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A great adventure for Close

CLOSE VENTURE MANAGEMENT

Close Income & Growth VCT

Type:
Venture capital trust

Aim:
Income and growth by investing in unquoted companies

Minimum investment:
Lump sum £1,000

Closing date:
April 4, 2005

Charges:
Initial 5.5%,
annual 2.5%

Commission:
Initial 2.5%,
renewal 0.25%

Tel: 020 7422 7830

The Close income and growth VCT is a venture capital trust that invests in property-based firms in the leisure sector such as pubs, higher growth companies and businesses that emerge from the engineering departments at Brunel University.

Capital Trust Financial Management partner Bruce MacFarlane feels that the changes in the Budget earlier in the year have made VCTs a very attractive income tax relief product. He says: “In the past, capital gains tax benefits were their priority but this tax break has been lost and replaced with a doubling of income tax relief to 40 per cent which will make VCTs a very attractive product to a new audience of investors.”

Turning his attention to the Close product he says: “The Close income & growth VCT provides an attractive opportunity for investors who are looking for a VCT with an exposure to the property market via a particular emphasis on public houses. This exposure should reduce the overall risk inherent in the VCT, while at the same time providing the capacity for generating a strong yield.”

MacFarlane points out that the Close Brothers Group has a strong track record in which should provide comfort to investors. He thinks it is likely that the tax changes will attract a lot of new players into the VCT market.

However, MacFarlane says VCTS are not a product for the short term and while the qualifying holding period may only be three years, investors should look to a much longer investment term of at least seven years.

According to MacFarlane VCTs are for more sophisticated investors and do tend to trade at a discount to their net asset value.

Looking at the potential drawbacks of the VCT MacFarlane says: “Although the shares are quoted on the London Stock Exchange there is likely to be a high degree of illiquidity which may result in investors having difficulty in selling their shares. To this end I would like to have seen Close incorporating a share buyback scheme for those investors wishing to exit.” He feels that other VCT providers with established track records who have incorporated a share buyback scheme, such as Isis with the Baronsmead VCT range, will provide the main competition.

MacFarlane concludes: “Experience is likely to be the key quality to look out for when choosing a VCT. Before investors part with their cash they need to seek out managers with a proven track record in selecting smaller companies that will outperform.”

BROKER RATINGS

Suitability to market: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average

Overall 8/10

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