Embracing growth in emerging UK companies - Octopus AIM VCT and Octopus AIM VCT 2 - Octopus Investments
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Octopus AIM VCTs
Embracing growth
in emerging UK
companies
Octopus AIM VCT and Octopus AIM VCT 2
August 2018
Key investment risks For UK investors only • Octopus AIM VCT and Octopus AIM VCT 2 are investments, that place your money at risk. This means the value of an investment into the VCTs, and any income from it, can fall as well as rise and you may not get back the full amount invested. • Venture Capital Trust (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 AIM VCT and Octopus AIM VCT 2, see page 12. It is important that you read and fully understand the key risks involved before deciding whether these investments are right for you. To help, we have a dedicated section detailing the key risks on page 18. 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 Documents (KIDs) available at octopusinvestments.com. 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 30 June 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: July 2018. CAM07000-1807
The Octopus AIM VCTs are a tax-efficient way to invest in established portfolios of AIM-listed, smaller companies with strong growth potential. This new share offer will help fund selective new investments. Find it fast About Octopus 2 VCTs: a home-grown success story 4 Reasons to consider a VCT 5 The AIM opportunity 6 Octopus AIM VCTs 7 The Octopus Smaller Companies team 8 Embracing growth in emerging UK companies 10 A strong performance record 12 Top ten holdings 13 New share offer 15 The life cycle of your VCT investment 17 Understanding the risks 18 Conflicts of interest 19 The charges 20 How to invest 21
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 650 employees and £7.8bn1 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 start-ups grow to become
household names, including Zoopla Property Group,
graze.com and Secret Escapes.
• We currently have £1.6 billion invested in companies
listed on the Alternative Investment Market.
• 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
Multi
es
7b
talk to the fund managers who invest your money,
tur
manager
£0.
you can. Just call us on 0800 316 2295 or pop in portfolios
Ven
for a visit. £1.2b
Property
£1.0b
2 We’ll never treat you like just another customer
We don’t use call centres and we don’t have recorded
£7.8 billion1
messages telling you “how important your call is”.
Octopus funds under AIM
Our Client Relations team is frequently praised by our management £1.6b
customers for the help and attention they give. Healthcare
£1.5b
3 We’ll always keep trying to improve
Having the courage to do things differently lets
us create innovative solutions to the real problems Energy
people face. £1.5b
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
Multi manager portfolios £1.3b
shareholders demanding short-term profits, so we
don’t have to cut corners or lower our standards. AIM £1.5b
Energy £1.6b
5 We’ll never let complexity win Talk to Octopus to find out more
Healthcare £1.3b
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, 31 March 2018
1
Octopus AIM VCTs 3VCTs: 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
Having launched our first VCT in 2002, Octopus is now
listed companies (for example, BP or Vodafone), the
the UK’s largest VCT provider.1 We currently manage
government introduced Venture Capital Trusts (VCTs)
more than £975 million of VCT money on behalf of over
in 1995 as a way of encouraging investment into
28,000 investors. We think VCTs offer great investment
Britain’s exciting, entrepreneurial businesses. In the
potential, with some exciting tax benefits attached.
two decades since they were introduced, VCTs have
However, VCTs are not suitable for everyone, which
helped to create jobs, reward innovation and bolster
is why we always recommend talking to a qualified
the UK economy.
financial adviser before deciding to invest.
Embracing growth in emerging UK companies If you have any questions after reading this brochure,
The UK’s small businesses are often hailed as the call 0800 316 2295 or visit octopusinvestments.com.
backbone of the British economy. However, many could We’re always happy to hear from you.
be growing even faster with better access to funding.
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 access
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 the shares have risen in value.
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 The Octopus AIM VCTs first invested in loop-up on
they take with their money. For more information 19 August 2016. Loop-up’s software aims to remove the
on the risks, please see page 18. pain points from conference calls and online meetings.
Find out more on page 11.
Source: The Association of Investment Companies, April 2018.
1
4 Venture Capital TrustsReasons to consider a VCT
Growth potential A number of tax benefits
VCTs invest in smaller, VCT-qualifying companies that are When you invest in new VCT shares, you’re entitled
not listed on the main London Stock Exchange. Smaller to a number of tax incentives on investments up to
companies have the potential to grow much faster than £200,000 each tax year. These include:
their larger listed counterparts. By offering investors
• Income tax relief – You can claim up to 30% upfront
access to an instantly diversified portfolio of smaller
income tax relief on the amount you invest, provided
companies, established VCTs can offer an attractive
you keep your VCT shares for at least five years. So if
way to gain exposure to this sector. Always remember,
you invest £10,000 in a VCT, £3,000 can be taken off
however, that investing in small, VCT-qualifying
your income tax bill, although the amount of income
companies means VCTs are high-risk investments and
tax you claim cannot exceed the amount of income
you may not get back the full amount you invest.
tax due.
Supporting British innovation • Tax-free capital gains – If you decide to sell your VCT
Investing in a VCT means you can feel confident that shares and you make a profit, the proceeds won’t be
you are helping innovative smaller companies to create liable for capital gains tax.
jobs, prosperity and economic growth. • Tax-free dividends – If your VCT pays dividends, there
is no tax to pay and you won’t need to declare them
Complementing other investments
on your tax return.
While VCTs typically carry a higher risk profile, they can
be a useful addition to your investment portfolio if you
are looking to complement existing pension plans or
other long-term investments, such as Individual Savings
Accounts (ISAs). Recent changes to pension rules have
placed further restrictions on the amount you can invest
into a personal pension, both annually and over your
lifetime. This means that VCTs could become a valuable
part of retirement planning if your pension limits are at
risk of being breached. As with any investment, please
ensure that you are comfortable with the associated REMINDER: You should never invest in a VCT solely
risks before making any investment decisions. for the tax benefits. Tax reliefs depend on the VCT
maintaining its VCT-qualifying status, and the tax
VCTs can help to generate additional income benefits available to you will depend on your own
The potential for tax-free dividends can enable an personal circumstances and can change. For more
attractive, supplementary income, which could be information on the key risks, please see page 18.
useful, especially if you’re approaching or in retirement.
Octopus AIM VCTs 5The AIM opportunity
The junior market of the London Stock Exchange is home to hundreds of
outstanding and exciting smaller companies. This makes AIM a market
of great opportunity, where investment expertise can bring potential to
life for investors.
Since its introduction in 1995, AIM has helped thousands Accessing AIM through a VCT
of companies raise development capital to help them
For those comfortable with the risks of investing in
grow. Its companies trade in more than 80 countries
smaller companies, getting exposure to these
and operate across 40 different sectors.1 It is currently
companies via a VCT can prove attractive. As well as
home to over 940 companies, with a combined worth
the long-term potential growth of smaller companies,
of more than £110 billion.1
the tax benefits associated with a VCT can enhance the
As well as being a good place for smaller companies to position for investors further. In addition, a larger and
gain access to funding to help them grow, AIM remains more diversified portfolio of companies can provide a
one of the best places for growing businesses to take higher level of confidence that if one company fails, the
their first steps to becoming public companies. It’s also performance of the other holdings can compensate.
worth noting that over the years, AIM companies have
made a significant contribution to the UK economy in Please be aware that the value of an investment
terms of job creation, tax revenue and gross domestic in a VCT, and any income from it, can fall or rise.
product growth. What is often overlooked within AIM Investors may not get back the full amount they
is the diversity of companies and sectors that exist invest. The ability of claiming tax reliefs available
on the market. This means that having the ability to depends on the investors own circumstances and
spot growth potential at an early stage can create the may change in the future. Tax reliefs also depend
opportunity for significant returns. on the VCT maintaining its qualifying status.
Reasons to consider AIM
High-quality companies Diversification Transparency
While AIM is the home of smaller AIM features a number of AIM-listed companies must meet
UK companies, you might be younger, dynamic businesses certain regulatory and governance
surprised at how much some of that operate in a diverse range requirements, ensuring higher
these companies can grow. of sectors. Many of these levels of reporting than companies
companies are providing solutions that are not listed on any stock
to modern-day problems in areas exchange.
such as technology, healthcare
and the environment.
1
Source: London Stock Exchange Group, AIM statistics, June 2018.
6 Venture Capital TrustsOctopus AIM VCTs: portfolios of
thriving UK smaller companies
Octopus manages two AIM VCTs. Each offers a tax-efficient way to
invest in diverse portfolios of emerging and established companies
judged to have strong growth potential.
The Octopus AIM VCTs
Octopus AIM VCT was launched in 1997 and Octopus Although new investments remain small enough to
AIM VCT 2 in 2005. Both VCTs have been making qualify for VCT funding, the established nature of the
investments alongside each other, in proportion to Octopus AIM VCTs means that they feature a large
the size of each VCT, since 2010. Each benefits from number of maturing AIM-listed businesses. This means
holding a broad spectrum of VCT-qualifying UK investors can instantly benefit from owning established
smaller companies. portfolios of around 75 AIM-listed companies, many of
which we believe will continue to deliver sales growth
and generate profits.
For those willing to accept the key risks of investing in small VCT-qualifying AIM-listed companies, the
Octopus AIM VCTs can offer an easy way to access this part of the market. They offer instant diversification
through a broad portfolio of around 75 companies across a diverse range of sectors, from building materials
and pharmaceuticals to software development. For more information on the key risks, please see page 18.
Number of holdings Fund size Dividend policy
Targets a tax-free dividend of 5p annually
Octopus AIM VCT 76 £131 million
or 5% of share price, whichever is greater.
Targets a tax-free dividend of 3.6p annually
Octopus AIM VCT 2 75 £90 million
or 5% of share price, whichever is greater.
Octopus AIM VCTs 7The Octopus Smaller
Companies team
Not every company listed on AIM will end up being successful or profitable.
That’s why our AIM portfolios are managed by an experienced team of AIM
specialists with a proven track record.
The Octopus Smaller Companies team includes some of Boards of Directors
the most experienced AIM-focused fund managers in the
Octopus AIM VCT and Octopus AIM VCT 2 have
market, with over 100 years of investment experience.
independent Boards of Directors appointed to
Together, they look after more than £1.6bn on behalf of
represent the interests of shareholders. The Directors
over 19,000 Octopus investors.
have broad experience across both small and large,
The team makes investment decisions based on their private and public companies. They operate in a non-
considerable knowledge of the market and analysis executive capacity and are responsible for overseeing
of the companies themselves, including the company the investment strategy of the VCT. You can find full
management track record, financial position, growth details of the Boards in the prospectus, available at
potential and long-term prospects. octopusinvestments.com/aimvct.
Maintaining a portfolio of companies operating in diverse
industries is fundamental to the team’s approach to
managing risk. They work extensively on AIM investments
and have a great track record of uncovering value in
smaller companies. Every year, the team conducts on
average 500 face-to-face meetings with AIM companies
to help identify the best investment opportunities.
Richard Power Kate Tidbury Edward Griffiths Stephen Henderson Mark Symington
Dominic Weller Chris McVey Charles Lucas Jessica Sweeney
8 Venture Capital TrustsA straightforward investment approach
The Octopus Smaller Companies team looks to invest in small businesses with significant growth potential.
In order to achieve this, the team applies the following investment process:
1 Research 4 Due diligence
Compared to larger companies, smaller Not all smaller companies will be successful. So,
companies are lesser known and under-researched. before making a decision to invest, the team
Undertaking extensive research helps the team investigates a broad range of factors including the
to uncover hidden gems with the opportunity for company’s business plan, its management, its
significant long-term returns. growth rate, its profitability (and how quickly this is
changing), its valuation relative to its peers and its
2 Eligibility
overall financial strength.
When selecting potential portfolio companies to
back the team must consider which companies 5 Knowing when to sell
will be VCT qualifying. There is an extensive range After investment, the team continues to monitor
of criteria to bear in mind which HMRC regularly the progress of the companies it has chosen to
reviews to ensure that funds are being directed into invest in. Selling profitable investments can help the
the right kind of companies. VCT achieve its aim of paying out regular tax-free
dividends to investors.
3 Portfolio diversity
Investments are spread across a wide range of
industries as diverse as building materials, It’s worth bearing in mind that dividends are not
pharmaceuticals and software development. New guaranteed. For five year performance history,
investors will gain access to existing portfolios of please see page 12.
around 75 AIM-listed companies.
Octopus AIM VCTs in numbers
£ 242m £ 221m 500+
The average market Combined funds under Average number of meetings
value of companies in the management of Octopus AIM with company management
Octopus AIM VCTs VCT and Octopus AIM VCT2 every year
75%+ 100+ 55%+
The proportion of the Combined years of investment The proportion of the portfolios
portfolios by value invested in experience within our Smaller by value invested in companies
profitable companies Companies team paying dividends to the VCT
Octopus AIM VCTs 9Embracing growth in
emerging UK companies
Breedon Group: supplying a wide range Craneware: Edinburgh-based IT provider
of materials to the construction industry for the US healthcare sector
Breedon is the UK’s largest independent construction Craneware earns most of its revenue in the US,
materials group, operating around 80 quarries, where it is a major software supplier to hospital
40 asphalt plants and 170 ready-mix concrete and networks. The company’s software tracks the
mortar plants. The company benefited from a series cost of operations for patients and insurance
of material acquisitions and now employs 2,900 companies, enables payments to doctors and
people in UK and Ireland. Breedon’s strategy is to other suppliers, and provides a complete audit trail.
continue growing through consolidation of the UK’s Software is usually sold via five-year contracts,
building materials sector. which gives Craneware predictable earnings.
learning
technologies
group
LTG: a group of businesses who provide MaxCyte: accelerating the development
innovative learning technology solutions of cell-based medicines
LTG’s businesses are at the forefront of innovation MaxCyte provide a patented, high-performance
and best-practice in the learning technology sector, cell-engineering platform to bio-pharmaceutical
and have received numerous awards for their partners engaged in drug discovery, development and
exceptional performance. Their portfolio of brands biomanufacturing. The company is working on a
represents the best of breed and they are proprietary cell therapy programme “CARMA” hoping
acknowledged throughout the industry as market to deliver a faster, less complex solution to patients.
leaders. The company benefited from a series
of material acquisitions and now employs 2,900
people in UK and Ireland.
Note: Any company examples are for illustrative
purposes only. They should not be considered as
an investment recommendation.
10 Venture Capital TrustsGB Group: leading specialists Gear4music: the largest UK-based online
in identity (ID) verification retailer of musical instruments & equipment
Recognised as a global leader, GB Group helps check York-based Gear4music sells own-brand musical
the identity of customers and employees for instruments and music equipment, alongside
regulatory and commercial reasons. Its services have well-known premium brands including Fender,
been increasingly in demand from organisations Yamaha and Roland, to customers ranging from
trying to prevent ID theft and fraud, particularly beginners to professional musicians. Since floating
through the internet. GB Group has made acquisitions on AIM in 2015, the company has expanded rapidly
to gain an international presence and client list, into Europe and operates 19 websites in 15 languages
and we expect this strategy to continue. and eight currencies, with distribution centres in
Sweden and Germany.
LoopUp: fast-growing software provider MYCELX: Providing ecologically friendly
for conference calls and online meetings water treatment technology
LoopUp’s software aims to make the conference call MYCELX is a revolutionary oil-free water technology
experience smooth and pain-free. Users can view company solving the world’s toughest oil removal
presentations simultaneously, see who else is on the problems in the oil and gas industry. They created
call and who is speaking in ‘real time’. The company the patented MYCELX polymer which allows oil to be
counts more than 2,000 businesses among its removed from water far beyond what conventional
customers. Having listed on AIM in August 2016, the systems have ever achieved, with a smaller physical
business has grown organically and concluded the footprint and in a virtually fail-safe process.
material acquisition of MeetingZone.
Octopus AIM VCTs 11A strong track record
Both Octopus AIM VCTs have a strong performance track record and a
history of paying a steady stream of tax-free dividends to investors.
Dividend policy
One of the main benefits of VCTs is their potential for from the sale of portfolio holdings. It’s worth bearing in
paying tax-free dividends to investors. Octopus AIM mind that dividends are not guaranteed.
VCT targets a tax-free dividend of 5p annually or 5% of
Please note that tax treatment depends on individual
share price, whichever is greater and Octopus AIM VCT
circumstances and may change in the future. Tax reliefs
2 targets a tax-free dividend of 3.6p annually or 5% of
depend on the portfolio companies maintaining their
share price, whichever is greater. In addition, the VCTs
qualifying status.
can pay special dividends if there are significant gains
12-month performance over 5 years
Year to 30 June 2014 2015 2016 2017 2018
Octopus AIM VCT NAV Total Return1 22.8% 0.3% -3.5% 25.1% 8.2%
Octopus AIM VCT 2 NAV Total Return1 23.1% -0.7% -2.6% 24.0% 8.1%
FTSE AIM All-Share Total Return2 14.6% -2.5% -5.0% 38.5% 13.5%
FTSE All-Share Total Return2 13.1% 2.6% 2.2% 18.1% 9.0%
Octopus AIM VCT Dividend Yield3 5.9% 2.2% 10.9%4 2.8% 7.5%
Octopus AIM VCT 2 Dividend Yield3 5.4% 7.2%4 5.2% 5.9% 5.0%
Net asset value (NAV): this is the combined value of all the Annual dividend yield is calculated by dividing all the dividends
3
assets owned by the VCT after deducting the value of its liabilities for the 12 months to 30 June by the share price on 30 June of the
(such as debts and financial obligations). prior year. For this calculation we use the record date for each
NAV total return: This shows the yearly performance, including
1 dividend, which is the cut-off date by which shareholders must be
the dividends paid out for the last five years to 30 June 2018. This on the shareholder register to receive the dividend. Note that for
is calculated from the movement in the NAV over the year to 30 Octopus AIM VCT, in some years one of the record dates has fallen
June with any dividends paid over that period added back. The in June and in others it has fallen in July. Because we calculate the
revised figure is divided by the NAV at the start of that year to get annual dividend yield with a year-end of 30 June, some annual
the annual total return. Performance shown is net of all ongoing dividend calculations include three regular dividends for the year
fees and costs (shown on page 20). and others include only one.
FTSE AIM and All Share Total Return: Performance is shown
2 Includes an additional special dividend of 4p per share for Octopus
4
alongside the total returns of the FTSE AIM and FTSE All Share AIM VCT and 2p per share for Octopus AIM VCT 2 from the sale of
indices, which are indicators of activity in the broader UK equity Advanced Computer Software.
market (source: Lipper). Note that none of these indices are used
as benchmarks for the Octopus AIM VCTs.
The value of shares can fall as well as rise. 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.
12 Venture Capital TrustsTop ten holdings for Octopus AIM VCT
Forecast annual
Percentage of Date of first Market cap2 Forecast annual profit before
portfolio1 investment1 (£m) revenue2 (£m) tax2 (£m)
GB Group plc 5.3% 03/11/2011 913.0 132.5 26.8
Learning Technologies Group plc 4.5% 13/06/2011 744.0 100.6 17.9
Breedon Group plc 4.5% 26/08/2010 1,380.1 671.6 81.0
Quixant plc 4.0% 15/05/2013 280.3 91.7 14.9
Staffline Recruitment Group plc 2.6% 08/12/2004 261.7 1,073.8 37.1
Yu Group plc 2.4% 14/03/2016 138.2 81.9 5.4
Mattioli Woods plc 2.4% 15/11/2005 208.0 54.4 10.9
Brooks Macdonald Group plc 2.3% 03/03/2005 275.3 103.2 19.2
Gear4music Holdings plc 2.2% 28/05/2015 151.4 103.8 3.0
Craneware plc 2.2% 11/09/2007 565.2 50.7 15.4
Top ten holdings for Octopus AIM VCT 2
Forecast annual
Percentage Date of first Market cap2 Forecast annual profit before
of portfolio1 investment1 (£m) revenue2 (£m) tax2 (£m)
GB Group plc 5.1% 03/11/2011 912.0 132.5 26.8
Breedon Group plc 4.3% 26/08/2010 1,380.1 671.6 81.0
Learning Technologies Group plc 4.3% 13/06/2011 744.0 100.6 17.9
Quixant plc 3.9% 15/05/2013 280.3 91.7 14.9
Craneware plc 3.6% 11/09/2007 565.2 50.7 15.4
Yu Group plc 2.3% 14/03/2016 138.5 81.9 5.4
Gear4music Holdings plc 2.1% 28/05/2015 151.4 103.8 3.0
RWS Holdings plc 2.0% 18/12/2009 1,174.9 299.2 60.5
Netcall plc 1.7% 27/07/2010 105.1 23.3 3.8
LoopUp Group plc 1.6% 19/08/2016 255.9 30.3 3.1
1Source: Octopus Investments, 30 June 2018. 2Source: Factset, 30 June 2018.
Octopus AIM VCTs 13The Octopus AIM VCTs first
invested in Breedon Group,
supplier of construction
materials, in 2010.
14 Venture Capital TrustsNew share offer
Octopus AIM VCT and Octopus AIM VCT 2 are open for investment.
This new share offer of £20 million with the potential for a further £10m,
subject to demand, can help diversify the portfolios further by making
selective new investments.
Choosing your investment Reinvesting VCT dividends
New investors have the option of buying shares in one Both Octopus AIM VCTs give you the option to reinvest
or both of the Octopus AIM VCTs. They can split their any dividends you are entitled to receive, using the
investment 60/40 between Octopus AIM VCT and proceeds to purchase more VCT shares. This could
Octopus AIM VCT 2, or place 100% of their investment increase your shareholding, enabling you to get further
into either VCT. As the two VCTs pay dividends at income tax relief on the additional shares allotted. To
different times of the year, investing in both VCTs offers reinvest your dividends, please complete the relevant
the potential for investors to receive four dividend section on the application form. You can also ask us to
payments per year. do this at any point after investing with us, and of
course, you can change your mind at any time. Please
Applying for shares be aware that reinvested dividends would form part of
Before applying, it’s important that you read the your £200,000 annual VCT investment limit.
prospectus, which is available at octopusinvestments.
com/aimvct. As with any investment, there are risks to Claiming income tax relief after
consider before you decide to invest. Please read about selling VCT shares
these key risks on page 18 and in the prospectus. We
HM Revenue & Customs (HMRC) places restrictions on
always recommend you talk to a professional financial
buying and selling shares in the same VCT within a
adviser about whether this investment is right for you.
six-month period. If you have recently sold shares in
If you decide to invest, you’ll need to complete an Octopus AIM VCT or Octopus AIM VCT 2, in order to
application form and return it to us. We’ll write to benefit from the 30% upfront income tax relief available
confirm we’ve received your application and we’ll let you will need to wait six months from the date of sale
you know if we need any further information. before investing in the same Octopus AIM VCT again.
“This new share offer will help us invest in growing companies with attractive positions in their markets.
We will also look to provide existing portfolio companies with additional funding to help accelerate their growth.”
Kate Tidbury, AIM VCT Fund Manager
Octopus AIM VCTs 15The Octopus AIM VCTs first
invested in Gear4Music, the
The Octopus AIM VCTs first
UK’s largest online retailer
invested in Breedon Group,
of musical instruments and
supplier of construction
equipment in May 2015.
materials, in 2010.
16 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, from making your application, the first five years and
what to do if you decide to sell your shares.
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 – available at VCT share prices are quoted on the London Stock
octopusinvestments.com/aimvct – you’ll need to Exchange, so you can buy or sell shares at any time
complete the application form and return it to us. through a stockbroker or a share dealing account.
We’ll let you know when we’ve received it and if we Usually the market price is less than the underlying
need any more information from you. NAV of the shares. It’s worth noting that since
previously owned VCT shares do not qualify for the
2 Issuing your shares
30% upfront income tax relief, the number of buyers
Once we’ve received your funds, we will allot your of second-hand VCT shares is, in practice, limited. As
VCT shares at the next available date. These dates a result, selling shares directly into the market can
are usually listed on our website. This process can produce a poor result.
typically take a few months, but we always seek to
allot shares in the same tax year as the application Sell your shares back to the VCT
was made. Once your shares are allotted, you can Because natural demand for VCT shares on the
check the value of your shares whenever you like secondary market is limited, the Octopus AIM VCTs offer
using our Octopus online service. a share buyback facility for investors, provided there are
3 Your share and income tax certificates funds available. This facility allows existing Octopus AIM
VCTs investors to sell their shares back to the VCT at a
You receive share and income tax certificates usually
small discount to the NAV. The current policy agreed
within 21 working days of your shares being allotted.
by the Boards is to buy shares back at a 5% discount to
In addition we’ll also provide you with a guide to
the NAV. Share buybacks are conducted at the Boards’
claiming tax relief.
discretion, and therefore there can be no guarantees that
4 Keeping you updated shares will always be sold on request. It’s worth noting,
We’ll send you annual and half-yearly reports which however, that the Octopus AIM VCTs have a strong
include updates from the Chairman of the VCT record of buying back shares from investors.
and Octopus Investments, the VCT manager. As a If you’d like more information please give us as call on
shareholder we’ll also write out to you giving you the 0800 316 2295 and we’ll send you a copy of our guide
option to vote on resolutions and proposals (e.g. new to selling your VCT shares.
fundraises) from the VCT’s Board.
5 Receiving dividends
When our VCTs pay dividends to you, you can choose
to have the dividend paid directly into your bank
account or re-invested into the VCT. If you choose the Please remember, VCT shares should be held for
latter you will then receive an additional share and a minimum of five years in order to retain the 30%
income tax certificate which will allow you to claim upfront income tax relief.
additional income tax relief from HMRC.
Octopus AIM VCTs 17Understanding the risks
We want to make sure you understand the risks associated with this
investment before making a decision. If you have any questions about
the risks mentioned here, we recommend you speak to a professional
financial adviser.
Any decision to invest in Octopus AIM VCT and Your shares may be difficult to sell
Octopus AIM VCT 2 should be made on the basis of
There isn’t an active market for VCT shares in the way
information contained in the prospectus and Key
there is for shares in bigger listed companies. This
Information Document (KID) These are available at
means that if you decide to sell your VCT shares, it may
octopusinvestments.com/aimvct.
take time to find a buyer, or you may have to accept a
Your capital is at risk and you price lower than the NAV of the investment.
could lose money
Tax rules can change
There’s no guarantee that the amount you invest will
The VCT tax benefits we’ve described in this brochure
be returned to you.
are correct at the time of going to print. However, rates
This is a long-term investment of tax, tax benefits and tax allowances do change. In
addition, the tax benefits available to you through this
You should be prepared to hold your shares for a minimum
investment depend on your own personal circumstances.
of five years. If you decide to sell your shares before then,
you will be required to repay to HM Revenue & Customs To ensure that VCT money continues to support
(HMRC) any upfront income tax relief you’ve claimed. government policy objectives, HM Treasury can also
change the definition of a VCT-qualifying investment
Past performance is no guide to the future in the future. This could impact the nature of new
The past performance of an investment is not a reliable investments a VCT can make over time.
indicator of future results. Nor should you rely on any
Investing in smaller companies is considered
forecasts made about future returns.
a high-risk investment
The VCT’s qualifying status could end Both Octopus AIM VCTs invest in smaller publicly
There is no guarantee that Octopus AIM VCT or Octopus traded companies that are listed on the Alternative
AIM VCT 2 will maintain their VCT status. If a VCT loses Investment Market, a sub-market of the London Stock
its qualifying status, tax advantages may be withdrawn Exchange. Investments in smaller companies can fall or
from that point. Additionally, if a VCT loses its status rise in value much more sharply than shares in larger,
within five years of your initial investment, you will be more established companies. They also have a higher
asked to repay any upfront income tax relief that you rate of failure.
have already claimed.
“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 risks are, before they reach any decision.”
John Averill, Head of Compliance and Risk Octopus Investments.
18 Venture Capital TrustsConflicts of interest
Octopus has built strong relationships with many of the companies in
which we invest, and we sometimes use different sources of funding to
invest in the same companies. This can present ‘conflicts of interest’,
as explained below.
With these relationships, there’s a chance that the interests of one group of investors will be at odds, or present a
conflict, with the interests of another group, or with the interests of Octopus. Conflicts of interest are not necessarily
a problem in themselves, but they need to be managed carefully to make sure investors are treated fairly at all times.
Investing alongside other Octopus funds Managing conflicts
The Smaller Companies team will often invest funds • Our goal is to make sure the interests of our customers
from Octopus AIM VCT and Octopus AIM VCT 2 are always looked after. So we have a number of
alongside and into other Octopus-managed products controls in place to manage conflicts of interest.
and sometimes even alongside Octopus itself. Through
• Our Investment Committee makes sure investment
this co-investment, investors in the Octopus AIM
decisions are in the best interests of investors, including
VCTs can have access to deals that may not have
how potential conflicts of interest are managed.
been possible without being part of the larger deal
with other Octopus investors. In addition, funds from • In cases where there are a large number of conflicts
Octopus AIM VCT and Octopus AIM VCT 2 may be of interest or they are particularly significant,
invested in other Octopus products. proposals are reviewed by the Octopus Conflicts
Committee, responsible for ensuring conflicts are
When could conflicts of interest be harmful handled appropriately.
to investors?
• As the Octopus AIM VCTs are publicly listed companies,
Sometimes we spot a good investment opportunity, but they both have a Board of Directors who are required
are unable to invest as much money as we’d like due to to act independently and represent shareholders’ best
restraints such as the size of a company or the number interests at all times.
of shares available. In these instances, the amounts
being invested from different Octopus vehicles must be
managed carefully. Similarly, when investments held
by a number of different investors come to be sold, the
interests of all parties may not be fully aligned.
We have agreed policies and processes in place to
make sure this is done fairly, but sometimes, investors
may still be limited in the amounts they can invest or
restricted in the timing of an exit.
Octopus AIM VCTs 19The 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 AIM VCT and Octopus AIM VCT 2
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 arrange
one-off cost of the investment advice you receive the purchase of VCT shares for you. They may charge
to be paid on your behalf through the VCT. 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 investment2. 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- – – up to 2.5% –
only intermediary)
Ongoing Effective annual management
1.5% 1.5% 1.5% 1.5%
annual charges (to Octopus)1
charges
Adviser charges2 – up to 0.5% – –
Commission (to execution-
– – 0.5% –
only intermediary)2
Direct application ongoing charge
– – – 0.5%
(to Octopus)2
Octopus charges an annual management charge of 2% per annum. However, Octopus reduces this by the amount of the maximum
1
ongoing adviser charges, execution-only commission and direct application charges. This creates an ‘effective rate’ of 1.5% for the first
nine years.
²Ongoing adviser charges, direct charges or commission can only be paid for a maximum of nine years after the investment date. After
these charges stop the effective annual management charge paid to Octopus will revert to the full 2%. If you choose to pay your adviser
less than the maximum amount shown in the table, Octopus AIM VCT and Octopus AIM VCT 2 will use the money left over to buy more
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.
20 Venture Capital TrustsHow to invest
If you have a financial adviser What if you change your mind?
If you have a financial adviser, they can help you to Please let us know as soon as possible. You can’t cancel
complete your application form. your investment, but if you contact us before your
shares have been allotted, we will do our best to return
If your adviser has any questions, they can call us on
your money to you.
0800 316 2067 or visit octopusinvestments.com.
After your shares have been allotted, you own
If you are investing directly shares in the VCT itself and you will need to sell the
If you have any questions, you can call our Client shares instead. See page 17 for details of how to sell
Relations team on 0800 316 2295. Please remember 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 AIM VCTs 0800 316 2295 Octopus Investments clientrelations@octopusinvestments.com 33 Holborn octopusinvestments.com London EC1N 2HT
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