EIS Industry Report 2018/19

71 70 INGENIOUS INGENIOUS PLAY EIS OFFER ABOUT THE PROVIDER Ingenious is an investment manager, providing investment opportunities to individuals, family offices and institutions across four unique and diversified sectors: media, infrastructure, real estate and education. Since our inception in 1998, clients have trusted us with over £9bn which we have deployed across our range of carefully designed investment strategies. We have invested over £1bn into EIS qualifying companies and £1.3bn into Business Relief qualifying investments. We pride ourselves on our ability to find the hidden angle, identifying innovative investment opportunities within these sectors which are largely uncorrelated to the stock market, have reliable cash flows and are complementary to our investors’ portfolios. Sector knowledge is central to our investment philosophy and our teams are comprised of specialists with experience operating and managing businesses and assets within these sectors, in turn mitigating risk and maximising returns for our investors. Our investment teams operate within a robust professional framework with expertise spanning across accountancy, tax, law and compliance. We build strategic partnerships with our investors and their advisers, working together to understand individual financial objectives and consistently providing compelling solutions which meet these as they evolve. INGENIOUS PLAY EIS OFFER Ingenious Play EIS targets growth for clients by investing in early stage companies in the games industry, which is now one of the UK’s fastest growing creative sectors*. Ingenious Play EIS invests in games companies that develop, produce and distribute high-quality games titles across mobile, PC and console platforms. We look for companies that are run by highly experienced, entrepreneurial individuals with a successful track record in the industry. Our investment team is led by senior Ingenious members with extensive expertise in the media and entertainment industry. The Ingenious Play team also includes experienced games professionals with specialist knowledge and networks across the gaming sector. We also utilise the services of a leading games data analytics company to assist with the evaluation of investment opportunities and the optimisation of game titles developed by investee companies to maximise potential returns. INVESTMENT CASE STUDY Ingenious Play EIS is looking to invest in one of the most exciting and fastest growing independent studios in the UK. To date, the studio has produced four successful games titles, including an acclaimed free-to- play PC hit which has over 13 million players worldwide. The studio has grown to a team of 45 developers with the capability to self-publish its games. It recently secured a lucrative commercial arrangement with games giant, Tencent, for the exploitation and franchising of one of its most successful titles. The company seeks growth capital to expand its team and operations to develop and deliver its pipeline of games titles. * Source: BFI Report 2018 IMPORTANT INFORMATION Ingenious is a trading name of Ingenious Capital Management Limited, which is authorised and regulated by the Financial Conduct Authority under Firm’s Reference Number 562563. The value of an investment may go down as well as up and investors may not get back the full amount invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in future. MERCIA MERCIA EIS ABOUT THE PROVIDER The Mercia Group was founded in 1982, through the formation of WM Enterprises, and has grown to become one of the most active venture capital investors in the UK, and is the only one listed with an EIS fund (https://about. beauhurst.com/blog/most-active- uk-venture-capital-funds). In the last few years Mercia has rapidly grown assets under management to over £0.5billion, expanded the team to almost 90 staff, who work across 9 offices, with unrivalled deal flow from our large commercial networks and our 19 university partners. During 2017, the Mercia group deployed £48million, including £12million of EIS capital, investing in great early-stage technology companies in the UK’s under-served regions (https://www.insidermedia . com/insider/midlands/mercia- invests-almost-50-in-2017). Whilst Mercia didn’t invest EIS Funds into Blue Prism, as they didn’t have any at the time, it is one of very few managers to have seeded an unicorn (PRSM: £1.7billion on 12th September 2018), through its managed fund, the RisingStars Growth Fund. The Group has delivered 12 IPOs and approximately 50 trade sales. THE MERCIA EIS The Mercia EIS Fund is a well- diversified early-stage technology fund, which aims to triple invested capital in five to seven years (including tax reliefs). This is an evergreen EIS fund with quarterly closes, aiming to raise £15million-£25million. Mercia commits to deploying funds within a year (with Advanced Assurances), however it normally takes 6-9 months, with tax certificates available 6-8 weeks afterwards. Their online reporting portal is industry-leading, with copies of tax certificates available, in addition to investment committee reports and other services. Mercia are active managers, helping companies grow, with funds over three years old having double the value of invested capital (2.4x with tax reliefs). Our early funds are now entering their distribution phase, with significant exits imminent. IINVESTMENT CASE STUDY:OXFORD GENETICS Oxford Genetics is a key company in Mercia’s portfolio, its technology provides efficiencies in synthetic biology, enabling pharmaceutical companies to more effectively make large drug molecules. This is a sector in which Mercia has deep expertise, and has high conviction. For successful portfolio companies, Mercia is a powerful long-term funder. Oxford Genetics was founded in 2013, and Mercia has funded its growth with SEIS (£150k at £42 per share), EIS (£426k) and investment from our PLC balance sheet (£4.7m). We introduced Oxford Genetics to our shareholder Invesco, which invested £5.5m (August 2017), and there is another fund raise shortly (at £299 per share or higher). Oxford Genetics has opened an office in the USA, and is considering an inorganic growth strategy. There may be opportunities to sell SEIS/EIS shares in future funding rounds, or following an IPO in coming years. FUND NAME* NO. OF EIS COMPANIES AVG EIS FUND VALORATION EIS VALUATION WITH TAX Over 4 years old MGF1, MGF2 10 2.3 2.7 Over 3 years old MGF3, MDF 10 1.8 2.2 Over 2 years old MGF4, UGF 19 1.1 1.5 Only 1 year old MGF5, MGF6 21 0.9 1.2 In the post capital preservation world, where high risk technology investments are the only remaining strategy, diversification is key to delivering returns: Valuations as of June 2018 Investors should expect a portfolio of approximately 15 EIS companies, with about a third of companies to fail, and loss relief should be expect to form part of the overall return. *from the date of the last investment in this fund