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YFM VCT easy as ABC

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

This 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 larger 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 larger 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 investors can access an existing portfolio. However, there is a lot of competition in the VCT market as the temporary 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 VCTs attracted 78.66m in the 2004/2005 tax year to November 1, well short of the markets 718.8m target.

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