Stellar launches tax efficient Technology EIS Fund

Stellar Asset Management, the specialist asset manager, today announces the launch of The Stellar Technology EIS Fund ("the Fund"). The Fund intends to invest in UK technology companies which are being starved of new capital for expansion. These companies will have an established revenue stream and proven technology. 

Stellar believes that demand for Enterprise Investment Schemes (EIS) will increase both this year and next as high earners seek alternative tax efficient investments. Valuations of technology companies are currently depressed and there are few experienced providers of capital actively investing in this sector.

The tax benefits of investing through an EIS offer means that investors can benefit from 20% income tax relief, up to 40% capital gains tax deferral and the shares are 100% exempt from inheritance tax after two years.

Stellar has joined forces with a specialist management team, Accretion Capital, who have been well known to them for many years, to launch the new Fund. Accretion Capital was set up in 2007 by Michael Bourne and Stephen Bellamy to focus on technology companies, their particular area of investment and management expertise. Mike Bourne, with more than 20 years fund management experience, is one of the most recognised names in technology investing. His previous business won numerous industry awards including TechMARK Fund Manager of the Year on three occasions. Steve Bellamy has extensive experience not only as a strategic investor but also in managing technology businesses in both an executive and non-executive capacity.

"We are delighted to be working with the Stellar team on this fund as we strongly believe technology represents an island of growth in a low growth world", Mike Bourne says. Jonathan Gain, Chief Executive, Stellar Asset Management, says "We are delighted that Stellar's partnership with Accretion makes it possible to offer The Stellar Technology EIS Fund for retail investors. Mike Bourne and Steve Bellamy are an award-winning technology investment team and to be able to offer their expertise within such a tax-efficient investment is a big coup for Stellar and more importantly for private investors.

The minimum investment for the Fund is £10,000 and initial commission of 2.5% and 0.5% trail are available for authorised intermediaries. Stellar is offering a 2.0% discount on the initial fee for investments made in the fund before 31 January 2010.

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Notes to the Editor

Stellar Asset Management Limited

Stellar Asset Management provides innovative investments that exploit diverse and interesting markets. The directors of Stellar have been responsible for the creation and management of a wide range of investment opportunities for the retail investment market. All directors were previously employed by Close Brothers Investment and offer investors a combined 40 years of investment management experience. They specifically have experience in developing, marketing and managing property and tax efficient funds.

Accretion Capital LLP

Accretion Capital LLP, formed in 2007, is a specialist provider of capital and advice to emerging European technology companies. Its partners have extensive skills and experience in this sector and they seek to provide capital and management expertise to companies in the European technology sector with the aim of enabling them to fulfill their potential on a self sustaining basis.

Mike Bourne, Chief Investment Officer at Accretion is one of the most recognised names in technology investing and made his name as manager of the Finsbury Technology Trust which he ran from 1995 to 2007. Mike was Chief Investment Officer at Reabourne Technology Limited which won the following awards.

Steve Bellamy, Chief Executive, has15 years operational & strategic business experience (in both an executive & non-executive capacity) and 16 years investment experience (both quoted & venture/private equity related). He was instrumental in Sherwood International's turnaround from being a diverse UK centric group with losses of £2 million on revenue of £26 million (in 1993), to being a leading technology solutions supplier to the global insurance industry and UK government with revenue of £55 million and profits of £ 8.5 million (in 2000). Steve is also Chairman of The First Close Technology Fund and non-executive director of two private and two AIM quoted technology companies.

Pierce Casey, Chairman, is a private equity specialist and an entrepreneur with 25 years investment experience including having been a director of Alchemy Venture Partners and of Apax Partners.

The First Close Technology Fund

This EIS fund was launched in May 2000, raising approximately £9 million. Its objective was to be a feeder fund for technologically advanced companies seeking early stage capital before moving to a wider public placing of shares. At the time of launch this strategy of investing in early stage companies was selected because quoted investments had risen and were rising significantly in value during the "dot com" market boom. However, within only a few months of closing this fund, the dot com boom had turned to dot com bust and any thought of easy investment gains had evaporated with it.

As at 30 June 2009, investors in The First Close Technology Fund have received £1.86 for every £1 invested (including income tax relief and 8p for the remaining investments). Out of the 15 original investments made in 10 different companies, 12 had been realised and only 3 remained. The fund's internal rate of return to 30 June 2009 was, after allowing for the EIS income tax relief, 16.8%. This compares to a 63.9% decrease in the value of the FTSE techMARK 100 index over the same period. 

Summary of Tax Reliefs

The Stellar Technology EIS Fund will be an "unapproved" fund and therefore tax relief will be available to investors on the date that investments are made by the Fund. 

• Income Tax Relief at 20% up to a maximum of £500,000 invested in any one tax year. 

• Up to 40% Capital Gains Tax Deferral if an EIS investment is made within one year prior or three years after the gain. 

• No capital gains tax on disposal of an EIS investment (where the conditions have been satisfied throughout the relevant period). 

• Exemption from Inheritance Tax after two years. 

• Loss relief available on any failed investment which limits any loss to 48p for every £1 invested for 40% marginal rate income tax payers and 40p for every £1 invested for 50% marginal rate income tax payers. 

The availability of the above reliefs will be subject to the investor and investee company satisfying the EIS conditions at the time of issue of shares as well as for the three years thereafter or three years following commencement of trading if later. Furthermore, the tax treatment depends on the individual circumstances of each investor and may be subject to change in the future.