Octopus Investments (‘Octopus’), one of the UK’s leading retail fund management companies specialising in smaller company investing, has announced the launch of a £50 million joint fundraising by the five Octopus Titan Venture Capital Trusts (VCTs).
The latest fundraising, which offers the opportunity to invest into all five Titan VCTs, provides investors with exposure to a portfolio of early stage high growth businesses, helping to meet the demand for access to the new generation of successful entrepreneurial businesses in the UK.Octopus is offering a 2% discount on initial management fees for those who invest in the Titan VCTs before 11th November.
The Octopus Titan VCTs invest in exciting early stage companies that have the potential to become global businesses. The Ventures team at Octopus focuses on identifying companies with talented teams that they can partner with to grow and scale their businesses in order to help them reach their potential. The current portfolio of 45 companies includes a diverse range of successful businesses including SwiftKey, the touchscreen keyboard app which was Google Play’s bestselling app in 2012 and 2013, YPlan, the last minute mobile ticketing application which is now live in five cities in the UK and US, and Swoon Editions, a ‘design a day’ online furniture business which recently announced it has reached 9000 customers since its launch only three years ago. Perhaps the most well-known success story of the Titan VCTs is Zoopla Property Group plc (ZPG), the online property portal in which the Octopus Titan VCTs first invested in 2009. In June 2014, ZPG floated on the London Stock Exchange, listing at a valuation of £919 million. This has since grown to more than £1 billion.
Alex Macpherson, head of the Ventures team at Octopus and fund manager of the Titan VCTs, commented:
“At Octopus, we look to back management teams with the potential to grow global businesses that can really stand out from the competition. We’ve had some fantastic success stories within the Titan VCT portfolio over the past few years, and we continue to see a strong pipeline of investment opportunities. We’re excited to be able to give more people the chance to access the significant potential that this sector of the economy can offer as well as the tax planning benefits VCTs can deliver.
“VCTs are a vital source of funding for smaller companies and play a critical role in helping to support the next generation of UK businesses. The entrepreneurial landscape is stronger than ever in the UK, and in recent years, we have seen high growth enterprises drive significant growth within the economy. We are seeing increasing numbers of people looking for ways to benefit from the growth potential that these young, dynamic businesses can offer and support the exciting companies of tomorrow.”
VCTs were introduced by the government in 1995 in order to stimulate growth and encourage investment into smaller companies. Since then, they have proved to be a critical source of funding to hundreds of smaller companies, with figures from the Association of Investment Companies (AIC) stating that the average turnover increase in each investee company since VCT investment is £9.8 million.[1] Within the Octopus Titan VCTs, at the initial point of investment the portfolio companies employed just under 500 people and had a combined turnover of approximately £22 million. These companies now employ over 1900 people, after an average investment of just three years, and their turnover is forecast to be £231.8m in 2014.[2]
VCTs provide investors a number of tax benefits, including 30% upfront income tax relief on the investment, exemption from Capital Gains Tax on the disposal of any shares, and tax-free dividends. The Titan VCTs 1 to 4 target a 5p annual dividend, and Titan VCTs 1-3 have previously also paid out special dividends to investors. The latest special dividend, of 15p to Titan VCT 4 shareholders and 10p to Titan VCT 5 shareholders, was announced in September 2014 (conditional upon a merger of the Titan VCTs). As investors do not have to pay income tax on potential dividends, VCTs have becoming a powerful planning tool for advisers and their clients looking for alternative sources of income, and have proved particular popular with those planning for retirement in the face of changing legislation in pensions.
Paul Latham, Managing Director at Octopus Investments, commented:
“VCTs are established investment solutions that have become increasingly popular with advisers for a range of planning requirements since they were first introduced. However, recent developments in pensions legislation mean we are seeing an even greater demand from advisers and their clients to planning tools that can complement or even offer an alternative source of income to a pension. There is a really strong appetite among advisers for VCTs as a result of this, and in particular the Octopus Titan VCTs. The Titan VCTs have a strong track record of performance and provide investors with an opportunity to access tax free income potential and a fantastic underlying portfolio of investments. We expect this latest fundraising to be warmly received by both adviser and investor communities.”
The Octopus Titan VCTs recently announced an intention to merge. This is currently pending shareholder approval, and if successful, will result in all five Titan VCTs combining into one single VCT later in 2014. The latest dividend announcement regarding Titans 4 and 5 is conditional upon approval of the merger. The proposed merged Octopus Titan VCT will target an annual regular dividend of 4p per share initially, increasing to 5p per share during the two years after the merger.
The share offer will remain open until September 2015, or until the fundraising capacity is reached.
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Notes to editors
[1] Source: AIC: Going for growth (June 2014)
[2] Source: Octopus Investments (31 August 2014)
Performance
Over the years, venture capital finds such as the Titan VCTs tend to follow a ‘J-curve’, While they’re starting out, before their cash is fully invested, costs are likely to outweigh income, so the value of the investments, and the Titan VCT overall, may fall. However, once the investment portfolio has been built, any potential growth in the underlying companies typically leads to an increase in total return – a combination of the net asset value (NAV) and dividends.
Annual total returns
The table below shows the year-by-year total return of the Titan VCTs over the last five years (each year ending 30 June). The annual total return for each Titan VCT is measured as the increase or decrease in value of the investments within the portfolio, plus any income investors have received from the investment in the form of dividends.
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.