PRODUC ODUCT T BROCHU CHURE RE SECTION 12J VENTU TURE RE - - PowerPoint PPT Presentation
PRODUC ODUCT T BROCHU CHURE RE SECTION 12J VENTU TURE RE CAPITAL TAL COMPANY ANY OLIVE VENTURE RE CAPITAL TAL COMPANY ANY LIMITE TED - OVCC REGISTRATI TRATION # 2018/4 /4625 2503/0 3/06 Regist stere red Financial Servi
SECTION 12J VENTU TURE RE CAPITAL TAL COMPANY ANY OLIVE VENTURE RE CAPITAL TAL COMPANY ANY LIMITE TED - “OVCC” REGISTRATI TRATION # 2018/4 /4625 2503/0 3/06 Regist stere red Financial Servi vice Provider # 49818 Approve
re Capital Company # 0153
The OLIVE tree thrives in fertile land with resulting benefits to the terrain, the farmer and the users. Similarly OLIVE Venture Capital Company Limited (OVCC) has been launched in South Africa at a time when fertile investments are desperately required to revive the economy by injecting capital into SMME’s, thereby creating much needed jobs and a source
process providing above average returns to its investors through a combination of generous tax deductions and strong underlying business performances. OVCC business principle is to follow ethical business practice throughout its supply chain and stakeholder management by adopting Shariah Islamic Business principles which will include:
Business requirements i.e. complete avoidance of businesses in liquor, cigarettes, gambling, pornography and any other business trade prohibited in Islam;
permissible income to 5% of total income;
based finance and total avoidance of non-asset based finance;
Shariah investment review.
Traditional Investment without S12J Investment utilising S12J @ 35% Tax rate Initial Investment R 100 R 100 Less: S12J Allowance R --- R -35 Net Investment R 100 R 65 ROI Average ROI ROI Average ROI Dividend Year 1 After Tax R 5 .00 5% R 4. 50 * 7% Dividend Year 2 After Tax R 6 .00 6% R 5. 40 * 8% Dividend Year 3 After Tax R 7 .00 7% R 6. 30 * 10% Dividend Year 4 After Tax R 8 .00 8% R 7. 20 * 11% Dividend Year 5 After Tax R 9 .00 9% 7% R 8. 10 * 13% 10% Capital Repayment After Tax R 100 .00 0% 0% R 84 .00 ** 29% 6% Average Return Over 5 Years
7% 16%
** CGT payable on S12J Equity Refund.
The tax benefits and return enhancement is illustrated for 45% marginal taxpayer using the 2019/20 tax tables:
5% 5% 7% 8% 9% 82% 9% 10% 13% 14% 16% 149% 0% 20% 40% 60% 80% 100% 120% 140% 160% Year 1 Year 2 Year 3 Year 4 Year 5 EXIT PMT % RETURN YEAR
ENHANCED RETURN ON NET CAPITAL
DIVIDEND % ON GROSS CAPITAL DIVIDEND % ON NET CAPITAL R327 040 R404 166 R430 000 R450 000
33% 40% 43% 45%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% R- R50 000 R100 000 R150 000 R200 000 R250 000 R300 000 R350 000 R400 000 R450 000 R500 000 R1 000 000 R1 500 000 R2 000 000 R2 500 000 % Tax Savings TAX SAVINGS ZAR TAXABLE INCOME
R1M INVESTMENT- IMMEDIATE TAX BENEFIT
Tax Saving due to S12J % Refund on R1m deduction R78 543 R102 500 R102 500 R112 500 31% 41% 41% 45% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% R- R20 000 R40 000 R60 000 R80 000 R100 000 R120 000 R500 000 R1 000 000 R1 500 000 R2 000 000 % TAX SAVINGS TAX SAVINGS ZAR TAXABLE INCOME
R250K INVESTMENT- IMMEDIATE TAX BENEFIT
Tax Saving due to S12J % Refund on R250K Deduction
20% 40% 10% 10% 15% 5%
In determining the investment mix , the following has been considered:
management team /partner
The investment mix and business selection is subject to change as approved by OVCC board of directors
Assump umptio tions ns:
from delay in investment roll-out or change in investment mix
CIAL FORECAST T IS BASED ON ASSUMP UMPTIONS AND RETURNS ARE NOT GUARANTE TEED Year 0-6 Months - Tax Refund 45% Year 1 Dividend 7.4% Year 2 Dividend 7.7% Year 3 Dividend 8.0% Year 4 Dividend 8.4% Year 5 Dividend 8.7% Year 5 Capital Repaid After Tax 82.0%
Ailing g South h African n Economy Financ ncial al Risk Investo tor Protecti tion Liquidi dity ty Risk to Investo tor Conflict t of Interest st
Investment mix;
Covid Resilient Businesses;
Businesses; Experienced Leadership and strong underlying Management
no funding in OVCC;
pipeline to limit earnings from lower cash-investment rates;
adopting to changing economy without compromising risk and target IRR of 17%;
to determine sell/buy/hold strategy;
achieving capital gain on disposal
Structures;
Directors;
the vendor;
subject to committee approval;
The hospitality investment mix has moved away from a Hotel bias towards Student Accommodation. The fund is seeking 2-3 investments at different campuses and 1-2 minor equity interest in hotels - location ; yield and condition of the building is key not withstanding providing halaal food and beverage. The asset underpin of these investments astutely purchased present opportunity for capital growth. Student Accommodation is offered at pre-tax yield of 10% whilst hotels in the existing market offer similar returns. Any acquisition will be linked to opening of Universities and the travel market stabilising. Special tax allowance on hotels and new commercial buildings are able to enhance the after tax income. .
Business Hospitality Net Dividend after taxes Year 1 3.8% Net Dividend after taxes Year 2 4.0% Net Dividend after taxes Year 3 4.2% Net Dividend after taxes Year 4 4.4% Net Dividend after taxes Year 5 4.6% Percentage of acquisition costs on Disposal - Pre-tax 120% Disposal Assumption Sale to listed REIT and re-rating of asset class
The filling station investments will be geographically spread across 2-3 filling stations allowing OVCC to earn high income returns in low risk locations through a minimum grant of a 15-year operating lease . Freehold will also be considered. The demand for filling stations presents both challenge in the acquisition and benefit from demand on disposal.
Business Filling Stations Net Dividend after taxes Year 1 8.9% Net Dividend after taxes Year 2 9.4% Net Dividend after taxes Year 3 9..8% Net Dividend after taxes Year 4 10.3% Net Dividend after taxes Year 5 10.9% Percentage of acquisition costs on Disposal - Pre-tax 75% Disposal Assumption Sale of 5-10 Year Lease plus working capital recoupment
Cattle feeding projects require short 4-5 month investment periods and the flexibility to recycle capital into other investment opportunities. It further allows diversification into agriculture related income. This investment type has been approved by Islamic Scholars There are many leading farmers and entities offering this service including Sernick Group; Beefcor and Al Mabroor utilising Morgan Beef. This investment is subject to pricing and seasonal fluctuations that may yield fluctuations in the expected profits
Business Cattle Feeding Project Net Dividend after taxes Year 1 8.9% Net Dividend after taxes Year 2 8.9% Net Dividend after taxes Year 3 8.9% Net Dividend after taxes Year 4 8.9% Net Dividend after taxes Year 5 8.9% Percentage of acquisition costs on Disposal - Pre-tax 100% Disposal Assumption No Capital Growth
OVCC made its first investment in a Renewable Energy Project to provide mix of grid, solar and battery energy to Malachite Mews , a large Body Corporate in Boksburg with 216 units. The homeowners now have protection against rolling-blackouts and savings on the monthly bill. The capex provided 60% by OVCC and 40% by an international private equity investor is through 10 year asset rental agreement for the use of the battery and 20 year Power Purchase Agreement for providing the solar energy. Tier 1 products have been purchased with long guarantees and the day to day management is undertaken by Residential Solar Services utilising advanced software and power metering systems. Call and Put options are in place for the sale of OVCC investment in the project after 5 years. Other similar investment opportunities are being explored.
Business Renewable Energy Net Dividend after taxes Year 1 7.6% Net Dividend after taxes Year 2 8.1% Net Dividend after taxes Year 3 8.5% Net Dividend after taxes Year 4 9.1% Net Dividend after taxes Year 5 9.6% Percentage of acquisition costs on Disposal - Pre-tax 100% Disposal Assumption Put Option and DCF Battery & PPA agreements with Body Corporate
This could range from distressed SMME businesses for sale ; franchised foods post Covid-19 and Digital Out of Home and any other compelling investment case. Most food franchises have multiple units which have been operating for some time, making it simple to determine and verify their track record of success The strength and experience of management and the discount to intrinsic value is key determinant to achieve above average returns Emphasis on existing brand recognition, where it may turn a profit quicker than opening an independent business will be prioritised.
Business Franchised Food - QSR Net Dividend after taxes Year 1 8.9% Net Dividend after taxes Year 2 9,4% Net Dividend after taxes Year 3 9.8% Net Dividend after taxes Year 4 10.3% Net Dividend after taxes Year 5 10.9% Percentage of acquisition costs on Disposal - Pre-tax 100% Disposal Assumption Realisable Value plus working capital recoupment
Board Sub-Committees Investors
(Limited to 20% shareholding)
Audit & Risk Committee Investment Committee Managing Company GROVEST Appointed Grovest individual Qualifying Company 1 Qualifying Company 2 Qualifying Company 3 Qualifying Company 4 Qualifying Company 5
Olive VCC Manco (Pty) Limited
Managing Company
Appointed Public Officer
OVCC is registered with Financial Sector Control Authority (FSCA) as Financial Services Provider and is subject to adherence with the FAIS act; OVCC is also registered as a S12J Venture Capital organisation with SARS thereby securing the benefit of upfront tax deductions for its shareholders OVCC will be professionally managed by the Olive VCC Manco (Pty) Limited (“OVCC Manco”) at competitive market related charges Grovest Corporate Advisory, a leading VCC consulting specialist has been appointed to ensure compliance with the FSCA and SARS regulations In addition to compliance with FSCA; S12J Regulations and the professional support of the OVCC Manco and Grovest Corporate Advisory to protect shareholder funds, the following principles are adopted to enhance shareholder interest: INDEPENDENT BOARD – In addition to the executive CEO appointed by OVCC Manco, two independent directors are to be appointed and subject to shareholder re-election as per MOI; AUDIT and RISK COMMITTEE – The audit and risk committee will have an independent director and a contracted consultant with the required skill to fulfil this important function; INVESTMENT COMMITTEE – The investment committee will have an independent director and a contracted consultant with the required skill to fulfil this important function; AUDITORS – Both OVCC and its Qualifying Companies through which investments are made will have independent auditors reporting to the Board of Directors through the Audit and Risk Committee; INDEMNITY AND FIDELITY INSURANCES – As per FSCA Requirements, stakeholders will be protected with these statutory insurances; CONFLICT OF INTEREST – A strict conflict of interest policy will be adopted including disclosures; recusal and any manager or director conflict of interest in acquisition or disposals requiring special resolution adopted by shareholders.
Jeff Miller
N on-Executive D i rector a nd Chairman: Audit a nd Ri sk Committee CA(SA) Director and owner of Grovest Corporate Advisory (Pty) Limited
Ebrahim A Sujee
Independent D i rector a nd Chairman: B oard a nd Investment Committee Dip Fin Mgmt. CFO Shoez Group ( Wholesale Footwear ) Advisor to Shoe Zone ( Mini Chain Shoe Retail ) Chairman Roshgold Group
Haroon Jeena
F ounding D i rector a nd CE O CA(SA) Higher Dip: Tax Law Former Group Executive: Commercial at ACSA Senior Accountant/ Alternate Director to several listed property companies at Anglo American Property Services
ANNUAL AL FEE
2% per annum m paid d monthl hly y in arrears s on capital tal investe ted d by OVCC, C, lowered d to 0,25% per annum on cash h holdings ngs in OVCC.
PERFORM RMAN ANCE E FEE
15% on realised d capital tal profits ts distribu bute ted d to OVCC shareho holde ders. s.
INITIAL AL FEE
Once off capital tal raising ng fee of 1%
R100 MILLION R9 MILLION R91 MILLION R5,0 MILLION R2,5 MILLION R103,000 5 YRS, avoid Tax Recoup- ment 26 OCT 2020 & 28 FEB 2021
TARGET FUND SIZE PHASE 1 FEBRUARY 2020 PHASE 2 - OCT 2020 & FEBRUARY 2021 MAXIMUM AMOUNT FOR COMPANIES MAXIMUM AMOUNT FOR INDIVIDUALS MINIMUM INVESTMENT MINIMUM PERIOD MULTIPLE SUBSCRIPTIONS
RISK K DISCLO LOSURE
The Olive Venture Capital Company Proprietary Limited (“OVCC”) will invest on behalf of its Investors with due care and diligence. There is, however, a high risk associated with investing in Venture Capital
there is a risk that the Investor may suffer financial losses. The Investor will not have a claim against OVCC in the event of loss unless it can be proved that the loss was due to gross negligence, fraud, misconduct or dishonesty by the Company, the Manager or their staff. The Investor is aware that the investment is of a long term nature.
DISCLAIMER
All the information in this Product Brochure should be considered by potential investors before making a decision to invest in the Olive Venture Capital Company Proprietary Limited (“OVCC)”. Venture capital investments are considered to be speculative and are considered to be more suitable for investors in a high income bracket who are prepared to accept the risks inherent in investments of this nature. Prospective investors should carefully consider their financial position and make every effort to familiarise themselves with the consequences of non-attainment by the OVCC of the objectives outlined in this Product
this investment. Prospective investors should be aware that the value of the ordinary shares
amount originally invested. Changes in legislation concerning VCCs in general and Qualifying Investments may restrict or adversely affect the ability of the OVCC to meet its objectives. There can be no assurances that OVCC will meet its objectives. In order to comply with VCC legislation, Qualifying Companies must be unlisted and have a book value of assets of not more than R 50 million once
companies. Qualifying Investments made by the OVCC will be in companies whose shares which are not listed and will therefore not be readily marketable. The Fund is seeking to raise up to R 30 million through the Offer ending 27 February 2020. To the extent that a lesser amount of funds is raised, the resultant investment portfolio may be less diversified than if the Offer is fully subscribed. The value of an investment in the Fund will depend on the performance of its underlying investments. Prospective investors are encouraged to seek independent financial, legal, tax and other relevant advice.
Haroon Jeena – 082 413 5248 hjeena@olivevcc.co.za www.olivevcc.co.za