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Amati VCT takes convertible angle on Aim

Ram Capital Partners and Amati Global Investors, formerly Noble Fund Managers, are raising up to £18m for the Amati VCT, a venture capital trust investing mainly in Aim-traded companies.

The VCT was launched in 2005 as the First State AIM VCT. It became the Noble Aim VCT in 2007 when manager Paul Jourdon moved from First State to Noble. The name was changed again to Amati last year after a management buyout.

New investors can access a mature portfolio of 64 companies that tap in to international growth opportunities such as the Far East and natural resources. Existing shareholders can increase their holdings through the dividend reinvestment scheme share offer, from which an additional amount of up to £2m will be raised.

The VCT’s directors believe there will be plenty of Aim opportunities over the next few years. Fewer Aim VCTs have been raising money over the last few years and most institutional investors are wary of liquidity risk, which Amati believes will result in the pricing of new issues on Aim remaining attractive.

The Amati VCT holds a big portfolio of convertible bonds in Aim quoted companies, which represents a different strategy to other Aim VCTs. Convertible bonds are held to reduce equity risk, increase income and retain access to equity returns. Returns are also enhanced by small and medium sized quoted companies as part of the VCT’s non- VCT qualifying holdings. Other non-VCT qualifying holdings include cash or cash equivalents, government bonds or investment-grade corporate bonds.

The VCT targets dividends of 5 to 6 per cent, equivalent to a 6.7 to 8.1 per cent tax-free yield after income tax relief and adjusting for up-front costs, but dividends at this level are not guaranteed.

An advantage is that this VCT falls under older VCT rules that allow investment in bigger firms with gross assets of up to £15m before investment. This widens investment choice and potentially lowers the risk relative to new VCTs that are restricted to investments in firms that haveup to £7m of gross assets before investment.

However some investors may prefer generalist or planned exit VCTs.

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