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Downing takes Aim

Downing Corporate Finance is offering D shares in the Pennine Aim VCT, a venture capital trust established in January 1996.

The directors are looking for new money because they are keen to diversify the VCT across more investment opportunities, which will reduce the fixed running costs to existing shareholders. Increasing the size of the VCT may also increase liquidity over the long term.

The D share arrangement will mean that the new money will initially be kept separate to the existing ordinary shares so as to protect existing investors from the costs of the new offer. It is expected that the D shares will be converted into ordinary shares within six years.

The VCT will invest in Aim companies to provide income and growth. At least 70 per cent of the portfolio will go into qualifying Aim companies, while the remainder will go into non-qualifying investments such as structured products linked to the FTSE 100 index and fixed income securities.

Statistics from the London Stock Exchange show that Aim is a growing market. At the end of December last year, it comprised 1, 328 companies with a market value of over £90bn, while at launch in 1995, it comprised 10 companies with a market value of £82.2m.

Although some Aim companies have moved onto the main market, a significant trend has been for companies to transfer from the main market to Aim due to less regulatory burden and the tax advantages to investors.. Last year, 31 companies transferred to Aim from the main market while only three moved the other way. More international companies are also joining Aim because the regulatory burden is lower than in countries such as US, where compliance costs are heavy.

Investors who are looking for VCT tax advantages may feel more comfortable with an established Aim product rather than a new offering which may invest in companies at different stages of their development.

However, the criteria governing VCT investments is strict and managers face having their wings clipped when looking for suitable investments within Aim. Qualifying companies must operate mainly in the UK and the value of eligible investments has been reduced from £15m to £7m.

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