Invesco VCT powers ahead

The board of the Invesco Aim Venture Cap Trust recently announced that they expected the trust to be capable of paying a minimum of 5p per share a year until at least the date of its continuation vote, seven years from launch.

Andy Crossley, manager of the trust, says it is coming up to an interesting time in its life.

According to VCT rules, investors must hold the shares for a minimum of three years to be eligible for the income tax break they are given on subscription.

The trust's first serious subscriptions were made in early 2005, meaning that at the start of 2008 there could be sales.

"We believe people should see VCTs as medium- to long-term investments but some may have seen it as a three-year investment," said Mr Crossley. "Shares are currently about 70p, the yield is 7 per cent, which grossed up would provide an expected yield equivalent to 11.7 per cent. We think these are attractive in the secondhand market, as well as attractive to hold." Mr Crossley has managed the trust since its launch.

The trust's NAV has fallen slightly from launch to 91p, but has paid out 10p in dividends.

The trust invests in VCTqualifying investments listed on the Alternative Investment Market and Mr Crossley says that the market for smaller Aim stocks has been difficult for the past six months.

"In the UK market, anything that has been domestically orientated has been quite badly hit over the last six months," he said.

Because VCTs invest in new shares, they are exposed to comparably higher risk than other funds. The poor performance of companies such as Hill Station, an ice cream company that has struggled with integration and a poor British summer, are an inevitable part of investment in UK Aim stocks.

"VCTs tend to invest in relatively young companies so they are bound to have some that do not do well," he said.

The trust's largest investment is a company called Energetix Group, which Mr Crossley says has an extremely interesting idea behind it.

The company develops devices that go into boilers to enable electricity to be generated in the home.

"There is a lot of excitement in this area and it is something the government is very keen to encourage.

Micro-distributed generation of electricity is very efficient and reduces the drain on the grid," said Mr Crossley.

There has been a great deal of interest surrounding plans to develop fuel cells that extract hydrogen to generate electricity inside homes, but the technology is still some way off the market.

However, Energetix uses technology that is already well established.

The product uses the air conditioning unit of a car and runs it in reverse. In a car, electricity is used to create cold air from warm air; here heated water in a boiler is cooled and electricity is generated as a by-product.

The share price of Energetix has performed extremely well, says Mr Crossley, and has allowed the trust to more than treble the money they invested in it.