Octopus launches £20 million fundraising for AIM VCTs
Octopus Investments (‘Octopus’), one of the UK’s leading retail fund management companies specialising in smaller company investing, has today announced the launch of a £20 million joint fundraising by the two Octopus AIM Venture Capital Trusts (VCTs) with scope for the offer to be extended to £30 million.
The latest fundraising offers investors the opportunity to invest into both Octopus AIM VCT and Octopus AIM VCT 2, both of which provide investors with potential income through their established dividend policies. Octopus AIM VCT targets a 5p dividend or 5% yield a year, whichever is the greater, while Octopus AIM VCT 2 targets a 5% yield with a minimum of 3.6p annually. This latest offer also sees Octopus offering a 2% discount on fees for those who invest in the VCTs before the end of September.
The latest fundraising has been launched on the back of increased demand from investors for year round access to VCTs and the investment opportunities available on the Alternative Investment Market (AIM) as more companies float on the market and seek to raise growth equity capital. In recent years, VCTs have grown in popularity as financial advisers and investors have become more familiar with the role that they can play in financial planning. In the last tax year, Octopus experienced record VCT inflows, and the latest figures from the Association of Investment Companies (AIC) stated that VCTs in total raised nearly £436 million in 2013/14 compared with £403 million in the previous tax year. Octopus is the first provider to launch a full VCT fundraise this tax year.
Paul Latham, Managing Director at Octopus Investments, commented:
“The Octopus AIM VCTs are long-running funds that provide a steady income stream through regular tax-free dividends. VCTs have a strong track record of delivering value for investors and are now an established planning tool for advisers and their clients, making them a year round investment solution. The days of VCTs being just a popular end of tax year planning tool for investors are over. Recent developments in pension legislation, combined with increased awareness of the many benefits of smaller company investing, have established VCTs as a valuable investment solution to help investors address their financial planning goals.”
The Octopus AIM VCTs are managed by the Smaller Companies team at Octopus, the UK’s largest provider of VCTs. The team manages over £500 million of assets and includes some of the most experienced fund managers in AIM with a proven and successful track record of stock picking. The portfolios of the two AIM VCTs have been built over many years and now comprise 60 or more holdings in a range of sectors. The AIM VCTs offer exposure to some of the great success stories of AIM. Examples include Advanced Computer Software Group plc, one of the largest UK based software and IT services providers, Staffline Group plc, an ambitious and fast growing provider of recruitment services and government training initiatives, and Brooks Macdonald Group plc, a Wealth Manager with a very strong history of growth. Earlier stage investments include Proxama plc, a much more recent investment and a leader in near field communications, enabling individuals to use mobile devices as a physical wallet as the mobile payments market takes off. Many of the companies in both Octopus AIM VCTs have been listed on AIM for several years, and the majority of portfolio holdings are already delivering sales growth and generating profits. The average turnover of all companies in the AIM VCTs is expected to exceed £100 million in 2014.
Andrew Buchanan, joint fund manager of the Octopus AIM VCTs, commented:
“AIM is home to a wide range of exciting and dynamic companies and leads the world as a market financing smaller companies. Recent changes to tax legislation by the UK Government have enhanced AIM’s already established position as a vital source of equity finance for small growing companies and consequently we anticipate the recent strong flow of VCT qualifying new issues to continue over the next year at least. We expect to invest at reasonable valuations, given the recent market correction. Both Octopus AIM VCTs have a strong track record of performance. We intend to continue that for all shareholders in both AIM VCTs as we put the new funds to very good use.”
Kate Tidbury, joint fund manager of the Octopus AIM VCTs, commented:
“Our position in the market means we have access to a fantastic pipeline of investment opportunities, from which we seek out sensibly priced companies with growth potential. AIM is a market where active management can really help to unlock value for investors. We monitor the companies within the portfolio closely, working to help them fulfil their potential and ultimately, deliver returns to the investors in both the Octopus AIM VCTs.”
Introduced by the government in 1995, VCTs provide a critical source of funding for smaller companies in the UK in order to help them fulfil their potential, stimulate growth and maximise the significant contribution these companies can make to the UK economy. They also deliver a number of tax benefits for investors including 30% upfront income tax relief on the investment, tax-free dividends and exemption from Capital Gains Tax on the disposal of any shares.
The share offer will remain open until 10 August 2015, or until the fundraising capacity is reached.
Notes to editors
One of the advantages of VCTs for income-seeking investors is that they have the potential to pay out their profits to investors in the form of tax-free dividends. Dividends cannot be guaranteed, but both Octopus AIM VCTs have dividend targets:
- Octopus AIM VCT targets total annual dividend of 5p per share or 5% of the average share price per year, whichever is greater
- Octopus AIM VCT 2 targets a total annual dividend of 3.6p or 5% of the average share price per year, whichever is greater
- Both AIM VCTs aim to pay tax-free dividends twice a year, with regular intervals
These graphs show what the annualised dividend yields have been for investors over the last few years. This is calculated by taking each dividend and annualising it (which takes into account the two dividend payments a year) and dividing by the (mid) share price at the time the dividend was paid. Dividends from VCTs are tax free.
This press release is issued by Octopus Investments Limited which is authorised and regulated by the Financial Conduct Authority for use by journalists in their professional capacity and should not be relied upon by retail clients. The value of investments, and the income from them, may fall or rise. The information in this document should not be construed as offering investment or tax advice.