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Private matter

YFM Private Equity intends to raise up to £15m in C shares for its British sma-ller companies venture capital trust.

The VCT was established in 1996 and raised £16.25m in its first two years. It has invested £18.2m in unquoted and Aim-listed companies to date since launch. The directors decided on a C-share issue rather than establishing a new VCT for several reasons. Unlike a new VCT, C shares do not depend on a minimum level of subscription to proceed. Also, the running costs will be spread over a bigger asset base.

The VCT currently holds 26 companies in a range of sectors and locations around the UK. The focus tends to be on traditional industries that profit from innovation. These are companies that have the ability to provide capital growth and have a good running yield.

Investments of between £125,000 and £500,000 will be made into Aim-listed companies, with bigger investments of between £250,000 and £1m going into companies that are completely unquoted. The directors note that many VCTs are investing purely in Aim companies so they see this trend as providing a possible exit from their own Aim investments.

Examples of current holdings in the portfolio include Cozart, a developer of hand-held drug-testing devices used by the police and the Home Office. The VCT invested £500,000 in this company, an investment which is now worth £1,487,000.

The main benefits of investing in a C-share issue is that investors can access an existing portfolio. However, there is a lot of competition in the VCT market as the tem-porary enhancements to income tax relief have prompted new issues. But according to IFA Allenbridge, the market is struggling to attract as much money as expected. Its figures show that VCTs attracted £78.66m in the 2004/2005 tax year to November 1, well short of the market’s £718.8m target.

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