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 vice Provider # 49818 Approve oved SARS Venture re Capital Company # 0153
OVCC business principle is to follow ethical business practice throughout its supply chain and stakeholder management by adopting Shariah Islamic Business The OVCC principles which will include: Businesses that meet permissible trade as per Shariah Islamic Value Proposition • Business requirements i.e. complete avoidance of businesses in liquor, cigarettes, gambling, pornography and any other business trade prohibited in Islam; The OLIVE tree thrives in fertile land with In the event of unavoidable non-compliance, limiting non- • resulting benefits to the terrain, the farmer permissible income to 5% of total income; and the users. Similarly OLIVE Venture Capital Company Limited (OVCC) has Strict adherence to the Shariah Islamic Business principle of asset- • based finance and total avoidance of non-asset based finance; been launched in South Africa at a time when fertile investments are desperately Not purchasing cash assets for premiums or discounts; • required to revive the economy by injecting capital into SMME’s, thereby Adhering to ethical business practices with all stakeholders • creating much needed jobs and a source of future taxation to the fiscus and in the Wherever necessary, subjecting investments to an independent • Shariah investment review. process providing above average returns to its investors through a combination of generous tax deductions and strong underlying business performances.
S12J TAX BENEFIT 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% - Excluding Time Value After allowing for higher administrative costs associated with an FSP. • ** CGT payable on S12J Equity Refund.
R250K INVESTMENT- IMMEDIATE TAX BENEFIT R112 500 R120 000 50% R102 500 R102 500 45% 45% 41% 41% TAX SAVINGS ZAR R100 000 40% % TAX SAVINGS R78 543 35% R80 000 31% 30% R60 000 25% 20% R40 000 15% 10% S12J TAX BENEFIT R20 000 5% R- 0% R500 000 R1 000 000 R1 500 000 R2 000 000 TAXABLE INCOME The tax benefits and return enhancement is illustrated for 45% marginal taxpayer using the 2019/20 tax tables: Tax Saving due to S12J % Refund on R250K Deduction R1M INVESTMENT- ENHANCED RETURN IMMEDIATE TAX BENEFIT ON NET CAPITAL R500 000 R450 000 50% R430 000 DIVIDEND % ON GROSS CAPITAL DIVIDEND % ON NET CAPITAL R404 166 R450 000 45% 45% 149% 43% 160% TAX SAVINGS ZAR R400 000 40% R327 040 40% % Tax Savings 140% R350 000 35% 120% 33% R300 000 30% % RETURN 100% 82% R250 000 25% 80% R200 000 20% 60% R150 000 15% 40% 16% 13% 14% 10% R100 000 10% 9% 5% 5% 7% 8% 9% 20% R50 000 5% 0% R- 0% Year 1 Year 2 Year 3 Year 4 Year 5 EXIT PMT R1 000 000 R1 500 000 R2 000 000 R2 500 000 YEAR TAXABLE INCOME Tax Saving due to S12J % Refund on R1m deduction
Investment Mix – Post Covid-19 19 In determining the investment mix , the following has been considered: businesses with strong brand value • track record & experienced • management team /partner predictable earnings from business • appropriate risk/return • 40% identifiable exit strategies • The investment mix and business selection 10% is subject to change as approved by OVCC board of directors 20% 10% 5% 15%
Assump umptio tions ns: Projections based on 45% marginal tax rate • 17% IRR includes s12J tax benefit • No provision made for cash drag return • from delay in investment roll-out or change in investment mix THE FINANCI 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%
TOP FIVE RISKS Liquidi dity ty Risk Conflict t of Investo tor Financ ncial al Ailing g South h to Investo tor Interest st Protecti tion African n Economy Risk - Diversified - Governance - Publish buy/sell net asset value; - Management is not - 100% equity funded, Investment mix; Structures; - Intrinsic value reviewed after 5 years the vendor; no funding in OVCC; - Invest Post Covid or - Independent to determine sell/buy/hold strategy; - All Investments - Advanced investment Covid Resilient Directors; - Manager performance fee aligned to subject to pipeline to limit earnings from Businesses; - FSCA Oversight; achieving capital gain on disposal committee approval; lower cash-investment rates; - Acquire Branded - Grovest Expertise; -flexible investment mix Businesses; - Annual Auditor adopting to changing Experienced Leadership economy without and strong underlying compromising risk and target Management IRR of 17%;
OLIVE PORTFOLIO
STUDENT ACCO- The hospitality investment mix has moved away from a Hotel bias towards Student Accommodation. MODATION & The fund is seeking 2-3 investments at different campuses and 1-2 minor equity interest in hotels - 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% Sale to listed REIT Disposal Assumption and re-rating of asset class
The filling station investments will be geographically spread across 2-3 filling stations FILLING 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. STATIONS 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% Sale of 5-10 Year Disposal Assumption Lease plus working capital recoupment
CATTLE Cattle feeding projects require short 4-5 month investment periods and the flexibility to recycle FEEDING capital into other investment opportunities. It further allows diversification into agriculture related income. PROJECTS 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 Cattle Feeding Business 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 RENEWABLE 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. ENERGY 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 INVEST- Agreement for providing the solar energy. Tier 1 products have been purchased with long guarantees and the day to day management is MENTS 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% Put Option and DCF Battery & PPA Disposal Assumption agreements with Body Corporate
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