1. How innovative thinking can create value for advisers and clients Simplybiz R2 Investment Events Mike Slater For use of the professional advisers only and not to be relied upon by retail clients

2. And you can tell it is because the whole thing looks like the small print we usually try to limit. But there are some things we should let you know about before we get to it. The following presentation is for investment professionals only and should not be relied upon by retail clients. Please do not forward this document wholesale to anyone who is not a professional adviser. If you take excerpts for use with clients, please ensure you’ve take responsibility for the document under the financial promotions rules and identified yourself as the issuer. Some products mentioned in this presentation invest in AIM shares or unquoted companies which are likely to have higher volatility and liquidity risk than securities on the London Stock Exchange Official List. Information is current as at July 2014 and is sourced to Octopus Investments Limited unless otherwise stated. The information you’re about to see is not a recommendation. The decision to invest (or not) should not be based on this document alone. Do your research, talk to our experts and make an informed decision. Octopus accepts no liability for any direct, indirect or consequential losses arising from decisions to act or not act based solely on this document. By investing in these products capital is at risk and investors may not get back the full amount invested. All statements and opinions are current at the date of publication and may not be applicable thereafter. They are based on our analysis of data that we believe to be objective and reliable. However, we accept no liability in respect to its completeness and accuracy (except where incompleteness or inaccuracy is caused by gross negligence or fraud). We try to avoid conjecture – neither past performance nor forecasts are a reliable indicator of future results. Rates of tax, tax benefits and allowances are based on current legislation and HMRC practice and depend on personal circumstances. The availability of tax reliefs also depends on underlying investee companies maintaining their qualifying status. These can change and are not guaranteed. Nothing in this document should be regarded as constituting legal, taxation, investment or other advice. Prospective investors are advised to consult their own professional advisers before contemplating any investment. Octopus Investments Limited is authorised and regulated by the Financial Conduct Authority. 20 Old Bailey, London EC4M 7AN | T: 020 7710 2800 | F: 020 7710 2801 | www.octopusinvestments.com IMPORTANT INFORMATION

3. LEARNING OBJECTIVES KEY LEARNING POINTS FROM THIS SESSION Following this presentation, you will be able to: Understand the structure and tax reliefs associated with Enterprise Investment Schemes (EIS), Venture Capital Trusts (VCT) and Business Property Relief (BPR) Identify client planning opportunities that EIS/VCT and BPR have the potential to provide Recognise how tax planning can help broaden adviser propositions and support customers 3

4. THINKING OUT LOUD…….. MARKET Competition intensifying Providers offering Direct to Consumer propositions Strong brands and customer support tools Commoditisation of investment solutions OPPORTUNITY TO REVIEW YOUR PROPOSITION 4

5. Source: Octopus/Tony Wickenden Research by Tony Wickenden, Technical Connection suggests: What they perceive as Difficult/Complex Estate Planning Investment Planning (personal, corporate and trustee) Pension Planning Tax Planning DO YOU KNOW WHAT YOUR CLIENTS ARE REALLY PREPARED TO PAY FOR?

6. ENHANCING YOUR PROPOSITION The first building block to be laid is to ask your clients what they want This must be delivered in the most efficient, automated manner possible, but you should also consider how you will differentiate yourself against your competition You can provide ‘over delivery’ through the provision of new planning ideas that your clients may not be used to/familiar with These services should allow you to: Engage in more income producing work Demonstrate real value in return for your client’s fees Tie in your most valuable clients Create a (stronger) link with your clients’ solicitors and accountants 6

7. ONCE A PROBLEM, NOW A £14 BILLION OPPORTUNITY 7 £5.6 BILLION Over 85s are the fastest growing age group in the UK (ONS, March 2014) £3.5 BILLION 2013/14 2018/19 OBR FORECAST Dec 2013 *Value of IHT HMRC receipts OBR FORECAST Dec 2013*

8. BUSINESS PROPERTY RELIEF

9. 100% RELIEF FROM IHT ON QUALIFYING BUSINESS PROPERTY Established – part of primary legislation since 1976 Non-aggressive Supportive of government objectives Applies to unquoted trading businesses and some AIM-listed businesses SHARES MUST HAVE BEEN HELD FOR TWO YEARS AND AT THE TIME OF DEATH Spousal transfer on death Replacement property relief 9

10. BUSINESS PROPERTY RELIEF WHY IT’S GOOD Speed: Effective in 2yrs Access: Regular or ad hoc withdrawals (subject to liquidity) Control: Your capital under your control Simplicity: No complex structures or underwriting 10

11. 11 ESTATE PLANNING OPTIONS – WHERE DOES BPR FIT IN? Discounted Gift Trusts Business Property Relief Gifting/Trust Strategies Insurance/ Assurance Immediate IHT advantage Access to income Speed (2 years) Access & control Doesn’t use NRB Non-aggressive Suitable for POA Broad range of alternatives on the market Familiarity Access/Control unaffected Non-aggressive Unsuitable for very elderly Some adviser charging complications Unfamiliarity AIM solutions too risky/volatile for some shorter-term investors Use up NRB (with 20% CLT on excess) Slow (7 years) Unsuitable for POA Unsuitable for very elderly (underwriting not possible) Can be costly IMMEDIATE 2 YEARS7 YEARSWHOLE OF LIFE PROS CONS Speed of relief

12. OPPORTUNITIES WITHIN YOUR CLIENT BANK

13. A NOTE ON THE FOLLOWING SCENARIOS 13 The following client tax scenarios are designed to assist you in developing your own client strategy where appropriate. Among other things, you will need to consider the eligibility and timings of tax reclaims and tax liabilities depicted, and also the impact of charges (i.e. initial fee and ongoing fees, including administration fee and an annual management charge), as relevant to the products(s) represented and/or any specific product you have chosen. For more details, please see the relevant product literature. Our examples are for illustration purposes only and assumes no loss or gain on the investment, although fluctuations will apply in practice. The tax situation should be assumed as is stated.

14. 14 ACCESS THE PROBLEM Client in their late 60s, wants IHT protection whilst retaining control Needs availability of an income for long-term care in later life THE PROBLEM Client in their late 60s, wants IHT protection whilst retaining control Needs availability of an income for long-term care in later life A POTENTIAL SOLUTION 100% IHT exemption after two years (provided the investments are held at time of death) Client retains full access to their investment Regular withdrawals to help towards care costs when needed in the future A POTENTIAL SOLUTION 100% IHT exemption after two years (provided the investments are held at time of death) Client retains full access to their investment Regular withdrawals to help towards care costs when needed in the future 14 For illustrative purposes only. Access subject to availability of liquidity.

15. 15 CLIENT IN ILL HEALTH PROBLEM ESTATE OF £1.7 MILLION, £700,000 IN LIQUID ASSETS Client had heart problems 3 years ago Would fail medical underwriting for whole of life insurance Would receive nil discount on a DGT Spouse in good health PROBLEM ESTATE OF £1.7 MILLION, £700,000 IN LIQUID ASSETS Client had heart problems 3 years ago Would fail medical underwriting for whole of life insurance Would receive nil discount on a DGT Spouse in good health A POTENTIAL SOLUTION BUSINESS PROPERTY RELIEF No underwriting Provides access Inter-spousal transfer available if he dies Combine capital preservation and growth focused solutions? A POTENTIAL SOLUTION BUSINESS PROPERTY RELIEF No underwriting Provides access Inter-spousal transfer available if he dies Combine capital preservation and growth focused solutions? 15 For illustrative purposes only. Access subject to availability of liquidity.

16. A POTENTIAL SOLUTION Transfer ISAs to Octopus AIM Inheritance Tax ISA Invest DGT income in ISA (use annual allowance) A POTENTIAL SOLUTION Transfer ISAs to Octopus AIM Inheritance Tax ISA Invest DGT income in ISA (use annual allowance) CLIENTS WITH DGT THE PROBLEM Client has significant DGT with income set up Also has ISA and other assets totalling £800,000 that provide adequate income THE PROBLEM Client has significant DGT with income set up Also has ISA and other assets totalling £800,000 that provide adequate income For illustrative purposes only. Access subject to availability of liquidity.

17. POWER OF ATTORNEY CASES POWER OF ATTORNEY Delegates to attorney to act on behalf of donor Can include investment powers RESTRICTIONS Gifting restrictions apply Placing a policy under trust for a third party constitutes a gift Court of protection approval required for deprivation POWER OF ATTORNEY Delegates to attorney to act on behalf of donor Can include investment powers RESTRICTIONS Gifting restrictions apply Placing a policy under trust for a third party constitutes a gift Court of protection approval required for deprivation POTENTIAL SOLUTION Attorney invests on behalf of donor in BPR solution IHT exempt after two years No gifting required Regular and ad hoc withdrawals available for donor Access maintained Strategies that target capital preservation are available POTENTIAL SOLUTION Attorney invests on behalf of donor in BPR solution IHT exempt after two years No gifting required Regular and ad hoc withdrawals available for donor Access maintained Strategies that target capital preservation are available 17 For illustrative purposes only. Access subject to availability of liquidity.

18. OTHER INSTANCES WHERE BPR COULD BE OF USE Business sale (replacement) Shares / property pregnant with gains Immediate Post-Death Interest Trusts Encashing Investment Bonds Loan Trust reversion Succession planning Seeding Discretionary Trusts 18

19. VENTURE CAPITAL TRUST AND ENTERPRISE INVESTMENT SCHEMES

20. 20 HOW DO EIS AND VCT’S COMPARE? EISVCT INCOME TAX RELIEFUp to 30% MINIMUM TERM3 YEARS5 YEARS MAXIMUM INVESTMENT*£1m (plus £1m carry back)£200,000 MINIMUM INVESTMENT*£25,000£5,000 DIVIDENDSTAXEDTAX EXEMPT GROWTHTAX EXEMPT CGT DEFERRALYES – NO MAXIMUM IHT EXEMPTION (BPR)AFTER 2 YEARS LOSS RELIEFYES *These figures are reflective of Octopus products only. For illustration purpose only. No loss or gain is shown on the investment. The investment will be subject to an initial fee and ongoing fees, including administration fee and an annual management charge. Tax relief is on investments up to £200,000 (VCT) and £1,000,000 (EIS) in a tax year and assuming shares are held for five and three years respectively. 20

21. 21 Rental Income Dividends Remittance Tax Chargeable Event Bond Salary Pension VCTs offer tax relief on income from multiple sources EARNED INCOME SAVINGS INCOME Employed clients complement pension Landlords who can’t use pensions Business owners extracting profit Retirees who want flexible drawdown WHO MIGHT BENEFIT FROM VCT? *Excluding deferred state pension (Finance Act 2005) Please remember that VCTs are high risk products and we always recommend investors seek independent investment and tax advice before considering these products

22. 22 The following client tax scenarios are designed to assist you in developing your own client strategy where appropriate. Among other things, you will need to consider the eligibility and timings of tax reclaims and tax liabilities depicted, and also the impact of charges (i.e. initial fee and ongoing fees, including administration fee and an annual management charge), as relevant to the products(s) represented and/or any specific product you have chosen. For more details, please see the relevant product literature. Our examples are for illustration purposes only and assumes no loss or gain on the investment, although fluctuations will apply in practice. The tax situation should be assumed as is stated. A NOTE ON THE FOLLOWING SCENARIOS

23. Company Director currently receiving income of £50,000 per year (40% tax payer) Additional profit in company of £60,000 that he would like to extract Requires a tax efficient method of extraction For illustrative purposes only and assumes no gains or losses on investments. You will need to consider the eligibility and timings of tax reclaims and tax liabilities depicted, and also the impact of charges (i.e. initial fee and ongoing fees, including administration fee and an annual management charge), as relevant to the products(s) represented and/or any specific product you have chosen. Current income: £50,000 pa (40% tax payer) Additional profit would like to extract: £60,000 PROFIT EXTRACTION FROM A COMPANY 23

24. TAX EFFICIENT PROFIT EXTRACTION USING VCT & EIS Company Profits £60,000 Dividend paid £15,000 additional tax liability £45,000 Net £50,000 EIS/VCT £15,000 income tax relief £50,000 invested in EIS/VCT + £10,000 tax-free cash For illustrative purposes only and assumes no gains or losses on investments. you will need to consider the eligibility and timings of tax reclaims and tax liabilities depicted, and also the impact of charges (i.e. initial fee and ongoing fees, including administration fee and an annual management charge), as relevant to the products(s) represented and/or any specific product you have chosen. Assumes a 40% tax payer. 24

25. Buy-to-let property currently valued at £350,000 Purchased for £250,000 Would like to sell but CGT an issue (£28,000) Ability to defer gains made in previous 3 years! Buy-to-let property £100,000 profit = £28,000 CGT For illustrative purposes only and assumes no gains or losses on investments. you will need to consider the eligibility and timings of tax reclaims and tax liabilities depicted, and also the impact of charges (i.e. initial fee and ongoing fees, including administration fee and an annual management charge), as relevant to the products(s) represented and/or any specific product you have chosen. CGT DEFERRAL: PROPERTY SALE 25

26. For illustrative purposes only and assumes no gains or losses on investments. You will need to consider the eligibility and timings of tax reclaims and tax liabilities depicted, and also the impact of charges (i.e. initial fee and ongoing fees, including administration fee and an annual management charge), as relevant to the products(s) represented and/or any specific product you have chosen. £350,000 PROPERTY FOR SALE £350,000 asset No diversification CGT of £28,000 (28%) deferred and IHT exempt after two years (40%) £30,000 upfront income tax relief (30%)* £280,000 invested in adviser portfolio (original cost + tax relief) After holding period can utilise 2 x annual CGT exemptions and repeat every year to wipe out gain – CGT also dies with you! RETAIN PROPERTY SELL PROPERTY AND INVEST £100,000 GAIN IN EIS *obtained via adjustment to tax code PROPERTY SALE (CONT’D) 26

27. CLAIMING RELIEFS 27 Business property relief through probate submission. EIS and VCT through adjustment of tax code or self assessment. Relief claimed up to income tax liability. Support from Octopus. HMRC help sheets

28. CONCLUSION Valuable and fast-growing opportunity Aligned with government legislation Range of solutions for different investment objectives Opportunities exist within current client base? We’re here to help 28

29. NEXT STEPS 29 OPPORTUNITIES WITHIN CLIENT BANK CLIENT MEETINGS WEBINAR Presentations CALL YOUR BDM

30. LEARNING OBJECTIVES KEY LEARNING POINTS FROM THIS SESSION Following this presentation, you will be able to: Understand the structure and tax reliefs associated with Enterprise Investment Schemes (EIS), Venture Capital Trusts (VCT) and Business Property Relief (BPR) Identify client planning opportunities that EIS/VCT and BPR have the potential to provide Recognise how tax planning can help broaden adviser propositions and support customers 30

31. OCTOPUS IS HERE TO HELP. If you have any questions or need any help after today’s event, please call us on 0800 316 2067 More information is available at www.octopusinvestments.com