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Julian Gibbs

Over £1bn has been inves ted in venture capital trusts since they were launched in 1995. All three trusts that have matured have returned tax-free divid ends higher than the gross dividends before tax of the average share in the FTSE All Share index.

Baronsmead VCT, in particular, has shown excellent overall returns. Some trusts which have not yet come up to the five-year period, such as Foresight Technology and Questor VCT, have already returned over 100 per cent of investors&#39 net investment.

All the trusts which have been in existence for four years or more are also likely to show good profits for investors after five years after taking into account tax reliefs.

But to get real benefit from them, the trusts should be kept for longer than this as the succes sful companies in which they are invested often become more highly rated later. Dividends and capital distributions are entirely free of tax.

For those investors who are prepared to take some risk, I believe that the VCTs which invest in early stage companies are likely to show the best overall returns. Quester, for example, has an outstanding track record. The total compound return on all its new investments made over the last five years is no less than 73 per cent a year. Original investors in its first VCT, claiming all tax reliefs, have already recouped their entire original investment while still holding assets worth over twice their original investment.

I also like British Smal ler Technology Com pany&#39s VCT 2, which provides early stage finance for core tech nology com panies and works closely with Generics, a Cam bridge-based technology consulting group. For those who want a wider spread, Trivest VCT is also recommended

IFAs who ignore VCT are losing out.


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