AIM Report 2019

64 65 CLOSE BROTHERS AM OCTOPUS INVESTMENTS ABOUT THE MANAGER In the complex world of finance, we deliver clarity and direction. Our expertise helps pinpoint what matters, guiding the decisions that will help you better serve your clients. We are one of the UK’s largest and longest established providers of high-quality investment services. We manage £12+ billion on behalf of individuals, charities and institutions. We are part of the Close Brothers Group, a FTSE 250 leading UK merchant banking group, providing lending, deposit taking, wealth management services, and stocks and shares trading. Established in 1878, our strategy focuses on developing long-term relationships through delivering high levels of client service and professional expertise to help the people and businesses of Britain thrive over the long-term. OUR AIM OFFER The Close Inheritance Tax Service (CITS) is one of the longest running AIM-based inheritance tax (IHT) services on the market, and has a successful track record. Since its launch in March 2001, it has proved effective in protecting clients’ estates from IHT. Objectives: 1. To achieve a beneficial tax status by capitalising on Business Property Relief (BPR) 1 2. To preserve capital 2 and achieve growth over the long- term within the context of BPR 3. To diversify risk across sectors, industries and (where possible) geographies Each segregated client portfolio holds 25 to 35 AIM (or NEX) quoted companies. Sam Barton and Stephen Wood have applied the disciplined, institutional quality investment process since 2008. WHAT WE LOOK FOR When researching specific companies to invest in, we consider a range of factors: Financial structure: a strong financial position, visible earnings, robust cash flow and growing dividends. Market position and customer base: a long trading history, blue chip customers, access to niche markets, strong brands and market leaders. Other considerations: strong management, under- researched companies and those uncorrelated to the performance of other assets. ABOUT THE MANAGER Since 2000, Octopus has been providing advisers and investors with solutions they won’t find anywhere else, along with fresh ideas that help them solve more problems. As well as being the market leader in inheritance tax investments and venture capital trusts, Octopus also provides an easy-to-use cash management platform that advisers can use to top tier savings rates for clients, a product through which investors can add property-backed loans to their portfolio, and a range of investment funds that draw on deep experience in smaller company and multi manager investing. Transparent on fees, proactive at keeping advisers in the loop, Octopus is strongly endorsed by financial advice professionals, having been awarded five stars in the Financial Adviser Service Awards for the last five years running. Octopus currently manages £8.6 billion 1 on behalf of its customers. OUR AIM OFFER The Octopus AIM Inheritance Tax Service is for investors who want to target growth while reducing their estate’s inheritance tax liability. The service, which can be held in an ISA, invests in a diversified portfolio of smaller companies that are expected to qualify for Business Property Relief. As long as shares have been held for at least two years and are still held when the investor dies, they can be left to their beneficiaries free from inheritance tax. The portfolio is managed by the experienced Octopus Smaller Companies team, one of the largest and most established teams investing in AIM companies. CASE STUDY GB Group combines individual identity data with technology to provide its corporate clients with identity verification intelligence. Octopus initially invested in the company for the FP Octopus UK Micro Cap Growth fund at 26 pence in September 2010, shortly after the company moved to AIM from the Main List. We made a further initial investment for the Octopus AIM VCTs at 40 pence in November 2011, and added GB Group to the Octopus AIM Inheritance Tax Service in August 2013 at 100 pence. Across all mandates Octopus owns 8% of the company. The shares currently trade at over 570 pence. GB Group has expanded rapidly since we first invested. Between 2011 and 2019 it acquired Capscan, tmg. tv, CRD (UK), DecTec Solutions, CDMS, Logate, IDScan Biometrics, Postcode Anywhere, Vix Verify and IDology. The company employs nearly 1,000 people, compared to 165 in 2011. Sales have increased seven-fold, and GB Group is now valued at £1.1 billion. 2 1 A company that qualifies for BPR at the time of investment may cease to qualify for reasons outside our control at a later date, which means any tax benefits will be lost until the capital is reinvested in BPR qualifying company. 2 This is not a capital protection service and your client’s capital is at risk. 1 Octopus Investments, 30 June 2019. 2 GB Group 5 year performance. All data as at 30 June 2019. Past performance is not a reliable indicator of future results. CITS launched on 14 March 2001. Performance figures for the Close Inheritance Tax Service are stated after annual management and dealing fees, but do not reflect the effect of any initial or administration fees. A reference client for each series is used as a proxy for that series and the figures above show the simple average return over all series active in the period under review. PERFORMANCE IN DIFFERENT MARKET CONDITIONS GB GROUP % RETURN LESS -5% MORE 5% -5% – 0% 0% – 5% 0% -2% -4% -6% -8% -10% -12% 2% 4% 6% 8% CITS NUMIS ALTERNATIVE MARKET Average monthly returns since CITS launch Monthly market returns 25 of 219 months 69 of 219 months 102 of 219 months 23 of 219 months SOURCE: NUMIS SECURITIES AND CLOSE BROTHERS ASSET MANAGEMENT – BOTH USE MID-MARKET PRICES AND ARE SHOWN AS TOTAL RETURN. CLOSE INHERITANCE TAX SERVICE OCTOPUS AIM INHERITANCE TAX SERVICE GB GROUP 30/06/2018 to 30/06/2019 30/06/2017 to 30/06/2018 30/06/2016 to 30/06/2017 30/06/2015 to 30/06/2016 30/06/2014 to 30/06/2015 % Return -7.37% 72.82% 27.38% 32.06% 35.62% SOURCE: LIPPER