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Kreis plaices trust in Cod EIS

KREIS CONSULTING

Johnson Seafarms &#45 Cod 1

Type:
Enterprise investment scheme

Aim:
Growth by investing in a Shetland-based cod farm

Minimum investment:
Lump sum £30,000

Opening/closing date:
January 1, 2004/March 1, 2004

Charges:
Initial 4%

Commission:
Initial 2%

Tel: 0141 5641523

Johnson Seafarms &#45 Cod 1 is an enterprise investment scheme investing in a cod farm which will produce parasite-free cod. Investments which do not make it into Cod 1 will go into Cod 2, an identical issue which will open as soon as Cod 1 closes.

Allenbridge Tax Shelter Research director David Knight thinks this is an interesting EIS with real upside potential &#45 as well as the risk that goes with all new ventures. He says: “This will be the first major cod farm in the UK and is expected to be a world leader. In return for the minimum investment of £30,000, the company project a 50 per cent tax-free return after three years &#45 even without allowing for your income tax saving of 20 per cent and possible capital gains tax deferral relief. The return allows for the costs of buying cod fry, feeding and managing the cycle as well as for a 21 per cent loss of fish and the exercise of options by Johnsons.”

Looking at the investment opportunity in more detail, Knight says: “The business is the brainchild of one of the most successful salmon farming companies in the country. However, now that the price of farmed salmon has fallen thanks to over production, the Johnson brothers who co-founded Johnson Seafarms in Shetland, have moved into marketing their technologies and establishing a large mussel farm. Now they have cracked the tricky task of farming cod.

“Curiously, evidence suggests that farmed cod are healthier and taste better than their wild cousins, who because they are scavengers, pick up unpleasant parasites. The problem has been that baby cod are cannibals &#45 the solution is therefore to feed them plenty of tastier, organically farmed alternatives to one another. There is no doubt that the current shortage in wild cod supplies and an ever-increasing demand must make farmed cod an excellent business opportunity.”

However, assessing the risks of investing in this product Knight says: ” First is the commercial risk that in spite of insurance against disease and disaster, the project fails for some other reason such as the failure of the supply of feed. Second are the risks that the EIS qualification is not obtained or is lost during the period.”

Summing up Knight says: “There are other good EIS offers about at present &#45 both single companies and funds. For pure tax shelter an asset backed pub or nurseries offer may make more sense. This is clearly a speculative investment for very well-off people who are prepared to take the risk as part of a portfolio &#45 the EIS tax wrapper is helpful but should not be the main reason for going into this.”

BROKER RATINGS

Suitability to market: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average

Overall 8/10

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