The Calculus EIS Fund and the Calculus VCT (“The Funds”) may not be suitable for all investors. Potential investors are recommended to seek independent financial and tax advice before investing. Please note that Calculus Capital is not able to provide you with advice about whether you should invest in the Funds.
As with many investments, there are risks associated with investing in the Funds. We have tried to explain these risks as clearly as possible below:
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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
You could lose all the money you invest
- Investments made by the Calculus EIS Fund will be in shares in early-stage businesses. Investors in these shares often lose 100% of the money they invested, as many early-stage businesses fail.
You are unlikely to be protected if something goes wrong
- Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here. https://www.fscs.org.uk/check/investment-protection-checker/
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here. https://www.financial-ombudsman.org.uk/consumers
You won’t get your money back quickly
- Even if the businesses the Fund invests your money in are successful, it may take several years to get your money back.
- The most likely way to get your money back is if the businesses invested in by the Fund are bought by another business or list their shares on an exchange such as the London Stock Exchange. These events are not common.
- Early-stage businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
Don’t put all your eggs in one basket
- Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
The value of your investment can be reduced
- The percentage of each investee company that the Fund owns will decrease if the business issues more shares. This could mean that the value of your investment in each investee company reduces, depending on how much the business grows. Most early-stage businesses issue multiple rounds of shares.
- These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.
Tax advantages not guaranteed
- Whilst it is the Fund’s intention to invest in companies qualifying under EIS legislation, Calculus cannot guarantee that all investments will qualify for EIS relief (or IHT relief) or, indeed, if they do initially, that they will continue to do so throughout the life of the investment. The tax advantages of investing through the Fund are therefore not guaranteed.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here. https://www.fca.org.uk/investsmart
- The Funds are not a UCIS.
- Having regard to the Fund’s investment objectives and the tax reliefs available, investment in the Funds must be considered as a long term investment.
- Investors may not receive back the full amount that they have invested. The value of each investment made by the Funds and the income from shares in the Calculus VCT may fall, and there is no guarantee as to whether any one of the investments may lose all of its value.
- Success of the Funds will depend in part upon the skill and expertise of the Manager and the continued availability of the senior investment team.
- Investments in shares in unquoted companies are not readily marketable and the timing of any realisation cannot be predicted. You should not invest in the Funds unless you have carefully thought about whether you can afford it and whether it is right for you, having had the opportunity to take independent advice. You should be prepared to leave an EIS investment in tact for significantly longer than three years. Investors disposing of VCT Shares within five years of subscription are likely to be subject to claw-back of any income tax reliefs originally obtained.
- The past performance of investments managed by the Manager should not be regarded as an indication of the future performance of investments made by the Funds.
- Although the Manager has been successful in identifying investments in the past, it may be unable to find a sufficient number of attractive opportunities to meet its investment objectives, including achievement of its target IRR, or fully invest the Funds’ capital.
- The fact that shares in unquoted companies are, in general, not publicly traded or freely marketable may mean that proper information to determine the current value of investments may not be available.
- The market price of the VCT Shares may not fully reflect, and will tend to be at a discount to, their underlying net asset value.
- Many unquoted companies requiring venture capital are commonly experiencing significant change and carry higher risk than would an investment in larger or longer established businesses.
- Legal and regulatory changes could occur during the life of the Funds which may adversely affect the Funds or their investors.
- VCT qualification requirements may not be met or maintained.
- Technology or scientific research related risks may be greater in some companies although this may be justified by the prospect of higher expected returns from those investments.
- Many unquoted companies have small management teams and are highly dependent on the skills and commitment of a small number of individuals.
- Rates of tax, tax benefits and allowances described in this Memorandum are based on current legislation and HM Revenue & Customs practice. These may change from time to time and are not guaranteed. This investment may not be suitable for all investors. Calculus Capital does not provide advice and potential investors are recommended to seek specialist independent tax and financial advice before investing. The Fund has been designed with UK–resident taxpayers in mind. If you are not resident or ordinarily resident in the UK for tax purposes, or if you are a US person, it may not be appropriate or advantageous for you to invest in the Calculus Capital EIS Fund or Calculus Knowledge Intensive EIS Fund.
- Whilst it is the intention of the Manager to invest in companies qualifying under EIS legislation, the Manager cannot guarantee that all investments will qualify for EIS relief or IHT relief or, indeed, if they do initially, that they will continue to do so throughout the life of the investment.
- Your obtaining income tax relief is subject to your making the proper filings with HM Revenue & Customs within the requisite time periods and you may lose such relief if you do not make such filings.
- The dates on which initial income tax relief, CGT deferral relief and inheritance tax relief relating to investment in EIS Qualifying Companies are available will vary depending on the date on which the Fund makes Qualifying Investments.
- Following an investment in an EIS Qualifying Company, the continued availability of EIS Reliefs to the investor relating to any individual investment depends on compliance with the requirements of the EIS legislation by both the investor and Investee Company.
- Where an investor or an EIS Qualifying Company ceases to maintain EIS status in relation to any individual investment, this could result in the loss of some or all of the available reliefs in relation to that investment (together with a possible charge to interest thereon).
- Following the admission of an Investee Company to the main market of the London Stock Exchange, (but not to trading on the AIM or PLUS markets) or certain overseas stock markets, Business Property Relief for Inheritance Tax purposes will cease.
- The levels and bases of reliefs from taxation may change or such reliefs may be withdrawn. The tax reliefs referred to in this document are those currently available and their value depends on the individual circumstances of investors.
- Where an exit is facilitated through a share buyback by the Investee Company, this may be treated as a taxable income distribution unless certain criteria are met, including that the Investor is a UK resident and has held the shares for a minimum five-year period.
The Fund Manager will normally allocate investments to Investors proportionate to their respective Contributions to the Fund. As investments arise at different times, the contributions of a later Investor in the Fund may not be invested in all or any of the
Investee Companies in which an earlier Investor is invested. Similarly, an early Investor in the Fund may not have sufficient uninvested cash in his Portfolio to participate in the same investments as a later Investor.
The Fund Manager may depart from this basis of allocation if, in its absolute discretion, it considers it appropriate to do so having regard to the overall investment policy of the Fund and the benefit of creating diversity within the Portfolios of Investors.