The VCT has raised more than £77m from previous share issues and is looking for new money because proceeds from previous offers are fully invested or approaching full investment. The VCT regularly comes into contact with suitable opportunities and the manager believes that the terms of investment it can obtain are increasingly attractive because there is a reduced level of borrowing available to businesses in the current economic climate.
The new G shares will form a separate pool of investments from the other share classes so that there is no dilution for existing investors. The proceeds will initially be invested in fixed income securities, cash and cash equivalents and up to 30 per cent remain in these assets, while 70 per cent is invested in qualifying companies. These comprise events companies that have licensing arrangements with established event promoters.
These arrangements speed up access to events, artists, venues and ensure unnecessary risks are not taken with investors’ capital as guaranteed minimum returns often form part of the arrangements. Edge Performance has existing arrangements with UK concert promoters SJM and AEG Live UK.
Each investment will typically be in a mix of equity and secured loan stock, which should also reduce risks. Higher-risk opportunities in the broader entertainment industry will also be used to enhance returns.
Since 2007, the VCT has declared or paid annual dividends of between 6p to 7p. For the G shares, there is a target return of 130p in cash for every 70p invested, assuming income tax relief at 30 per cent. This is equivalent to a return of 160p per 100p invested.
Edge Investment Management says that despite economic uncertainty in the UK, people have continued to spend on quality entertainment, particularly on events that cannot be reproduced or pirated as they are about experiencing the atmosphere.
Advisers and their clients may like the VCT’s five-year track record, experienced investment team and measures taken to reduce risks in a high-risk sector. However, the VCT’s narrow focus on the entertainment sector will not appeal to those looking for broader exposure to unquoted companies through generalist VCTs.