BR Guide FINAL 20 Feb

31 30 BR INVESTMENT OPTIONS A PRACTICAL ROUTE TO BR Underlying Asset Sectors In terms of underlying assets in unquoted estate planning services, the choice of these is primarily informed by three factors: the BR qualifying rules, the overarching capital preservation mandate and the investment objective: growth and/or income. The investment sectors currently covered by BR products are General Enterprise, Renewable Energy, General Lending, Industry & Infrastructure and Media & Entertainment. The majority of investment managers in BR are typically generalists (usually focused on AIM shares). Just over a third of the market over its history has been made up of specialist offerings, investing in an area of particular expertise (usually focused on unlisted assets), although, some do a bit of both. A generalist has a bigger universe of potential investment and more deal flow, so potentially more diversification. There is less chance of them struggling to place the money in the right opportunity, whereas specialists can leverage many years of relevant experience to find good value deals. They can also use their experience to help guide investee companies and they can afford to manage a smaller portfolio more closely to ensure it remains within the BR qualifying rules. The most popular sectors for those that specialise, in terms of offerings, are listed below, along with example investments in these sectors from our sponsor. 3.2 Rollover Relief Timeline Rollover relief is also used to allow a fund manager running a BR qualifying portfolio to switch clients from one unlisted or AIM stock to another, or clients to switch their strategy from growth to income or to change manager. It is a feature that allows investors a lot of flexibility once they have passed the two-year qualifying period. Note that rollover relief does not work if someone dies before they have reinvested their money (unless they have a surviving spouse or civil partner to inherit the relief that has been built up). There are some nuances to the timing of this three-year rule: it is in fact more generous than it first appears - BR will apply, providing the ownership periods total at least two years in a five-year rolling period. It is the cumulative period of ownership within the five-year window that counts, rather than an unbroken period of ownership. Relevant asset sold Relevant asset sold after ownership in 3 of last 5 years Reinvestment into relevant asset Reinvestment into relevant asset YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 DEATH OF HOLDER OF RELEVANT ASSET Example of rollover relief BR qualification of relevant asset OWNERSHIP OF RELEVANT ASSET The relevant asset is BR qualifying as it has been held for at least 2 of the last 5 years and it was held by the deceased on death. MEDIA & ENTERTAINMENT 1% RENEWABLE ENERGY 2% ENERGY GENERATION 10% INDUSTRY & INFRASTRUCTURE 12% GENERAL LENDING 13% GENERAL ENTERPRISE 62% 62% GENERAL ENTERPRISE SOURCE: MICAP BR market composition by sector