b'Principal risks anduncertainties (continued)EIS and SEIS-qualifying status of regulations and tax relief may be withdrawn. Under the SEISPotential conflicts of interest General risksinvestee companies legislation, the equivalent period in which funds must be spentAlthough there is a policy that sets out how conflicts areProspective investors should not regard the contents of this by SEIS-Qualifying Companies is three years from the date ofmanaged and the circumstances in which conflicts areInformation Memorandum as constituting advice relating If an investee company ceases to carry on business of the typeinvestment and, if funds are not spent in that period, tax relief prescribed for EIS or SEIS-Qualifying Companies during themay be withdrawn. escalated to an appropriate forum, it is important to noteto legal, taxation or investment matters and should consult Three Year EIS or SEIS Period, this could prejudice its qualifyingA sale of Shares in an investee company within the Three Yearthat situations may arise where the interests of the Fundtheir own professional advisers before contemplating any status under the EIS or SEIS. There are other events andEIS or SEIS Periods will result in some or all of the income taxconflict with the interests of other investors, including otherinvestment or transaction. Each party to whom this document matters whereby an investee company may lose its qualifyingand capital gains tax relief available upon subscription forfunds managed by the Mercia Group. The Fund may investis made available must make its own independent assessment status. those Shares becoming repayable to HMRC, any capital gainsin companies in which other funds managed by Mercia mayof the Fund after making such investigations and taking such The situation will be closely monitored with a view towill be subject to CGT and any deferred gain will be broughtinvest or may already hold investments. advice as may be deemed necessary. In particular, any preserving the Investee Companys qualifying status, butback into charge. It is possible for Investors to lose their EIS taxDecisions made by Mercia may be more beneficial to one fundestimates, projections or opinions contained in this document this cannot be guaranteed. A failure to meet the qualifyingreliefs and/or Capital Gains Deferral relief and/or Businessmanaged or advised by Mercia than to another. involve significant elements of subjective judgement, analysis requirements for EIS or SEIS could result in: (Property) Relief by taking (or not taking) certain steps. The Fund may co-invest with third parties or enter into jointand assumptions, and each recipient should satisfy themselvesInvestors being required to repay the 30% (EIS) or 50%Investors are advised to take appropriate independentventures or other structures. Such co-investing may give risein relation to such matters.The contents of this Information Memorandum references (SEIS) income tax relief received on subscription for Sharesprofessional advice on the tax aspects of their investment. to the possibility that a co-investor or partner may at any and interest on the same time have economic or business interests or goals which arethe current laws concerning EIS Relief, SEIS Relief, BusinessAny gain deferred by Capital Gains Deferral through an EISEIS and SEIS tax regime change inconsistent with those of the Fund, or that such person may(Property) Relief, Capital Gains Deferral and Capital Gains take action contrary to the Funds investment objectives.Exemption as at the date of this Information Memorandum. investment coming back into charge liability to CGT if theInvestors should be aware that the tax reliefs regime may beThe entitlement of the Fund Manager to the performanceThese levels and bases of relief may be subject to change. The Shares are sold and a gain is realised changed in the future. fee referred to in Schedule 2 of the Investors Agreement,tax reliefs referred to in this Information Memorandum areInvestors being required to pay CGT on Capital Gainsthose currently available and their value depends on individualpreviously invested through SEIS Re-investment Relief Past performance may create an incentive for the Fund Manager to make morecircumstances.speculative investments on behalf of the Fund than it would Further details of the taxation implications of an investment inThe past performance of previous Mercia EIS funds, or relatedotherwise make in the absence of such a performance basedAll statements of opinion and/or belief contained in this an EIS or SEIS-qualifying Company are set out in Appendix Afunds, is not a guide to future performance and may notcompensation arrangement. The Fund Manager may enterdocument and all views expressed and all projections, of this document. necessarily be repeated. The value of investments and incomeinto fee sharing arrangements with third party marketers,forecasts or statements relating to expectations regarding Assurances will be sought from HMRC and therefore Investeefrom them may go down as well as up and Investors may notincluding placement agents, or other advisers who referfuture events or the possible future performance of the Companies activities should, at least initially, qualify under theget back the amount they originally invested in the Fund. Investors to the Fund, and such marketers may have a conflictFund represent the Fund Managers own assessment and EIS or SEIS regulations. However, there is no guarantee thatForward-looking statements of interest in advising prospective investors whether to invest ininterpretation of information available to it as at the date the formal EIS or SEIS claims will be agreed by HMRC, or thatthe Fund. of this document. No representation is made or assurance such agreement will not be subsequently withdrawn. In thoseInvestors should not place reliance on forward-lookingConflicts of interest may arise in connection with decisionsgiven that such statements, views, projections or forecasts circumstances, subscription monies will not be returned tostatements made by either Mercia or external parties that wemade by the Fund Manager that may be more beneficial forare correct or that the objectives of the Fund will be achieved. Investors. If an Investee Company fails to obtain EIS or SEIS- may reference. This document includes statements that are (orcertain Investors than for others. Prospective investors must determine for themselves what Qualifying Company status, or if it is subsequently withdrawn,may be deemed to be) forward-looking statements, whichIn making such decisions, the Fund Manager intends toreliance (if any) they should place on such statements, views, EIS Relief, SEIS Relief, Capital Gains Deferral Relief, SEIScan be identified by the use of forward-looking terminologyconsider the investment objectives of the Fund as a whole, notprojections or forecasts and no responsibility is accepted by Re-investment Relief and CGT Disposal Relief would not beincluding, but not restricted to the terms believes, continues,the investment objectives of any individual Investor. Mercia Fund Management Limited, or the Mercia Group, in available to Investors or could be withdrawn. expects, intends, may, will, would, should or, in eachrespect thereof.case, their negative or other variations or comparableThe Fund Manager may provide certain Investors with theProspective Investors are strongly advised to conduct their Under the EIS legislation, Qualifying Companies are requiredterminology.opportunity to co-invest in Investments. Potential conflicts may to have employed 100% of their net funds (after the deductionbe inherent in, or arise from, the Fund Managers discretion inown due diligence including, without limitation, the legal and of issue costs) within 24 months after the date of issue ofThese forward-looking statements include all matters thatproviding such opportunities to certain Investors. In addition,tax consequences to them of investing in the Fund.Shares, except where the qualifying activity consists ofare not historical facts. Forward-looking statements involveonce such co-investments are made, the Funds interests and preparing to carry on a trade, in which case the time limit is 24risk and uncertainty because they relate to future events andthose of co-investing Investors may subsequently diverge.months after the date of commencing the trade. If an Investeecircumstances. Forward-looking statements contained in this Company fails to employ this level of funds within the requireddocument, based on past trends or activities, should not beA copy of the conflicts policy is available on request.deadlines, the Investee Company would be in breach of the EIStaken as a representation that such trends or activities will continue in the future.26 27'