Downing Corporate Finance is raising up to £1,98m to top up the Electra kingsway venture capital trust (VCT).
Electra kingsway was established in September 2001 and is managed by Electra Partners. It invests in a portfolio of unquoted and developing companies that are listed on the alternative investment market (AIM).
The top-up investment will allow the VCT to broaden its range of investments. The companies will need to have good business plans and show there is demand for their products and services. They must also show profitability and have adequate capital to support their business plans. Investments in start-ups will be avoided because they are perceived as too risky.
The money raised by the VCT will not be immediately in unquoted and AIM-listed companies. It will first go into a portfolio of fixed interest securities and will then be transferred when suitable investment opportunities in unquoted and AIM-listed companies are identified.
This VCT could appeal to investors with less money to invest, but who want exposure to companies at an early stage of development as part of a wide portfolio. Proposed changes which will increase the income tax breaks and add 20 per cent to investors' capital as an incentive during the first two years should boost the appeal of VCTs after April 6 this year. But investors may want to invest in this top-up issue before the CGT break is abolished.
According to Standard & Poor's, the Electra kingsway VCT is ranked 11 out of 25 trusts based on £1,000 invested on a mid-to-mid basis with net income reinvested over two years to February 23, 2004.