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THE SENECA MANAGED STORAGE EIS FUND NO. 2

INFORMATION MEMORANDUM

THE FUND MANAGERThis Financial Promotion has been issued by Seneca Partners Ltd, the Fund Manager of The Seneca Managed Storage EIS Fund No. 2. Seneca Partners Limited is authorised and regulated by the Financial Conduct Authority (reference 583361).

IMPORTANT NOTICEThe Fund is an unapproved EIS fund which will comprise of shares in a selection of EIS Companies. The Fund Manager will be responsible for the discretionary management of the Fund. Each Investor, for legal and tax purposes, will be the beneficial owner of a specific number of shares in each Investee Company. All shares and cash will be managed in accordance with the investment objectives and restrictions set out in the Investor Agreement.

It is the responsibility of the Investor, and their adviser where appropriate, to ensure that this opportunity is a suitable investment in light of the contents of this Information Memorandum and their individual circumstances. If you are in any doubt about the content of this Information Memorandum, you are strongly recommended to seek advice immediately from an independent financial adviser authorised under the Financial Services and Markets Act 2000 (“FSMA”) who specialises in advising on investments of this type. This Information Memorandum is only intended for release in the United Kingdom and is not for publication or distribution in any other jurisdiction.

The Fund is an Alternative Investment Fund (“AIF”) for the purposes of the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”). It is not a collective investment scheme within the meaning of section 235 of FSMA nor a Non-mainstream Pooled Investment by virtue of it being a fund complying with the meaning of Article 2 of the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001. Investors in the Fund will make Investments together and their Investments will be managed on a common basis. The Fund will, therefore, constitute a collective investment undertaking within the meaning of the Market in Financial Instruments Directive (“MiFID”) and, by virtue of the exemption for collective investment undertakings in Article 2.1(h) of MiFID, the Fund falls outside the remit of MiFID.

This Information Memorandum is intended exclusively for persons to include the following categories, as defined in legislation and by the FCA: Professional Clients and Eligible Counterparties, which broadly comprise regulated financial institutions, high net worth individuals, sophisticated investors and investment professionals. If you are not such a person and have this presentation please return to the address at the end of the document or destroy it.

OTHER REGULATORY DISCLAIMERSProspective Investors should not regard the contents of this Information Memorandum as constituting advice relating to legal, taxation or investment matters and are advised to consult their own professional advisers before contemplating any investment or transaction. Investors’ money subscribed to the Fund will be committed to investments which may be of a long term and illiquid nature. The companies in which the Fund invests will often not be quoted on any regulated market and, accordingly, there will not be an established or ready market for any such shares and the Fund Manager may experience difficulty in realising them (for value or at all).

The Fund Manager believes that the factual content contained in this document is accurate and the statements of their opinions herein are reasonably held. Subject to the Fund Manager’s overriding duty to ensure that the content of this Information Memorandum is presented in a manner which is fair, clear and not misleading with respect to the persons to whom the Fund is promoted by them, the Fund Manager does not accept responsibility to any recipient of this Information Memorandum for inaccuracies in factual representation or for any consequences to such persons of placing reliance upon statements of their opinion. Additionally some material included in this Information Memorandum is derived from public or third party sources, and the Fund Manager disclaims all liability for any errors or misrepresentations which any such inclusions may contain.

The investments envisaged may not be suitable for all potential Investors. Investments in unquoted companies generally carry a high degree of risk and you should consider the Risk Factors set out on pages 20 to 23 in this Information Memorandum carefully.

Except where required by applicable laws, no responsibility or liability is accepted for any loss or damage howsoever arising that you may suffer as a result of this Information Memorandum and any and all responsibility and liability is expressly disclaimed by the Fund Manager and its subsidiaries, directors, shareholders, partners, officers, affiliates, employees, advisers or agents.

The Fund Manager reserves the right to update this Information Memorandum from time to time.

THE SENECA MANAGED STORAGE EIS FUND NO. 2The Seneca Managed Storage EIS Fund offers Investors the opportunity to invest in one or more storage companies, with the potential to benefit from:

• 30% income tax relief on the value of their investment• Capital Gains Tax deferral• No Capital Gains Tax on the realisation of their investments• 100% inheritance tax relief after two years• Income tax relief on any holding that is sold (or crystallised) at a loss

Please remember that tax rules and regulations are subject to change. The key risks associated with this service are explained on pages 20 to 23 of this brochure. Please note that all the figures and information provided within this document are correct as at February 2017.

NOTE: Income tax relief and CGT exemption require each investment to be held for at least 3 years and inheritance tax relief requires at least 2 years’ ownership. All benefits listed are subject to numerous conditions. All tax reliefs/exemptions need to be claimed by the Investor – they are not automatic and we recommend you seek professional assistance to make the claims.

We recommend that Investors take independent advice before making an investment in the Seneca Managed Storage EIS Fund No. 2.

CONFLICTS OF INTERESTThere are situations where the interests of our Investors may conflict with other areas of our business and where these arise, controls are in place. Further details can be found on page 24 to 25

CONTENTS Welcome 01

Summary of Offer Terms 02

The Seneca Managed Storage EIS Fund No. 2

03

The Proposition 04

Structure and Tax Status 05

Why EIS Investments? 06

Why Seneca Partners? 07

Why Invest in the Managed Storage Sector?

09

Introducing SureStore, Our Specialist Adviser

12

Our Specialist Adviser’s Leadership Team

13

Tax Reliefs 14

Tax Benefits of EIS Investments 15

Fees and Charges 16

FAQs 18

Risk Factors 20

Property and Storage Sector Risks 23

Conflicts of Interest 24

Next Steps 27

Definitions 28


01


Following the successful fundraise in our first Managed Storage EIS Fund, Seneca Partners are pleased to introduce the Seneca Managed Storage EIS Fund No. 2.

Seneca Partners already manage c. £40m in the Seneca EIS Portfolio Service and c. £10m in the first Seneca Managed Storage EIS Fund. We are now adding to that by providing investors with a second opportunity to invest in the managed storage sector, whilst also benefiting from the tax reliefs afforded by the Enterprise Investment Scheme.

Seneca Partners have been invested in the storage sector since 2014, working alongside the management team who are responsible for managing our current portfolio of storage assets. This team have identified the opportunity to acquire a number of freehold and/or long leasehold storage facilities to further expand the estate of storage assets that they manage.

The Seneca Managed Storage EIS Fund No. 2 provides investors with the ability to invest in this expansion whilst benefiting from both the tax reliefs available under EIS and the underlying asset value represented by the freehold or long leasehold managed storage facilities.

We believe that the underlying fundamentals of the managed storage sector combined with the inherent asset backing of the storage sites has significant appeal. The sector benefits from low fixed operating costs, recurring revenues, low customer concentration and has also enjoyed increasing demand and yields in recent years¹.

With our management team having already identified the target sites in which the Fund is looking to invest, we have targeted a fundraise of £10m.

It is important that you read and fully understand the Risk Factors involved with the Seneca Managed Storage EIS Fund No. 2 so that you can decide whether it is right for you. These are outlined at pages 20 to 23.

We hope that you find this document clear and the investment process transparent and easy to understand, however we always recommend that you speak with your financial adviser before making an investment.

Ian CurrieCo-Founder and Director, Seneca Partners LtdFebruary 2017

¹ Source: Cushman & Wakefield annual industry survey 2016

WELCOME

02

SENECA PARTNERS

The Fundraise

Target fundraise: £10 million

Threshold before any investment made: £2 million

Minimum investment per investor: £25,000

Target Return

Target Return: 1.2 x Investment Amount

Target Exit: 4th anniversary

Investors receive 99.99% of any realisation proceeds up to a 1.2 x return on their Investment Amount. In addition, investors will receive 20% of any realisation proceeds above that threshold. Please note that the target return is not guaranteed and you could get back less than you invest.

The following fees are paid to the Fund Manager by the investee companies

Initial fee: 2.0% + VAT

Annual management charge: 2.0% + VAT

The following fees are paid by Investors

Custodian dealing fees (per transaction, on entry and exit): up to 0.35%

Custodian fee (per investor): ): £55 p.a. + VAT

An initial advice fee can be facilitated by deduction from an Investor’s Subscription, where this has been agreed between an Investor and their adviser.

Advance Assurance has been applied for and will be in place before any investment monies are released.

SUMMARY OF OFFER TERMS

03


Investor commitments will be invested in 1 or more EIS qualifying managed storage companies.

The target EIS fundraise for this Fund is £10m; £5m each into two EIS qualifying companies.

The Minimum Threshold is £1 million.

Each EIS qualifying company intends to acquire suitable sites that will facilitate either a new build development of, or conversion of an existing building into, a managed storage facility. At a fundraise of £10 million, each company intends to operate two managed storage facilities.

The investee companies will utilise the services of an experienced Special Adviser, who will advise them on how to best achieve their business plans.

Having acquired and fitted out the storage sites, the business plan is to drive occupancy levels, which against a relatively fixed cost base is expected to lead to increased net operating income. (Net operating income is one of the key metrics we believe will be considered as a part of the exit strategy).

The managed storage facilities will either be freehold or long leasehold in nature. The leases on any long leasehold sites will typically be for more than 100 years in term. These sites provide an asset-backed model with the potential for a level of downside protection for Investors, as a result of the potential value represented by the property assets. The realisation proceeds generated from a sale of these properties could return part of an Investor’s Subscription to them in the event that the underlying managed storage trade is not as successful as anticipated.

SUMMARY OF INVESTMENT STRATEGY

THE SENECA MANAGED STORAGEEIS FUND NO. 2

04

SENECA PARTNERS

The Fund Manager is Seneca Partners Limited which is authorised and regulated by the FCA (reference no 583361). Seneca Partners Ltd, is a Small Authorised AIFM, who will exercise their discretion in selecting and allocating investments.

Once we have received your investment, your Subscription will be placed with our Custodian for safe keeping. When we have raised more than £1 million and Advance Assurance has been obtained, we will subscribe for shares in at least one EIS Qualifying Company on your behalf, to be held for you by the Nominee of the Service.

The investee companies will be unquoted private companies.

We have already undertaken financial, operational, legal and strategic due diligence on this opportunity. This included a detailed analysis of the business plan, as well as an analysis of the competitive landscape, financial and operating model. In addition, we are also experienced in supporting managed storage companies, having been investors in the sector in previous years.

THE PROPOSITION

“The Seneca Managed Storage EIS Fund No. 2 (“the Fund”) offers Investors the opportunity to invest in one or more managed storage companies, with the potential for capital growth in an asset backed environment.”

05


The Fund will comprise of shares in one or more EIS Qualifying Companies. For legal and tax purposes, each Investor will be the beneficial owner of a specific number of Shares in each Investee Company. All Shares and cash within the Fund will be managed together on behalf of all Investors by the Fund Manager.

The Fund is an Alternative Investment Fund (“AIF”) and, under the required FCA Rules, the Fund Manager will be the Alternative Investment Fund Manager (“AIFM”) and will treat the Fund as its client for regulatory purposes. The Fund Manager is Seneca Partners Ltd. The Fund is not an unregulated collective investment scheme.

The Share Centre Ltd will act as the Custodian of the Fund. The Share Centre Ltd is a company registered in England and Wales, whose registered office is at Oxford House, Oxford Road, Aylesbury, Buckinghamshire, HP21 8SZ and which is authorised and regulated by the Financial Conduct Authority (reference 146768). The Share Centre’s sister company, Share Nominees Ltd, will act as the Nominee.

The Fund has not been approved by HMRC under section 251 of ITA 2007 and therefore Investors may only claim EIS income tax relief in the year in which each underlying investment is made, or the previous tax year if carried back, rather than in the tax year in which an approved fund closes.

Once an EIS Qualifying Company has been trading for four months and clearance has been obtained from HMRC, EIS 3 forms will be distributed to Investors by the Fund Manager, each setting out that Investor’s entitlement to any EIS tax relief.

STRUCTURE AND TAX STATUS

06

SENECA PARTNERS

The UK government created the Enterprise Investment Scheme in order to stimulate investment in the SME sector. The Scheme grants Investors generous tax benefits in return for providing equity funding to qualifying businesses.

These benefits include the ability to offset income tax and defer CGT liabilities, together with CGT exemption on the investments themselves. Investments in trading companies which qualify for the EIS will also normally qualify for business property relief once held for 2 years, meaning that inheritance tax is not payable on the value of those investments.

We believe that the Seneca Managed Storage EIS Fund No. 2 aims to reconcile the ambitions of Investors looking for both the potential for attractive returns and tax efficiencies.

WHY EIS INVESTMENTS?

The Enterprise Investment Scheme grants Investors generous tax benefits in return for providing equity funding to qualifying businesses.

07


Seneca Partners is an independent investment and corporate finance business for private individuals, entrepreneurs, companies, funds and trusts. Formed in 2010, our team brings together decades of experience in providing investment solutions for Investors.

Our strong local presence in the UK’s SME heartlands and the established, trusted and high quality Advisory Partners Network (which includes fellow professionals, funders, Investors and SMEs themselves) is critical to the ability of the Seneca Partners team to source what we consider to be the most compelling investment opportunities. We have c. £400 million invested assets across the Seneca family of companies.

Since December 2012, Seneca Partners have been the Portfolio Manager of the Seneca EIS Portfolio Service. As at the end of January 2017, over 400 individuals have invested c. £40m million into that service and we have so far completed 49 investment rounds into 29 EIS qualifying companies. We are also the Fund Manager of the Seneca Managed Storage EIS Fund in which we have received c. £10m of investment.

Seneca Partners will act as Fund Manager and will also advise on the strategic development of the Fund’s investee companies throughout the investment period and on the options available to realise each investment once the three year EIS qualification period has ended.

As Fund Manager, Seneca Partners will be responsible for the management of each Investor’s holding(s).

WHY SENECA PARTNERS?

08

SENECA PARTNERS

Managed storage is an industry in which a managed storage solution is provided to domestic and commercial customers. The business provides secure rooms or areas, in which customers can store their goods. Managed storage customers include businesses and individuals.

There are estimated to be over 60,000 storage facilities worldwide, of which 48,500 are located in the United States1. From 2000 to 2005, over 3,000 new facilities were built every year with one in ten U.S. households now renting storage2.

Whilst the USA is by far the world’s most mature storage market, recent growth in other territories has been strong, with the UK market now supplying over 37 million square feet of storage space3.

Managed storage arrived in the United Kingdom in the early 1980s and demand has grown steadily since then. The industry has proven to be counter cyclical and recession resistant, many operators reporting year on year revenue growth through the recent recession3.

WHAT IS MANAGED STORAGE?

1 Source: Self-Storage Association (USA)2 Source: New York Times Magazine3 Source: Cushman & Wakefield annual industry survey 2016

09


Managed storage businesses have proved to be an attractive option for investors looking to capitalise on increasing demand for storage solutions resulting in growth of this sector of the economy. The low level of fixed operating costs in the industry together with the large number of alternative uses for the underlying assets, has also provided an element of downside protection to their investment. Economic data and trends analysis suggest there is significant headroom for growth in the short and medium term.

The primary drivers of retail storage demand are generally social factors such as moving home, marriage, divorce, retirement and bereavement. For businesses, storage proves useful for a number of reasons including start-up workspace solutions, storing archives, stock or office equipment. Increased public awareness of the industry has also contributed to its growth.

Current lettable occupancy rates across the UK are estimated at 73%, a 4% increase on the previous year1, despite additional capacity, which indicates that currently demand for the product is growing slightly faster than supply, whilst yields per sq. ft. have also been improving in recent years.

Growth in the UK Industry is being driven by increased awareness. Smaller houses and an increase in post-recession housing transactions has led to an increase in domestic requirements. In addition, the increase in online trading has led to demand from entrepreneurs seeking flexible and accessible storage1.

WHAT IS MANAGED STORAGE?

The UK industry now has around 37.6 million square feet of managed storage space, an increase of more than 5% on 2014. This equates to around 0.59 sq. ft. of storage per head of population in the UK. It is estimated that the total turnover of the industry in 2015 was circa £440m.1

1 Source: Cushman & Wakefield annual industry survey 2016

WHY INVEST IN THE MANAGED STORAGE SECTOR?

10

SENECA PARTNERS

We believe that managed storage businesses represent an attractive asset class due to a number of appealing features:

• Storage business models proved resilient through the recent financial crisis

• Managed storage has good customer diversity: it does not rely on one single, large customer.

• Stable and relatively secure cash flow (recurring earnings)

• Low operating cost combined with high prices per square foot (compared to the leisure and healthcare sectors)

We believe that the market opportunity exists to develop a portfolio of carefully selected facilities with the aim of creating a geographical block. Such a block is expected to prove attractive to a number of different types of purchaser, potentially offering multiple exit routes. These would likely include a larger trade player seeking to bolster its footprint in the area through the acquisition of a well invested and profitable portfolio of managed storage facilities.

We intend to exit the Funding’s managed storage facilities during the fourth year following full investment.

Managed Storage as an Asset Class

11


Site Operating Model

The table below provides an example operating model for the first 6 years of operations for a site with a maximum lettable area of 42,000 sq. ft. As the operating costs are mostly fixed, in this example the site becomes profitable during year three when revenue has grown sufficiently to cover this cost base.

Year 1 Year 2 Year 3 Year 4 Year 5Forward Revenue

Total Revenue (£’000s) 82 167 256 348 444 637Op expenses (£’000s) (216) (232) (239) (246) (254) (264)Net Operating Income (£’000s) (134) (65) 17 102 190 373

Lettable area available by year end (sq. ft.)

13,000 19,000 28,000 34,000 42,000 42,000

Area actually let (sq. ft.) 9,000 15,000 21,000 27,000 33,000 35,900

Phased Development Model

A part of the business plan is that capital expenditure will be tightly controlled as each facility matures, with the fit out of each site being phased to match the increased demand from customers

In order to drive occupancy levels, this model provides for rental fees below the regional market average. Once the site has achieved profitability, there will be a gradual increase in rental fees to bring them in line with that average. The effect of this increase is reflected in the forward revenue column. The sale price would be based on that forward revenue projection, with visibility growing from the first recorded profit (shown in the table under ‘Year 3’).

Assumes Day 1 occupancy of 3,000 sq. ft. growing by 500 sq. ft. per month thereafter

Based on a maximum lettable area of 42,000 sq. ft.

12

SENECA PARTNERS

We are seeking to raise £10 million to provide funding of £5 million into each of two EIS qualifying managed storage companies. These new companies will retain an experienced Operating Partner to provide expert management input.

We have chosen SureStore Consultants Ltd to be the Specialist Adviser, due to their management team having a wealth of experience in providing operational, marketing, management, site selection and development expertise. SureStore are also the Specialist Adviser for our first Managed Storage EIS Fund.

The management of SureStore have combined experience of over 45 years in the storage industry and have managed another Seneca backed storage business, which has developed a portfolio of seven highly profitable and cash generative storage businesses across the North West. By Selecting SureStore as the Operating Partner, we are seeking to replicate this success and are offering Investors the opportunity to back this proven and experienced management team.

Four potential sites have already been identified across the UK and terms are being negotiated.

INTRODUCING SURESTORE CONSULTANTS LTD, OUR SPECIALIST ADVISER

13


Mike Wilson

Mike qualified as an accountant in 1999 and subsequently gained extensive experience of general and strategic management across a range of businesses. He has start-up and turnaround experience not only in storage but in a number of other sectors including healthcare, property, mezzanine finance and technology.

After joining Smart Storage in 2007, Mike spent his first six years as CFO developing the growth of the business.

In 2013, Mike became the CEO of Smart Storage, replacing one of the founders, and then subsequently completed a management buyout of the business with funding from Seneca Partners in 2014.

Mike was appointed to the Board of the Self-Storage Association UK, in 2015, as a representative for Independent Operators.

Mike will lead the operational and strategic direction of the Fund’s investee companies.

Andrew Wood

From 1995 as European Sales Director for a Storage construction company, Andy was responsible for the design and build, project management, sales, business marketing and strategic planning for over 100 storage centres.

Andy Co-founded Planet Space Storage in 2003 in Mallorca and developed it to a position of market leader. It provides residential and commercial storage but also specialises in yacht storage. Andy Co-founded Storage Boost in 2005 and having recognised the opportunity to develop storage facilities in the North of England, Storage Boost became an award winning operator of 3 storage facilities in Cheshire and Staffordshire.

He is active in the European storage industry as a consultant and investor and has extensive experience of operating and constructing storage facilities across Europe. Andy is a Board member of the South Cheshire Chamber and sits on its property board. He also is a Director of Trax Commercial a property company that provides industrial and office space to SME’s in the Northwest.

Andy will lead the acquisition and development of the new storage facilities for the Seneca Managed Storage EIS Fund No. 2.

OUR SPECIALIST ADVISER’S LEADERSHIP TEAM

14

SENECA PARTNERS

The Seneca Managed Storage EIS Fund No. 2 is an Alternative Investment Fund.

The investments are made on behalf of individual Investors, albeit legal title to the shares in the investee company will be held by the Nominee. For tax purposes, however, individuals will be treated as having full direct ownership of the investments and therefore the tax benefits will still accrue to Investors personally.

Generally, EIS relief claims may be made each time an investment is completed. An EIS3 certificate is obtained from the Investee Company and is sent to Investors for the purpose of claiming tax reliefs. Advance Assurance has been applied for and will be in place before any investment is made in the investee companies.

Please note that as these will be new companies, there is a requirement for 4 months of qualifying trade to have been completed following the investment before a claim for EIS relief can be made.

Claims for tax reliefs must be made within 5 years of the 31 January following the tax year in which the relevant investment is made (a tax year runs from 6 April to 5 April).

TAX RELIEFS

15


Up to 30% Income Tax Relief

Income tax relief equal to 30% of the amount invested in Qualifying Companies is available to individual Investors, up to a current maximum investment of £1,000,000 (with corresponding maximum relief of £300,000). This is lost if the investments are not held for a minimum of three years. Relief may be carried back to the previous tax year if the investment limit for that tax year has not already been utilised.

Income tax relief is subject to sufficient income tax being payable in the relevant tax year.

Unlimited CGT Deferral

Unlimited CGT Deferral is available for a subscription by an individual in EIS eligible shares (up to the amount of the subscription), made in a period beginning one year before and three years after the Investor has realised a chargeable gain on the disposal of any asset. CGT deferral is available to individuals and trusts, whether or not they qualify for income tax relief under the EIS scheme. Any gains deferred will come back into charge on the disposal of the EIS investment.

For disposals of assets between 23 June 2010 and 2 December 2014 which qualify for Entrepreneurs’ Relief, it is generally not possible to defer such gains under the EIS and for them to qualify for Entrepreneurs’ Relief on the gain coming back into charge. Further advice should be sought in the event you wish to defer any gain on which Entrepreneur’s Relief is available, to ensure that all of the relevant conditions are met.

TAX BENEFITS OF EIS INVESTMENTS

CGT exemption on disposals of the investments is available after the end of the Three Year Period, subject to EIS Income Tax Relief conditions being satisfied throughout that period and EIS Income Tax Relief having been claimed.

100% Relief from Inheritance Tax

100% relief from Inheritance Tax is available under the Business Property Relief rules for shares which are held for at least two years providing that the shares are still held and the company is a trading company for Inheritance Tax purposes at the date of death (and qualifies for Business Property Relief).

Income Tax Relief on Losses

Relief is available against income at the Investor’s marginal tax rate on losses made upon the sale or disposal of any particular EIS investment. Alternatively, a capital loss may be claimed and set off against chargeable gains. In both cases, relief is given after taking into account the benefit of any income tax relief.

Please Note

The availability of these tax reliefs is subject to an Investor being a Qualifying Person for the purposes of the EIS rules, tax status and personal circumstances. In particular, you should take further advice before investing in a Company if you have a previous involvement with that Company.

CGT Deferral Relief is only available once each EIS investment is made and the EIS3 certificate has been obtained.

Please remember that tax rules and regulations are subject to change. EIS investment is not suitable for everyone; you should seek advice from your financial and tax advisers before making an investment.

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SENECA PARTNERS

Initial Fees and Deductions

Seneca will not charge an initial fee to Investors. Instead, the investee companies will pay an initial fee to the Fund Manager equal to 2% (plus VAT, where applicable) of an Investor’s Subscription.

The Custodian charges certain fees which are detailed in the ‘Custodian Fee’ section on page 17. These fees are payable by the Investor.

An initial advice fee can be paid to your financial adviser where you have agreed these with your adviser and instructed us to make payment in the application form for their advisory services. Please note that if you ask us to facilitate an advice fee, it will be by deduction from your initial Subscription.

The Subscription, after the deduction of the Custodian fees and any advice fee, will be the Investment Amount and this will be the figure on which any reliefs are calculated.

Annual Management Fee

Again, Seneca will not charge any annual fee to investors. The investee companies will pay the Fund Manager an Annual Management Fee equal to 2% (plus VAT, where applicable) of the Investment Amount.

Charging the Annual Management Fee in this manner removes the requirement for a portion of an Investor’s Subscription to be retained in cash to cover the Annual Management Fee and therefore increases the amount that we can invest on an Investor’s behalf, and consequently the amounts upon which tax relief may be claimed.

FEES AND CHARGES

17


Specialist Adviser’s and Fund Manager’s Incentive

Normal market conditions, based on the performance metrics of similar managed storage sites, suggest that an exit value of c. £1.30 per £1 invested* may be possible.

Upon exit, for every £1 invested* investors will receive 99.99% of the first £1.20 of any return. If the return exceeds £1.20, the Specialist Adviser and Fund Manager will be incentivised by a larger “catch up” position. This means that investors will also receive 20% of any return beyond £1.20, for every £1 invested*.

So, for example, if a return of £1.30 per £1 invested* is achieved, investors will receive approximately £1.22 (being 99.99% of £1.20 plus 20% of £0.10).

Please note that the target return is not guaranteed and you could get back less than you invest.

* after deduction of the Custodian fees and any advice fee facilitated

Custodian Fees

The Custodian fees and charges are as follows:

1. A transaction fee of up to 0.35% (VAT not applicable) of the value of any shares purchased.

2. A transaction fee of up to 0.35% (VAT not applicable) of the value of any shares sold.

3. An annual administration fee of £55 plus VAT per investor.

Upon your Subscription to the Fund, the Custodian will set aside an amount of £275 plus VAT from the initial Subscription and hold this amount in cash in your name, to cover the annual administration fee for the first five years.

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SENECA PARTNERS

What is the minimum I can invest?

The minimum investment is £25,000.

What is the maximum I can invest?

The maximum amount available for EIS Income Tax Relief is £1,000,000.

Will my Subscription be invested immediately?

No investments will be made until we have received Advanced Assurance from HMRC and raised at least£1 million.

How do I follow the progress of my Investment?

A statement and investment update report will be sent to you every six months. In addition where requested, we will notify you as each individual investment completes on your behalf. The Seneca EIS Team will always be happy to deal with any enquiries.

Will the investee companies borrow money alongside this fund raising?

Assuming that the Fund raises the full £10 million sought in this fundraise, the investee companies do not intend to borrow money to assist with the purchase and fit out of any of the storage sites. The investee companies may, however, take on additional debt funding to assist with short term working capital requirements but do not expect this to exceed 25% of the maximum fundraise.

FAQS

19


FAQS

Can I withdraw money from the Seneca Managed Storage EIS Fund No. 2?

You may give notice to withdraw money at any time by writing to us at 12 The Parks, Haydock, WA12 0JQ or calling us on 01942 271 746. However, investments in unquoted companies are often illiquid and the timing of any sale cannot be predicted. As such, you should be prepared to retain these investments until an appropriate exit is achieved.

Additionally if any investments are exited before the Three Year Period you will be exposed to potential tax consequences such as the repayment of any EIS Income Tax Relief, payment of any previously deferred CGT and payment of CGT on any gain you make on the realisation of investments. In addition, if the exit is achieved via the investee company purchasing the shares within 5 years of your investment, you will be taxed on any profit made at the same rate as would apply to dividends. You should consider seeking independent financial advice before an early exit.

How are capital gains treated?

Any EIS gains on investments held for the minimum Three Year Period are not subject to CGT for Qualifying Investors provided that a claim for EIS Income Tax Relief is made. Also, you can elect to defer capital gains you realise on other assets disposed of within the period running from 3 years before your investment to 12 months afterwards. As mentioned above, if your exit is achieved via the investee company purchasing the shares within 5 years of your investment, you will be taxed on any profit made at the same rate as would apply to dividends.

What should I expect after I invest?

• Welcome pack confirming completion of investment formalities.

• Notification as each individual investment completes on your behalf.

• Half yearly statement and investment update report as at 30th September and 31st March.

• More regular information may be provided upon request.

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SENECA PARTNERS

Deal Flow

Investors should be aware that there is a risk that the Fund Manager may be unable to find a sufficient number of investment opportunities to meet its investment criteria. It may, therefore, be the case that the Fund is not fully invested. The level of returns from investments may be less than expected if there is such a delay insofar as all or part of the Fund is held in cash or near cash investments for longer than expected, or if the returns obtained on investments are less than planned, or if investments cannot be realised at the expected time and values. There can be no guarantee that suitable investment opportunities will be identified in order to meet the Fund’s objectives. Furthermore an insufficient number of investments may lead to Investors’ Subscriptions not being invested in the 2016/17 tax year and therefore EIS tax relief being deferred to later tax years or not materialising altogether.

Risk to Capital

Prospective Investors should be aware that the value of shares in each Investee Company can fluctuate. In addition, there is no guarantee that the valuation of shares will fully reflect the underlying net asset value of the Investee Companies. Your capital and the investment return are not guaranteed and you may not receive back all or any of the money you invest. You should consider the Seneca Managed Storage EIS Fund No. 2 to be a three to five year investment. Investments will be made in unquoted companies. Investments in unquoted companies are likely to be more volatile and present a higher degree of risk to your capital than those on the London Stock Exchange official list. You should not invest in this service unless

RISK FACTORS

You should not invest in this service unless you have thought carefully about whether you can afford it, and whether it is right for you.

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RISK FACTORS you have thought carefully about whether you can afford it, and whether it is right for you. If you are in any doubt, you are strongly recommended to seek advice immediately from an independent financial adviser authorised under the Financial Services and Markets Act 2000 (“FSMA”) who specialises in advising on investments of this type.

Liquidity Risk

Investments in unquoted companies are less liquid than those traded on the main stock exchanges. It is not intended that any income or capital will be returned to Investors during the Three Year Period. After holding the shares in the Investee Companies for the initial Three Year Period, it may still be difficult to realise the shares or obtain reliable information about their value. Consequently whilst we will always attempt to redeem your investment upon receipt of a withdrawal request, this may not always be possible. You should be prepared to leave your investment intact for the medium term, and at least for the minimum three year period.

Debt Finance

If the Fund raises the full £10 million sought in this fundraise, the investee companies do not intend to borrow money to assist with the purchase of any of the storage sites. The investee companies may, however, take on additional debt funding to assist with working capital or any unforeseen costs but do not expect this to exceed 25% of the maximum fundraise. If an investee company does obtain debt funding and there is a default under the terms of an Investee Company’s borrowing, this may result in Investors losing all or part of their investment in the Fund. Typically a bank will be entitled to require the loan to be repaid in certain circumstances which are classed as events of default. These include, without limitation, breaches of certain covenants,

a significant fall in the value of the properties, misrepresentations and the winding up of the Investee Company. In an event of default, the bank would be entitled to enforce its security (including the sale of the properties). Following such enforcement, the Investee Company would only have the right to any residual proceeds after any debt has been repaid and all other amounts payable have been met. In this event there is significant risk that Investors would not recover part of or all of their investment.

Minimum Fundraising

If the Minimum Fund Size is not reached, the Fund will not proceed (subject to the discretion of the Fund Manager) and Investors’ monies will be returned without interest.

Investment Concentration

The Fund Manager’s objective is to raise £10 million (subject to increase at the Fund Manager’s discretion) for the Fund and this will mean that the Fund will aim to invest in up to 2 Investee Companies. If the Fund only raises £2 million (the Minimum Threshold) then the size of the Investments will be smaller and also the number of Investments will be reduced. This means that an Investor’s Subscription will be concentrated on one Investee Company thereby increasing the risk profile of the Fund. An adverse investment return from one Investee Company can substantially impact on the amount returned to Investors.

Current Legislation

Rates of tax, tax benefits and allowances described in this document are based on current legislation and HMRC practice and depend on personal circumstances. These may change from time to time and are not guaranteed. Seneca Partners

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does not provide advice and potential Investors are recommended to seek specialist independent tax and financial advice before investing. The Seneca Managed Storage EIS Fund No. 2 has been designed with UK resident taxpayers in mind. If you are not resident or ordinarily resident in the UK for tax purposes, it is not appropriate or advantageous for you to invest in the Seneca Managed Storage EIS Fund No. 2.

EIS Approval

We will invest in companies that have received Advanced Assurance prior to investment, but please be aware that there is no guarantee that such companies will remain Qualifying Companies at all times thereafter, or that EIS tax reliefs will be available to Investors. There are circumstances in which an Investor could cease to qualify for the taxation advantages offered by the EIS. If a Qualifying Company ceases to carry on a Qualifying Trade during the three year period, this could prejudice its qualifying status under the EIS. In addition, if a Qualifying Company does not employ the funds made available to it within the deadlines set out in the EIS rules, it would be in breach of those rules and the tax advantages would be withdrawn. The situation will be closely monitored with a view to preserving each Qualifying Company’s EIS status, but this cannot be guaranteed. A failure of a Qualifying Company to meet the qualifying requirements for the EIS could result in:

• Investors being required to repay the 30% Income Tax relief received on subscription plus interest on the same;

• a liability to CGT on a disposal of shares; and

• any deferred gain crystallising.

Early Exit

In exceptional circumstances, the Fund Manager may decide to dispose of a holding in an investee company that has been held for less than 3 years, where it is believed to be in line with the Investment Objective. (Please see Schedule 1 on page 17 of the Seneca Managed Storage EIS Fund No. 2 application form).

If the Fund Manager disposes of part or all of the shares held on behalf of an Investor in an investee company that have been held for less than 3 years, the tax reliefs and tax benefits of EIS investment will be lost in relation to the shares sold. This may impact on an Investors own tax position and therefore the impact of this risk should be carefully considered by an Investor prior to investing in the Fund.

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Property Development.

Investment in commercial property, in which the Investee Companies will be involved, involves significant risk associated with the progression of building works. The Investee Companies will have to obtain the necessary permissions, approvals and legal consents, and for the storage sites to be built to and fitted out to the required specifications and a good standard.

Any new build development or refurbishment may encounter site problems or technical issues that were previously unknown. There are no guarantees that the Investee Companies will obtain all necessary planning consents or be able to acquire one or more of the properties.

All or any of the above can have a significant impact on the ability of the Investee Companies to make a profit.

Opening New Sites

Sites can take varying levels of time to reach the planned occupancy levels. The rate at which the planned occupancy rates are achieved, if they are achieved at all, may differ significantly from the assumptions made in the business models, thereby affecting the timing of an exit and/or the sale price achieved.

It is also possible for sites to be loss making. There are many factors that cause a site to lose money and it is possible in certain circumstances to address these and improve performance. If a site makes a loss and the performance cannot be turned around, it is possible that the site will need to be sold at a loss or written down in value.

Property Market

The property market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including investor/buyer supply and demand, that are beyond the control of the Investee Companies. The Fund Manager cannot predict whether the Investee Companies will be able to sell the sites for the price or at the time envisaged in the business plan.

Site Profitability

As well as sales, site profitability is impacted by costs incurred. Many factors can impact costs including inflation, changes to utility costs, marketing spend, maintenance expenditure and rates reviews. As a result, site profitability could be different to the levels projected in the business plans.

Competition

A competitor can open near to one of the sites at any point in the project and impact upon the profitability of a site.

Site Acquisition

The UK property market is highly competitive. It is possible that each or one of the Investee Companies will acquire a different number of sites to the number envisaged in the business plan. It is also possible that the purchase price paid for sites and the capital expenditure required to fit out those sites out will be materially different to the levels built into the business plans.

PROPERTY AND MANAGED STORAGE SECTOR RISKS

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SENECA PARTNERS

We provide a range of services to a number of different types of client. Investors are one such type of client. Where reference is made to ‘a client’ or ‘clients’ in the following paragraphs, this includes ‘an Investor’ or ‘Investors’ where appropriate.

Conflicts of interest may occur between a client and us, including our managers, employees, appointed representatives, clients of appointed representatives or any other persons directly or indirectly linked to us; or between two or more clients.

Treating Customers Fairly is central to our core values. We have an embedded culture that understands what is acceptable and what is unacceptable behaviour. As such, conflicts of interest and the identification / management / mitigation thereof are central to this philosophy and culture.

Whilst undertaking our usual activities and services, an actual or potential conflict may arise when our interests and those of our clients are directly or indirectly in competition.

When might a conflict of interest occur?

Here are some examples of circumstances in which general types of potential conflicts of interest may arise:

• We undertake investment business for other clients;

• A director or employee of ours is a director or partner of a company that we have invested in on behalf of a client;

CONFLICTS OF INTEREST

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CONFLICTS OF INTEREST • A director or employee of ours is involved in the management of a company that we have invested in on behalf of a client;

• A transaction is effected, on behalf of a client, in units or shares of a fund or company of which a director or employee of ours is the manager, operator or adviser

• A transaction is effected, on behalf of a client, in securities what we (or a director or employee of ours) is also trading or has previously traded or has a long or short position;

• We may, when acting as agent for a client, match an order of the client with an order of another client for whom we are also acting as agent.

How Do We Manage Conflicts of Interest?

We have put a number of systems and controls in place to ensure Investors are always treated fairly. The general nature and/or source of any conflicts will be disclosed to clients before undertaking business in sufficient detail to enable the client to make an informed decision about the service in the context in which the conflict has arisen.

It is not always possible to prevent actual conflicts of interest from arising. In that case, we will try to manage the conflicts of interests in a number of ways. These include:

Segregation of Duties

Our Investment Committee is responsible for reviewing any new trading proposals for the various companies in which our Managed Storage EIS Fund invests and ensuring that they are in the best interests of our Investors. Separately, each of the companies that are managed by us have a committee member who represents their interests to the Investment Committee. That committee member will be not be involved in the final decision as to whether an investment should be made.

Conflicts Committee

Our Risk Committee acts as our Conflicts Committee. It considers proposals that could give rise to conflicts of interest and decides whether, in light of the conflicts, the basis of the proposals is appropriate. Their role is to ensure that despite the existence of conflicts of interest, we never compromise the fair treatment of our Investors.

We take the management of any potential conflicts of interest very seriously and in certain circumstances, for example where we believe the consequences of a conflict of interest to create client detriment, we are prepared to decline to take on a new client or transaction.

We maintain a ‘Register of Potential Conflicts of Interest’ in which we record any potential conflicts of interest we are or become aware of, along with details of what action has been taken to manage them.

We update our ‘Conflicts of Interest Policy’ and ‘Register of Potential Conflicts of Interest’ as necessary on an ongoing basis and formally review our arrangements annually.

We believe that the Seneca Managed Storage EIS Fund No. 2 is a compelling solution to the issues Investors face in the current environment of low interest rates, modest economic growth and the lack of opportunities to mitigate personal tax.

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We believe that the Seneca Managed Storage EIS Fund No. 2 is a compelling solution to the issues Investors face in the current environment of low interest rates, modest economic growth and the lack of opportunities to mitigate personal tax.

If you wish to invest in the Seneca Managed Storage EIS Fund No. 2, please complete and return the Application Form to The EIS Team at Seneca Partners Ltd, 12 The Parks, Haydock, Merseyside, WA12 0JQ. You may invest by cheque (which should be payable to “The Share Centre – Seneca Managed Storage EIS” or via bank transfer. If the latter, we will provide transfer instructions to you once the Application formalities have been completed.

The Application Form contains a copy of the Investment Management Agreement. Please read it carefully in order to familiarise yourself with the terms and conditions of your proposed investment. By completing an Application Form you are entering into the Investment Management Agreement as an Investor.

It is recommended that you take independent financial, legal and taxation advice before making an investment.

NEXT STEPS

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DEFINITIONS

Advance Assurance

HMRC offer a free service to companies who intend to raise money under EIS or SEIS whereby HMRC will provide an opinion as to whether, following an application by the company, the company’s proposed share issue would qualify for the EIS/SEIS tax reliefs.

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager. In this case this refers to Seneca Partners Ltd

AIFMD The Alternative Investment Fund Managers Directive (2011/61/EU)

Applicable Laws Relevant UK laws and FCA Rules.

Associate Any person or entity who is under the control of another person or entity.

CGT Deferral ReliefEIS reinvestment (deferral) relief for chargeable capital gains under section 150C and schedule 5B TCGA.

CGT Capital Gains Tax.

CustodianThe Share Centre Limited, a company registered in England and Wales, whose registered office is at Oxford House, Oxford Road, Aylesbury, Buckinghamshire, HP21 8SZ.

EIS or Enterprise Investment Scheme

Enterprise Investment Scheme as set out in Part 5 of ITA and sections 150A-D TCGA and schedule 5B TCGA.

EIS Carry Back ReliefEIS Income Tax Relief against an individual’s income tax liability for the tax year preceding that in which shares in Qualifying Companies are issued pursuant to Section 158(4) ITA.

EIS Income Tax Relief Relief from income tax pursuant to Section 158 ITA.

FCA Financial Conduct Authority.

FCA RulesThe FCA Rules made under powers given to the FCA by the Financial Services and Markets Act 2000.

FundThe Seneca Managed Storage EIS Fund No. 2. All investments and cash to which an Investor is beneficially entitled and which is held in the Fund.

Fund Manager

Seneca Partners Limited (a company registered in England and Wales with CRN: 07196273, FCA Authorised Representative No: 583361), whose registered office is at 12 The Parks, Haydock, Merseyside, WA12 0JQ being the party responsible for the management of each Investor’s holdings.

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Gross Investment The amount an Investor invests before the deduction of any fees or charges.

HMRC HM Majesty’s Revenue & Customs.

Investment AmountThe amount an Investor invests after the deduction of Custodian Fees (1 and 3, as detailed on page 17) and any advice fee agreed with their financial adviser.

Investment Committee The investment committee appointed by the Fund Manager.

I.M. or Information Memorandum This information memorandum, excluding any accompanying document

InvestorAn individual who completes an Application Form which is accepted by the Fund Manager.

Investee Company Companies in which the Fund invests.

Investment Management Agreement

The agreement entered into by an Investor and the Fund Manager (Seneca Partners).

ITA Income Tax Act 2007.

Minimum ThresholdThe minimum amount that the Fund must raise before any investment is made in any Qualifying Company. In the case of the Seneca Managed Storage EIS Fund No. 2 this is £1 million.

Nominee/Nominees Share Nominees Limited, a nominee company that will hold Investments on behalf of the Investors.

Qualifying Company/ies Companies that qualify under EIS under s.180 ITA.

Qualifying Trade A trade which is a qualifying trade within the meaning of Part 5, Chapter 4, ITA.

Small Authorised AIFMAn Alternative Investment Fund Manager that is authorised by the FCA and whose funds under management are below the threshold set out in Schedule 3 of the AIFMD. In this case, this refers to Seneca Partners Ltd.

SMEs Small to medium sized UK companies.

Specialist Adviser SureStore Consultants Ltd

SubscriptionThe amount an Investor invests before the deduction of any fees or charges or the facilitation of any advice fee to their Financial Adviser.

TCGA Taxation of Chargeable Gains Act 1992.

Three Year Period The three years following the point at which the Fund invests in an Investee Company.

VAT Value Added Tax.

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NOTES


Seneca Partners Limited is authorised and regulated by the Financial Conduct Authority.

Version 2.0 February 2017

Seneca Partners Limited12 The Parks, Haydock, WA12 0JQ.

T: 01942 271 746F: 01942 275 848E: [email protected]: www.senecapartners.co.uk

the seneca managed storage eis fund no. 2€¦ · the seneca managed storage eis fund no. 2...

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