BANKING AFFAIRS

Detailed explanation-1: -VCTs invest in which of the following assets? Answer: [C] Companies listed on AIM. Notes: VCT invest in holdings of shares or securities, including loans of at least five years duration, in unquoted companies and those whose shares are traded on the alternative investment market (AIM).

Detailed explanation-2: -Generalist VCTs invest in a wide range of small, usually unquoted companies in different sectors – from retail to healthcare and technology. The idea is to diminish risk by diversifying, so if one sector suffers setbacks, another might shine.

Detailed explanation-3: -AIM VCTs. AIM VCTs focus on companies that are listed on AIM – the London Stock Exchange’s market for smaller growth companies. Their management teams usually have a background in fund management rather than private equity investment.

Detailed explanation-4: -The balance of up to 20% can be invested into areas such as government securities, gilts or blue-chip shares. VCTs may invest up to £5 million in a qualifying company. Each individual investment cannot make up more than 15% of VCT assets.

Detailed explanation-5: -VCTs offer up to 30% upfront income tax relief, tax-free dividends and an exemption from capital gains tax on the shares should they rise in value. It’s important to understand that smaller companies can struggle in their early years, and some will not be successful.