Backing Britain's brightest businesses - Octopus Titan VCT brochure September 2018 - Octopus Investments
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Octopus Titan VCT
Backing Britain’s
brightest businesses
Octopus Titan VCT brochure
September 2018
Key investment risks For UK investors only • Octopus Titan venture capital trust (VCT) is an investment that places your money at risk. This means the value of an investment, and any income from it, can fall as well as rise and you may not get back the full amount invested. • VCT shares could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell. • Please note that tax reliefs available on VCT investments depend on individual circumstances and may change in the future. Tax reliefs also depend on the VCT maintaining its VCT-qualifying status. • Past performance is not a reliable indicator of future results. For the past performance of Octopus Titan VCT, see page 16. • Where we refer to a specific company, this is for illustrative purposes only and is not an investment recommendation. It is important that you read and fully understand the key risks involved before deciding whether this investment is right for you. To help, we have a dedicated section outlining the key risks on page 22. This document is an advertisement and not a prospectus. Any decision to invest should only be made on the basis of the information contained in the prospectus and the Key Information Document (KID) available at octopusinvestments.com/titan. You can also request print copies by calling our Client Relations team on 0800 316 2295 or by sending an email to clientrelations@octopusinvestments.com. Octopus does not give advice on investments, legal matters, taxation or anything else. We always recommend you talk to a qualified financial adviser before making any investment decisions. All data and factual information provided within this document is sourced to Octopus and is correct at 31 August 2018, unless otherwise stated. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: September 2018. CAM07285-1809
Octopus Titan VCT gives investors the opportunity
to participate in the growth of some of the UK’s
most exciting entrepreneurial businesses.
This new share offer will provide further funding
to a number of existing portfolio companies, as
well as add some exciting new investments.
Find it fast
About Octopus 2
VCTs: a home-grown success story 4
Reasons to consider a VCT 5
Octopus Titan VCT 6
Three ingredients for a successful VCT 8
Three ingredients for a great early stage company 10
Three great companies we’ve backed 12
Backing Britain’s brightest businesses 15
A strong performance record 16
New share offer 19
The life cycle of your VCT investment 21
Understanding the key risks 22
Conflicts of interest 23
The charges 24
How to invest 25
Octopus Titan VCT 1
About Octopus
When we launched Octopus in 2000, we wanted to create an investment
company that put its customers first. We started by looking at what didn’t
work very well, and found ways to do things differently.
Today we have more than 700 employees and £8.3bn1 We want what we do to matter, and for the money we
in assets under management. We work with tens of invest to make a big difference to people’s lives. That’s
thousands of clients and we’ve built market-leading why, for example, we invest in:
positions in tax-efficient investment, smaller company • UK smaller companies that create thousands of jobs
financing, renewable energy and healthcare. But no and generate economic growth.
matter how big we get, we’ll keep doing the simple
• Companies that address the needs of older people,
things well and we’ll keep looking after each of our
by building GP surgeries, retirement villages, care
customers, day in, day out.
homes and hospitals.
• Renewable energy facilities that are changing the
shape of the UK energy market.
We see a strong business case for each of these sectors,
whether that’s providing for an ageing population in
need of lifelong care, or the long-term trend towards
renewable energy as a viable alternative to fossil fuels,
or investing in dynamic, entrepreneurial companies that
have a positive effect on the economy, and the people,
around them.
• We’ve helped several companies grow to become
household names, including Zoopla Property Group,
graze.com and Secret Escapes.
• Over the last year alone, smaller companies backed
by Octopus Ventures have grown their revenues by
45%, or around £250 million.
• We currently have £1.7 billion invested in companies
listed on the Alternative Investment Market (AIM).
• Octopus Healthcare’s managed GP surgery
investment fund currently invests in facilities which
care for more than one million people.
Our head office is at 33 Holborn, London.
2 Venture capital trusts
Five promises from Octopus There’s more to Octopus than you
Being different means putting our customers first, might think…
every time. Our relationship with our customers is We manage assets on behalf of retail investors,
more important than anything else. So, here are five institutions and charities across a range of
promises we are determined to keep. specialist sectors.
1 We’ll always remember that it’s your money
Other £0.3b
This means we work for you, so if you want to
talk to the fund managers who invest your money, Ventures
you can. Just call us on 0800 316 2295 or pop in AIM
£0.8b
for a visit. £1.7b
2 We’ll never treat you like just another customer Property
£0.9b
We don’t use call centres and we don’t have recorded
£8.3 billion1
messages telling you “how important your call is”.
Octopus funds under
Our Client Relations team is frequently praised by our management
customers for the help and attention they give. Multi- Energy
manager £1.7b
3 We’ll always keep trying to improve 1.3b
Having the courage to do things differently lets
us create innovative solutions to the real problems Healthcare
people face. £1.6b
4 We’ll keep putting customers first
Octopus is not listed on a stock exchange, and
is mostly owned by the people who work here.
That means we’re not accountable to public
shareholders demanding short-term profits, so we
don’t have to cut corners or lower our standards.
5 We’ll never let complexity win Talk to Octopus to find out more
The best companies and products make your life We can’t give you financial or tax advice, but
simpler, not harder. Why should financial services be we can answer any questions you have about
any different? Although we have to include some us, or about this investment. So, if you have
fairly complicated information in this brochure, we’ve any questions after reading this brochure,
done our best to avoid small print and tried to please give us a call on 0800 316 2295 or visit
remove any unhelpful jargon. If we haven’t got it octopusinvestments.com.
right, please let us know.
Octopus Investments, 30 June 2018
1
Octopus Titan VCT 3
VCTs: a home-grown
success story
The UK is one of the world’s most successful markets for entrepreneurial
small companies. But companies that start small usually need investment
to help them grow and develop.
Recognising that investing in such companies typically Octopus: the biggest name in VCTs
involves taking more risk than investing in larger
listed companies (for example, BP or Vodafone), the Having launched our first VCT in 2002, Octopus is the
government introduced venture capital trusts (VCTs) in UK’s largest VCT provider. We currently manage more
1995 as a way of encouraging investment into Britain’s than £975 million of VCT money on behalf of over
exciting, entrepreneurial businesses. In the two decades 28,000 investors. We think VCTs offer great investment
since they were introduced, VCTs have helped to create potential, with some exciting tax benefits attached.
jobs, reward innovation and bolster the UK economy. However, VCTs are not suitable for everyone, which
is why we always recommend talking to a qualified
Backing Britain’s brightest businesses financial adviser before deciding to invest.
The UK’s small businesses are often hailed as the If you have any questions after reading this brochure, visit
backbone of the British economy. However, many could octopusinvestments.com or call us on 0800 316 2295.
be growing even faster with better access to funding. We’re always happy to hear from you.
VCTs provide investors with the opportunity to support
these small entrepreneurial companies and, in return,
benefit if they do well.
VCTs offer a number of tax benefits
As well as providing an easy way for investors to gain
exposure to these small companies, VCTs offer a number
of useful tax reliefs. Investors can claim up to 30% upfront
income tax relief, receive tax-free dividends and, when
the time comes to sell the shares, investors don’t have to
pay capital gains tax if they’ve risen in value.
Octopus Titan VCT first invested in myTomorrows in
January 2017. Find out more on page 15.
VCTs are high-risk investments. It is important to understand that smaller companies can struggle, and many
will not be successful. The tax incentives are there to help compensate investors for the risk they take with their
money. For more information on the key risks, please see page 22.
£728 million was invested into VCTs in the 2017/18 tax year,
the largest amount in a decade.1
Source: The Association of Investment Companies, April 2018
1
4 Venture capital trusts
Reasons to consider a VCT
Growth potential Generating additional income
VCTs invest in smaller, VCT-qualifying companies that The potential for tax-free dividends can provide an
are not listed on the main London Stock Exchange. attractive supplementary income, which could be useful,
Smaller companies have the potential to grow much especially if you’re approaching, or are in, retirement.
faster than their larger, listed counterparts. By offering
investors access to an instantly diversified portfolio A number of tax benefits
of smaller companies, established VCTs can offer an When you invest in new VCT shares, you’re entitled
attractive way to gain exposure to this sector. Always to a number of tax incentives on investments up to
remember, however, that investing in small, VCT- £200,000 each tax year. These include:
qualifying companies is high risk and you may not get
back the full amount you invest. • Income tax relief – You can claim up to 30% upfront
income tax relief on the amount you invest, provided
Supporting British innovation you keep your VCT shares for at least five years. So if
you invest £10,000 in a VCT, £3,000 can be taken off
Investing in a VCT means you can feel confident that
your income tax bill, although the amount of income
you are helping innovative smaller companies to create
tax claimed cannot exceed the amount of income
jobs, prosperity and economic growth.
tax due.
Complementing other investments
• Tax-free capital gains – If you decide to sell your VCT
While VCTs carry a higher risk profile, they can be a shares and you make a profit, the proceeds won’t be
useful addition to your investment portfolio if you are liable for capital gains tax.
looking to complement existing pension plans or other
long-term investments, such as Individual Savings • Tax-free dividends – If your VCT pays dividends, there
Accounts (ISAs). Changes to pension rules have placed is no tax to pay and you won’t need to declare them
further restrictions on the amount you can invest into a on your tax return.
personal pension, both annually and over your lifetime.
This means that VCTs could become a valuable part of REMINDER: You should never invest in a VCT solely
retirement planning if your pension limits are at risk of for the tax benefits. Tax reliefs depend on the VCT
being breached. As with any investment, please ensure maintaining its VCT-qualifying status, and the tax
that you are comfortable with the associated key risks benefits available to you will depend on your own
before making any investment decisions. personal circumstances and can change. For more
information on the key risks, please see page 22.
Octopus Titan VCT 5
Octopus Titan VCT
Since 2007, Octopus Titan VCT has earned a reputation for backing
talented entrepreneurs. We invest in companies that use technology
to drive innovation and disrupt traditional industries.
The investment team What does a successful VCT need?
Octopus Ventures is the team that manages the We believe a successful VCT needs three things. First,
investments in Octopus Titan VCT. The team has a it must have access to a wide range of investment
well-deserved reputation for finding great deals and opportunities, what investment managers call deal flow.
nurturing the companies they back. Second, a successful VCT needs to be able to back its
They are one of the largest venture capital investment winners through multiple investment rounds. It should
teams in Europe with over 150 years’ combined experience. hold sufficient funds to invest in both new businesses
Octopus Ventures has had significant success in backing and to make follow-on investments into companies it
ambitious UK businesses like Zoopla Property Group, already has a stake in.
Graze.com and Secret Escapes, helping to turn them into Third, it has to have the resources in place to manage the
household names. investments it makes. This includes providing practical
support and guidance to company management to
increase the chances of success.
We look at each of these three ingredients in more
detail on page 8.
For those willing to accept the risks of investing in small VCT-qualifying companies, Octopus Titan VCT offers an
easy way to access this part of the market with instant diversification through a broad portfolio of around 67
companies. For more information on the key risks, please see page 22.
6 Venture capital trusts
Octopus Titan VCT first invested in
WaveOptics in December 2015.
Octopus Titan VCT 7
Three ingredients for
a successful VCT
Deal flow: Finding the best investment Funding: Backing winners with
opportunities additional investment
To back the best ideas, you need to know about them An early stage company will often need several rounds
first. Having access to a wide range of investment of funding as it grows. So entrepreneurs want to partner
opportunities is essential. The best entrepreneurs tend with investors who can support them throughout their
to be selective about accepting investment, so it’s journey. Being able to show we have sufficient funds to
important a VCT manager has a good reputation for back companies through multiple investment rounds is
providing ongoing investment and adding value a powerful factor in attracting new deal flow.
through giving advice as well as access to other
As a result, the majority of the investments made by
entrepreneurs who can support them.
Octopus Ventures are actually follow-on investments.
These days, many entrepreneurs make the first move We have around 67 companies in the portfolio, from a
and come to us, because they know we offer great diverse range of sectors. Because we work closely with
support. They sometimes include entrepreneurs we’ve them, we know which companies will want follow-on
backed previously, who come back to us with a new investments and when, as well as how they’re
idea. This is a strong endorsement of the relationships performing against their goals.
we build with entrepreneurs. For example, the co-
One important feature of investing in early-stage
founder of graze.com, the snack subscription company
companies is that there’s no guarantee they will prove to
we invested into in 2009, came back to us when he
be successful, or will deliver a return on the investment.
started pet food business Tails.com (see page 13).
The team recognises that smaller companies, on
The team now engages with around 5,000 companies average, have a higher failure rate than companies listed
seeking investment each year. They typically select on the main market of the London Stock Exchange. The
around 400 of those to meet with and choose 15-20 team typically starts cautiously, making small initial
new companies to invest in each year. investments in companies, with an Investment
Committee scrutinising each deal. We then build up
Over the years, the team has built an established portfolio
larger stakes in those companies that continue to prove
of around 67 early stage companies operating in a
successful, with milestones put in place for each
diverse range of sectors. These businesses are founded
investment. This approach helps the team to reduce
on some of the very best ideas the UK’s vibrant
the impact of failures by typically only making repeat
entrepreneurial scene has to offer.
investments in the potential winners.
The typical industry failure rate of early-stage companies
is around 50%.1 Since Octopus Titan VCT launched in
2007, we have exited 21% of the companies we’ve
invested in at a loss. However, this accounts for less than
12% of all the money invested since launch. This shows
the benefit of making only small initial investments.
However it’s worth remembering past performance is no
guide to the future. For the past performance of Octopus
Titan VCT, see page 16.
Growing pains: Majority of SMEs don’t survive five years, RSA Insurance group, October 2014
1
8 Venture capital trustsResources: Providing practical support We’re also in a great position to help companies expand
to help companies succeed internationally. We work with the entrepreneurs we back
by holding workshops on strategy, advising on sales and
Backing entrepreneurs and helping them reach their
marketing plans, as well as providing connections to other
ambitions goes well beyond just providing finance.
companies which could help. Additionally the team is
Octopus Ventures understands that you also have
spread between offices in London and New York, which
to provide practical support to the people you back,
can help portfolio companies expand into the US market.
whether it’s opening doors or helping them seize
opportunities. We help companies find the right people The team is also bolstered by the Venture Partners, a
to hire and introduce them to industry experts. group of entrepreneurs and business experts who offer
best-in-class expertise in areas such as CEO leadership,
Since Titan was launched, Octopus Ventures has built
sales and international expansion that can make a
the team from five to over 30 people, including an
significant difference for companies. They are based
investment team of 21. This is important, because the
globally in London, San Francisco, Shanghai and
number of potential investment opportunities we’re
Singapore and their purpose is to focus purely on helping
looking at has increased by around 50% since last year.
the portfolio companies reach their full potential and
Early-stage companies often need nurturing. So, we don’t achieve their global ambitions.
just make an investment, we also actively participate in
A reminder of the risks
the company’s growth plans.
Because we invest in small companies, there is increased
Usually someone from Octopus Ventures sits on the
investment risk. The value of an investment in Octopus
board of the company they invest into, which allows
Titan VCT can go down as well as up and you might end
them to play a prominent role in the company’s
up getting back less than you originally put in. Shares in
ongoing development. Octopus Ventures has a
smaller companies can also be harder to sell.
combined investment experience of over 150 years and
brings together a wide range of specialist skills and
individual insights, having been involved in some of the
most successful European technology companies.
Octopus Titan VCT in numbers
£615m 67+ 45%1 50%2 9001
funds under portfolio annual revenue revenue growth of the jobs were created
management companies growth of the top 10 holdings by portfolio
portfolio companies companies last year
Octopus Ventures, comparison of 2016 calendar year vs. 2017 calendar year
1
Octopus Ventures, takes top ten as at April 2018 and compares their revenues from 2016 calendar year with 2017 calendar year
2
Octopus Titan VCT 9Three ingredients for a great
early stage company
The UK is a excellent place to find people with bold Talented entrepreneurs and
new business ideas. So how do you zero in on the very management team
best ones?
As any founder will tell you, things rarely go according to
In the past decade, the UK has become the most active the business plan. Things change. There are challenges
technology market in Europe. Back in 2010, there were to overcome, most of which can’t be predicted in
only two European technology companies founded after advance. So you need a management team who can
2000 valued at more than a billion dollars. Today there adapt, while at the same time keeping everyone
are over 50, with more than 20 of them based in the UK. focused on the goal.
And the UK continues to demonstrate strong growth,
So we need to see a deep-seated passion for the idea,
with the total volume of venture capital investment
knowledge of the relevant industry and an appreciation
almost doubling between 2016 and 2017 alone.
of how big the opportunity is.
70% of the companies Octopus Titan VCT invested in
Often, we’ll be approached by entrepreneurs who already
were less than three years old when we first invested.
have successful ventures under their belt. Sometimes
Investing in companies when they’re still young means
they’ll be people we’ve backed before, so we know they’re
we often buy shares at a lower price, so we have the
up to the task of leading a company and scaling it up. In
potential of making a greater profit if they’re successful.
other cases, a first-time entrepreneur will have a great
Therefore we can sell shares at a higher profit than if we’d
business that only they can make happen. They’ll know
invested at a later stage. We’ve followed this approach
exactly how they’re going to disrupt the market, and
for over a decade, and have built up a portfolio of around
they’ll have a great team around them to help them do it.
67 companies. The majority, just over 50%, of the
portfolio’s value is in the top ten holdings. Those top ten
companies are ones we know well because we’ve been
working with them for a long time. Over that time
they’ve achieved what they set out to do, and we’ve
invested more as they’ve grown.
There are many factors that Octopus Ventures must
take into consideration before making an investment.
As a rule of thumb there are three criteria the team
look for in every company we back.
10 Venture capital trustsOctopus Titan VCT first invested
in Origami Energy in May 2015.
A world-changing idea
Many great businesses are based on finding small,
incremental improvements for something that already
exists. While this is a valid approach, it’s not what we
look for.
We look for those ideas that disrupt the status quo.
The ones that can turn an established industry upside
down or create something that didn’t exist before.
We also want to back businesses that can grow quickly
to be very valuable, especially those with global
ambitions. This is why we focus on technology-driven
companies whose business model allows for rapid
scale-up without a big increase in costs. Because when
you have a fantastic product or service, you want to
reach as many customers as you can as quickly and
efficiently as possible.
Enormous market opportunity
We’re not interested in niche ideas that will only ever
stay niche. We look for those companies that could
grow to be much, much bigger than they are today. So
the potential market for what they do needs to be large,
to give them plenty of room for future growth.
An example is Origami Energy, which creates real-time
markets where energy suppliers, users and traders can
buy, sell and trade the energy being produced by a wide
network of power-generating assets. Origami could
revolutionise an industry which saw an annual
investment worldwide of $1.8 trillion in 2017.1
World Energy Investment 2018, International Energy Agency
1Three great companies
we’ve backed
Memrise Sofar Sounds
Memrise is a recent addition to the Octopus Titan VCT Sofar Sounds was born in 2009 out of a frustration with
portfolio. We first invested in 2018, although we’ve been the live music experience. At one extreme there’s the
tracking the company since 2012. The Memrise app O2 arena, where the singer is a speck in the distance
makes learning a new language fun, with games that and you watch most of the gig on a giant screen. At
learners can play at home, on their commute, or the other, you’ve got sweaty pubs and clubs where
wherever they’re using their phone. people are talking, jostling and spilling your beer. Sofar,
which is short for ‘songs from a room’, brings the magic
The company’s founders have an academic background
back to live music by organising secret, intimate
in cognitive science. One is a memory grandmaster,
performances in unique locations like rooftops, private
which means he can memorise a 1,000 digit number in
homes and boutique shops.
one hour. This gives them deep insight into how people
learn and the techniques that are most effective. The It’s a great idea, as shown by how widely it’s spread.
management team also includes people with a proven Having started in London in 2009, there are now hundreds
record of driving big sales increases at early stage of Sofar events each month across more than 400 cities
companies. around the world, everywhere from Beijing to Buenos
Aires to Brighton. Performances are filmed and can be
Memrise won iPad App of the Year 2016 in several
watched on a dedicated YouTube channel. There is now
countries, and Best App of 2017 at the Google Play
an online community of 750,000 fans, 2,500 volunteers
awards. The app continues to receive great reviews on
and a database of over 26,000 hand-picked artists
Google Play and Apple’s App Store, and has proven itself
including 33 Grammy Nominees (12 winners).
with strong growth in the number of people who not only
sign up initially, but also go on to be paying customers. Sofar’s management team has more than two decades’
experience in senior marketing roles at brands like
The market opportunity is huge and growing, thanks to
Coca-Cola and Disney. So we’re confident the team can
two very strong global trends. The first is the growth in
continue building Sofar into a brand associated with
language learning, which in turn is driven by population
high-quality live music events.
growth and higher levels of geographical mobility. The
second is the growth of online learning, also called Live music generates $25 billion in global revenues each
eLearning, which includes learning ‘on the go’. The year. Most of that is ticket sales, but things like ticketing
eLearning market is currently worth around $165 billion a fees, sponsorship and licensing make up a healthy
year globally, and is growing at around 5% a year. chunk. Sofar has created something live music fans
were crying out for. It has inspired people to open their
If Memrise can take full advantage of that opportunity,
homes and give up their time to help create unique
there should be much more room for growth. It has a
experiences, and has built a loyal following along the
compelling product and a strong management team,
way. This gives Sofar a springboard to dominate a
so we believe it could.
market they created from scratch.
12 Venture capital trustsTails.com
Exit history
In 2013, a team of serial entrepreneurs approached us
with a great idea for disrupting the pet food market. Evi Technologies
2012
We already knew one of these founders very well - Sold to Amazon
Graham Bosher had been a co-founder of graze.com
(backed by Titan VCT in 2009). Also James Davidson, Rangespan
2014
the current chief executive, worked previously for Sold to Google
Unilever and Innocent Drinks, so we knew the team
had great experience of building big businesses.
Magic Pony
They also had a great business idea. A subscription dog Sold to Twitter
food service, where the food is nutritionally tailored to
each individual dog and delivered directly to customers. Vision Direct
2016
At a stroke, it offers dog owners both higher quality and Sold to Essilor
more convenience. It was also a business that was SwiftKey
highly likely to see repeat buying from its customers. Sold to Microsoft
Indeed, that’s one of the big attractions of running a
subscription business.
Zoopla Property Group
2017
This was clearly a huge market opportunity. It’s estimated Listed in LSE in 2014, sold
that a quarter of the UK adult population has a dog.1 final shares in 2017
Plus, the concept could be applied to other pets as well.
Octopus Titan VCT made its first investment in Tails.com Tails
in 2013, the year it was founded. We made a follow-on Sold to Nestlé Purina PetCare
2018
investment in 2015. By August 2017, Tails.com was one of
Secret Escapes
the fastest-growing start-ups in the UK, feeding more
Partially sold to Old Mutual
than 70,000 dogs. In April 2018, we sold our stake to pet
food giant Nestlé Purina Petcare.
This is just one of high-profile exits that Octopus Titan This is not an exhaustive history of exits.
VCT investors have benefited from. A few of the other Investing in small, VCT-qualifying companies is high risk
exits are in the opposite column: and many will go on to fail. Company examples are for
illustrative purposes only. They should not be considered
as an investment recommendation. For more information
on the key risks, please see page 22.
PAW report 2018, PDSA
1
Octopus Titan VCT 13Octopus Titan VCT first invested
in Sofar in March 2014.
14 Venture capital trustsBacking Britain’s brightest
businesses
Octopus Ventures looks for companies with talented entrepreneurs
and management teams, world-changing ideas and enormous
market opportunities.
We’re always looking for businesses which we think have the potential to be worth £1bn in
the future. Here are some examples of businesses which we think have the potential to
achieve this over the coming years:
Secret Escapes is a free-to-join members-only WaveOptics designs and manufactures ‘waveguides’,
travel website, which offers luxury hotel stays and the see-through displays for augmented reality
holidays at up to 60% off by selling hotel rooms wearable devices, which overlay the real world with
that would otherwise lie empty. computer-generated images.
Digital Shadows deals with digital security Big Health provides mental health treatments
and managing digital risks such as cyber through software rather than with medicines.
threats and data breaches by using advanced Its Sleepio app is designed to teach users how to
threat intelligence solutions. overcome poor sleep without pills or potions.
Origami Energy creates real-time markets where Bought By Many is a free, members-only service
energy suppliers, users and traders can buy, sell and that helps users find insurance for the things they
trade the energy being produced by a wide network care about, from pets or gadgets to travel, health
of power-generating assets. and home insurance.
myTomorrows helps patients who have exhausted Depop is the social marketplace where people buy,
existing approved medical options to get access to sell and discover unique items.
potentially life-saving pre-approval treatments.
Note: Any company examples are for illustrative purposes only. They should not be considered as an investment
recommendation. Forecast performance is not a reliable indicator of future results.
Octopus Titan VCT 15A strong performance record
Launched over a decade ago, Octopus Titan VCT now features a number
of established companies, such as Secret Escapes, Calastone and graze.
com, along with its more recent investments into early stage businesses.
Dividend history Targeting a 5p annual dividend
Octopus Titan VCT targets high levels of capital growth Octopus Titan VCT aims to pay regular tax-free
from a portfolio of early stage UK companies. However, dividends of at least 5p per share annually, as well as
like most VCTs, rather than increasing the value of its offering investors the potential for special dividends if
shares, it aims to return this investment performance portfolio companies are sold at a significant profit. Since
back to shareholders in the form of tax-free dividends. its launch in 2007, it has announced total cumulative
The potential for paying tax-free dividends to investors dividends of 71p per share to investors. While profits are
is one of the main benefits of VCTs, although it is not usually paid out to investors as tax-free dividends, if the
guaranteed. shares do rise in value, there’s also no capital gains tax
to pay when you eventually choose to sell them.
Five-year performance
Year to 30 April 2014 2015 2016 2017 2018
Annual total return 9.6% 11.4% 7.2% 4.7% 4.3%
Annual dividend yield 5.6% 5.4% 9.2% 5.2% 5.3%
Total value 137.2p 147.7p 154.7p 159.2p 163.3p
Calculating performance
The performance information above shows the total Just to remind you, the NAV is the combined value of all
return of Octopus Titan VCT for the last five years to 30 the assets owned by the VCT after deducting the value
April, the VCT’s interim accounting period. The annual of its liabilities (such as debts and financial obligations).
total return for Octopus Titan VCT is calculated from The performance shown is net of all ongoing fees and
the movement in net asset value (NAV) over the year costs (shown on page 24). The annual dividend yield is
to 30 April, with any dividends paid over that year then calculated by dividing the dividends paid per annum
added back. The revised figure is divided by the NAV at by the NAV at the start of the period.
the start of that year to get the annual total return.
We have determined it would be incorrect to compare
Total value shows the sum of the NAV per share in the NAV of Octopus Titan VCT with those of other VCTs
pence for the last five years to 30 April and cumulative as different year-end dates for other VCTs would result
dividends per share in pence since inception for the last in timing differences in each NAV calculation.
five years to 30 April.
Important information
The value of an investment, and any income from it, can fall as well as rise and you may not get back the full
amount invested. Past performance is not a reliable indicator of future results and may not be repeated.
Please note, the NAV per share may be higher than the share price, which is the price you may get for shares in
the secondary market. On 27 November 2014, Octopus Titan VCTs 1, 3, 4 and 5 merged into Octopus Titan VCT 2,
which was then renamed Octopus Titan VCT.
16 Venture capital trustsOctopus Titan VCT first invested
in Secret Escapes in April 2011.
Over five years,
£5,000
the total amount
invested in
returned to the
Octopus
investor would
Titan VCT five
be £6,950,
years ago
a 39% gain
This illustration assumes upfront fees have already been taken from the value of the initial investment
and that the investment on 30 April 2013 was held for five years up until 30 April 2018 – the VCT’s latest
interim accounting period. The cumulative total return shown above takes into account any ongoing
fees and costs and is inclusive of any dividends paid out. It does not include any upfront income tax
relief claimed by the investor.
Octopus Titan VCT 17Octopus Titan VCT first
invested in Tails.com in 2013.
18 Venture capital trustsNew share offer
Octopus Titan VCT is open for investment through a new share offer of
up to £120 million, subject to demand. This money will be used to make
further investments into established and developing portfolio companies,
as well as selectively funding investments into new companies.
Reasons to invest Reinvesting VCT dividends
Octopus Titan VCT features an existing portfolio of Octopus Titan VCT gives you the option to reinvest any
around 67 companies. It looks to invest in exciting early dividends you are entitled to receive, using the proceeds
stage companies and then sell the holdings in these to purchase more VCT shares. This could increase your
companies, aiming to realise a significant profit. We shareholding, enabling you to get further income tax
invest small at the start, and then look to commit relief on the additional shares allotted. To reinvest your
more money as we see these companies grow. When dividends, please complete the relevant section on the
the time is right, we look to sell our stakes in these application form. You can also ask us to do this at any
companies and return any profits to investors in the point after investing with us and, of course, you can
form of tax-free dividends. change your mind at any time. Please be aware that
reinvested dividends would form part of your £200,000
Applying for shares annual VCT investment limit.
Before making an application, it’s important that
you read the Octopus Titan VCT prospectus and Key
Claiming income tax relief after
Information Document (KID), available at selling VCT shares
octopusinvestments.com/titan. As with any HM Revenue & Customs (HMRC) places restrictions on
investment, there are risks to consider before you buying and selling VCT shares in the same VCT within a
decide to invest. Please read about the key risks on six-month period. This means that if you have recently
page 22 and in the prospectus for the share offer. We sold shares in Octopus Titan VCT, you will need to wait
always recommend you talk to a professional financial six months from the date of sale before investing again
adviser about whether this investment is right for you. in order to benefit from the 30% upfront income tax
If you decide to invest, you’ll need to complete the relief available.
application form and return it to us. We’ll write to
confirm we’ve received your application, and we’ll let
you know if we need any further information.
“At Octopus, we’re passionate about supporting the UK’s entrepreneurs and small businesses. We are delighted to
launch this new share offer, enabling Octopus Titan VCT to continue to support its entrepreneurs on their journey to
build the big businesses of tomorrow.” Paul Latham, Managing Director, Octopus Investments
Octopus Titan VCT 19Octopus Titan VCT first invested
in Swoon Editions in 2013.
20 Venture capital trustsThe life cycle of your
VCT investment
This section tells you what to expect from your investment over the
course of its life.
Your investment journey Selling your VCT shares
1 Making your initial investment Sell your shares on the secondary market
After you’ve read the prospectus and Key Information VCT share prices are quoted on the London Stock
Document (KID) – available at octopusinvestments. Exchange, so you can buy or sell shares at any time
com/titan – you’ll need to complete the application through a stockbroker or a share dealing account.
form and return it to us. We’ll let you know when Usually the market price is less than the underlying
we’ve received it and if we need any more NAV of the shares. It’s worth noting that since
information from you. previously owned VCT shares do not qualify for the
30% upfront income tax relief, the number of buyers
2 Issuing your shares
of second-hand VCT shares is, in practice, limited. As
Once we’ve received your funds, we will allot your a result, selling shares directly into the market can
VCT shares at the next available date. These dates produce a poor result.
are usually listed on our website. This process can
typically take a few months. Once your shares are Sell your shares back to the VCT
allotted, you can check the value of your shares Because natural demand for VCT shares on the
whenever you like using our Octopus online service. secondary market is limited, Octopus Titan VCT offers
a share buyback facility for investors, provided there are
3 Your share and income tax certificates
funds available. This facility allows existing Octopus Titan
You will receive share and income tax certificates VCT investors to sell their shares back to the VCT at a
usually within 21 working days of your shares being small discount to the NAV. The current policy agreed
allotted. In addition we’ll also provide you with a by the Board is to buy shares back at a 5% discount to
guide to claiming tax relief. the NAV. Share buybacks are conducted at the Board’s
4 Keeping you updated discretion, and therefore there can be no guarantees that
shares will always be sold on request. It’s worth noting,
We’ll send you annual and half-yearly reports which
however, that Octopus Titan VCT has a strong record of
include updates from the Chairman of the VCT
buying back shares from investors.
and Octopus Investments, the VCT manager. As
a shareholder we’ll also write to you giving you the Due to regulations governing public companies, there
option to vote on resolutions and proposals (e.g. can be specific times of the year when a buyback is
new fundraises) from the VCT’s Board. restricted - for example, when the VCT is preparing its
annual and half-yearly reports and accounts.
5 Receiving dividends
If you’d like more information please give us a call on
When our VCTs pay dividends to you, you can choose 0800 316 2295 and we’ll send you a copy of our guide
to have the dividend paid directly into your bank to selling your VCT shares.
account or re-invested into the VCT. If you choose
the latter you will then receive an additional share Please remember, VCT shares should be held for
and income tax certificate which will allow you to a minimum of five years in order to retain the 30%
claim additional income tax relief from HMRC. upfront income tax relief.
Octopus Titan VCT 21Understanding the key risks
We want to make sure you understand the key risks associated with this
investment before making a decision. If you have any questions about
the key risks mentioned here, we recommend you talk to a professional
financial adviser.
Any decision to invest in Octopus Titan VCT should The VCT’s qualifying status could end
be made on the basis of information contained in
There is no guarantee that Octopus Titan VCT will
the prospectus and Key Information Document (KID).
maintain its VCT status. If a VCT loses its qualifying
This is available at octopusinvestments.com/titan. status, tax advantages will be withdrawn from that
point. Additionally, if a VCT loses its status within five
Your capital is at risk and you could years of your initial investment, you will be asked to
lose money repay any upfront income tax relief that you have
The value of an investment, and any income from it, already claimed.
can fall as well as rise and you may not get back the
full amount that you invested.
Tax rules can change
The VCT tax benefits we’ve described in this brochure
Investments in smaller companies are correct at the time of going to print. However,
can be volatile rates of tax, tax benefits and tax allowances do
Octopus Titan VCT invests in smaller companies that change. In addition, the tax benefits available to you
are not listed on the main market of the London Stock through this investment depend on your own personal
Exchange. Investments in smaller companies can fall or circumstances.
rise in value much more sharply than shares in larger, To ensure that VCT money continues to support
more established companies. They also have a higher government policy objectives, HM Treasury can also
rate of failure. change the definition of a VCT-qualifying investment
in the future. This could impact the nature of new
This is a long-term investment
investments a VCT can make over time.
You should be prepared to hold your shares for a
minimum of five years. If you decide to sell your shares Your shares may be difficult to sell
before then, you will be required to repay to HMRC any There isn’t an active market for VCT shares in the way
upfront income tax relief you’ve claimed. there is for most other listed company’s shares. This
means that if you decide to sell your VCT shares, it may
Past performance is no guide to the future
take time to find a buyer, or you may have to accept a
The past performance of Octopus Titan VCT is not a price lower than the NAV of the investment.
reliable indicator of future results. Nor should you rely
on any forecasts made about future returns.
“Our goal is to be totally transparent with our investors and their advisers. We want them to understand how our
products work, how their money is being invested, and what the investment key risks are, before they reach any
decision.” John Averill, Head of Compliance and Risk, Octopus Investments.
22 Venture capital trustsConflicts of interest
We’ve built strong relationships with many of the companies in which
we invest, and sometimes this can present ‘conflicts of interest,’ as we
explain below.
With these relationships, there’s a chance that the carefully. Similarly, when investments held by a
interests of one group of investors will be at odds, or number of different investors come to be sold, the
present a conflict, with the interests of another group interests of all parties may not be fully aligned. We
or with the interests of Octopus Investments. We aim have agreed policies and processes in place to make
to make sure that the interests of our customers are sure this is done fairly, but sometimes, investors may
always looked after. Conflicts of interest are sometimes still be limited in the amounts they can invest or be
unavoidable. In the first instance, we look to prevent restricted in the timing of an exit.
them but if we can’t we’ll take action to manage, or
Fees from portfolio companies
mitigate, any effects.
We may receive fees from the companies that Octopus
For more information on some of the main conflicts,
Titan VCT invests in (for example, when making or
please see below, and refer to the Octopus Conflicts
selling our investment in a company, as well as for
of Interest policy, which is available on our website,
appointing a representative to the Board of Directors).
octopusinvestments.com.
The costs of all deals that do not proceed to completion
Investing alongside other Octopus funds are typically borne by either the company seeking
Octopus Ventures has previously invested funds from funding or by Octopus Investments, not by Octopus
Octopus Titan VCT alongside other Octopus managed Titan VCT.
products and sometimes even alongside the Venture
Managing conflicts
Partners and Octopus itself. This is typically not the case
on new deals going forward. Through this co-investment, We have a number of controls in place to manage any
investors in Octopus Titan VCT have had access to deals conflicts of interest where we cannot prevent them.
that may not have been possible without being part of These include:
the larger deal with other Octopus investors. In addition, • Octopus Ventures investment Committee makes
funds from Octopus Titan VCT may be invested in other sure investment decisions are in the best interests of
Octopus products. investors, including how potential conflicts of interest
The role of Octopus employees are managed when they cannot be avoided as well
as being responsible for the allocation policy.
We often place an Octopus employee on the Board of the
• In cases where there are a large number of conflicts
companies we invest in, either as an observer or a director.
This means we are able to closely monitor the investment of interest or they are particularly significant,
we’ve made on behalf of Octopus Titan VCT investors. proposals are reviewed by the Conflicts Committee,
However, this also means that, as company directors, which is responsible for ensuring conflicts are handled
those employees have obligations to all shareholders of appropriately, and who are independent of Octopus
the company, and not just Octopus investors. Ventures and Octopus Titan VCT.
• As Octopus Titan VCT is a public-listed company,
When could conflicts of interest
it has its own Board of Directors, which is required
be harmful to investors?
to act independently and represent shareholders’
Sometimes we spot a good investment opportunity, best interests at all times, and who are ultimately
and we want to invest from more than one Octopus responsible for ensuring the investment objectives
fund. In these instances, the amounts being invested and policy of Octopus Titan VCT are carried out.
from different Octopus vehicles must be managed
Octopus Titan VCT 23The charges
Our charges are taken from the money you invest, so you don’t have
to send any additional payment for the services we provide. If there’s
anything about our charges that you don’t understand, call us on
0800 316 2295 and we’ll be happy to talk them through.
Four ways to invest in Octopus Titan VCT
1 Through a financial adviser who charges a 3 Through an ‘execution-only’ intermediary:
one-off fee on investments: You can ask for the They won’t offer financial advice, but they will
one-off cost of the investment advice you receive arrange the purchase of VCT shares for you. They
to be paid on your behalf through the VCT. may charge you a commission for this service.
2 Through a financial adviser who may also charge 4 Make a direct application yourself:
ongoing fees: You can choose to pay your financial Although we are happy to arrange this, we always
adviser a smaller initial fee and ongoing fees for as recommend you talk to a financial adviser before
long as you hold the investment. Both of these fees deciding to invest.
can be paid on your behalf through the VCT.
Advised Advised (initial Execution- Direct
(initial only) and ongoing) only investor
Upfront Initial fee (to Octopus) 3% 3% 3% 5.5%
charges
Adviser charges up to 4.5% up to 2.5% – –
Commission (to execution-
– – 2.5% –
only intermediary)
Ongoing Annual management
2% 2% 2% 2%
annual charges (to Octopus)
charges
Adviser charges1 – up to 0.5% – –
Commission (to execution-
– – 0.5% –
only intermediary)1
Direct application ongoing
– – – 0.5%
charge (to Octopus)1
Admin and accounting
0.3% 0.3% 0.3% 0.3%
charge (to Octopus)
Performance fees2 20% 20% 20% 20%
Ongoing adviser charges, direct charges or commission are paid for a maximum of seven years after the investment date. If you
1
choose to pay your adviser less than the maximum amount shown in the table, Octopus Titan VCT will use the money left over to buy
more VCT shares for you. Similarly, if your execution-only intermediary chooses not to take any upfront commission, this amount will
instead be used to buy additional VCT shares for you.
We want our investments to do what we say they will. When the performance of the companies we invest in exceeds expectations, we
2
think it’s fair to take a performance fee of 20% on all future gains. In order to do so the NAV plus cumulative dividends of the Octopus
Titan VCT at the year end (31 October) must exceed the previous highest NAV plus cumulative dividends (net of performance fee
already taken). In this case Octopus will charge a 20% performance fee on the excess. For full details on the performance fee and other
fees please see the prospectus and KID. Both documents are available on our website, octopusinvestments.com/titan.
The minimum investment is £3,000.
24 Venture capital trustsHow to invest
If you have a financial adviser What if you change your mind?
They can help you to complete your application form. Please let us know as soon as possible. You can’t cancel
If your adviser has any questions, they can call us on your investment, but if you contact us before your
0800 316 2067 or visit octopusinvestments.com. shares have been allotted, we will do our best to return
your money to you.
If you are investing directly
After your shares have been allotted, you own shares in
If you have any questions, you can call our Client
the VCT itself and you will need to sell the shares instead.
Relations team on 0800 316 2295. Please remember
See page 21 for details of how to sell your shares.
that we can’t offer investment or tax advice, but we’ll
be happy to talk you through the application process
and help you with anything else we can.
Giving us feedback
Outstanding customer service is at the heart of everything we do. But that doesn’t mean we get it right every
time. If you’re not happy with the service we give you, we’ll listen to your complaint and confirm it in writing,
as well as outlining how we plan to resolve it.
Our complaints procedures follow the rules set out by the Financial Conduct Authority, responsible for
regulating investment companies like Octopus, and the Financial Ombudsman Service, which has been
set up to resolve disputes between consumers and companies.
If you want to make a complaint, email complaints@octopusinvestments.com, call 0800 316 2295 or
write to us at: Octopus Investments Limited, 33 Holborn, London EC1N 2HT.
If we are unable to settle a complaint, it may be referred to the Financial Ombudsman Service. You can
contact them at Exchange Tower, London E14 9SR. Further information on the service can be found at
financial-ombudsman.org.uk.Octopus Titan VCT 0800 316 2295 Octopus Investments clientrelations@octopusinvestments.com 33 Holborn octopusinvestments.com London EC1N 2HT
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