayer of 31.1% per annum). The protection of NAV is entirely dependent upon purchasing assets and disposing of them over time at yields that are not too far apart. Higher yields required by purchasers will depress capital values for investors, although experience of the development of the market for this type of assets has indicated a steady compression in the yields that investors demand. We believe that investors setting their expectation levels at a return of 100p after four years are probably more likely to avoid disappointment. In our view Investors will be better served by investing with larger providers such as Ingenious, who have the potential to accumulate a large solar portfolio as we believe that better priced exits might be achieved by such providers, and our rating reflects our view. Tax Efficient Review rating: 86 out of 100 Tax Efficient Review Reprinted for Ingenious Investments February