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Julian Avery, chairman of Invesco Perpetual’s AIM VCT, says the sharp decline in the fund’s assets reflects ‘extreme aversion to investment in UK companies with low market capitalisations’. Net assets shrunk to £28.4 million in the year to May, a decline of 41.4 per cent.

The fund's total return over the same period was minus 34.8 per cent as three of its investee companies got into fatal difficulties, including business airline Silverjet. The VCT's share price halved from 97.5p to 46p, broadening the discount to net asset value to some 29 per cent.

The VCT has underperformed the FTSE AIM All-Share Index (down 15 per cent in the same period) as well as the FTSE Small Cap Index excluding investment trusts (down 33 per cent) and the FSTE Fledgling excluding investment trusts (down 30 per cent). Avery says the latter two indices are more representative of the sort of companies VCTs can invest in, as the FTSE AIM All-Share has a high exposure to the non-qualifying resource sector.

Despite the ‘very disappointing’ performance, Avery maintains there is sufficient value in the VCT’s portfolio to deliver ‘reasonable returns’ until the planned continuation vote in 2011. The fund will pay a 3p dividend in October, bringing the total for the year to 5p per share.

Investment manager Andy Crossley says there are still opportunities for attractive returns especially from the life sciences, green energy and software businesses within the VCT’s current portfolio, once the ‘debt binge indulged in the Anglo-Saxon economies’ has been redressed and confidence in the financial markets restored.

Invesco Perpetual VCT holds more than 70 per cent of its assets in qualifying investments, as required by legislation. Its largest holdings by valuation are in alternative energy producer Energetix, voicemail-to-text specialist Spinvox, and communications electronics business Software Radio Technology.

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