1This chapter applies to a venture capital trust with, or applying for, a primary listing.

To be admitted to listing, a venture capital trust must comply with LR 2 (Requirements for listing - all securities) and LR 6 (Additional requirements for listing equity securities), subject to the modifications and additional conditions set out in LR 16.2.2 R to LR 16.2.10 R.

A venture capital trust must have obtained either:

1. (1)

   confirmation from HM Revenue and Customs that it qualifies as a venture capital trust, if it has been in existence for more than three years; or

2. (2)

   provisional approval from HM Revenue and Customs, if it has been in existence for less than three years.

A venture capital trust must satisfy the FSA that its directors and any investment managers have sufficient and satisfactory experience (usually over at least the preceding three years) in the management of a portfolio of investments of the size and type in which the venture capital trust proposes to invest.

The board of directors of a venture capital trust must be able to demonstrate that it will act independently of any investment managers of the venture capital trust.

A majority of the board must not be directors or employees, or former directors or employees of, or professional advisers to, the investment managers or any other company in the same group as the investment managers.

LR 6.1.3R (1)(a) (audited accounts for three years), LR 6.1.4 R (nature and duration of business activities) and LR 6.1.16 R (working capital) do not apply to a venture capital trust.

LR 6.1.3R (1)(b) to (f) apply to a venture capital trust to the extent that it has published accounts.

A venture capital trust must not control the companies in which it invests in such a way as to render them subsidiary undertakings until it has obtained approval as a venture capital trust from HM Revenue and Customs.

None of a venture capital trust's investments, other than in a venture capital trust or a company which would qualify as a venture capital trust if it were listed, must represent more than 15% by value of its investments.

No more than 20% of a venture capital trust's total assets may be invested in the securities of companies which are property companies.

In addition to the requirements of LR 9.8, a venture capital trust must include in its annual report and accounts:

1. (1)

   a list of all investments with a value of greater than 5% of the total assets of the venture capital trust and at least the 10 largest investments stating, with respect to each investment so listed:

   1. (a)

      a brief description of the business;

   2. (b)

      the proportion of capital owned or intended to be owned;

   3. (c)

      the voting rights attributable to the shares owned;

   4. (d)

      the cost of the investment;

   5. (e)

      the value of the investment at the latest practicable date;

   6. (f)

      the method of valuation; and

   7. (g)

      brief details of the results and assets and liabilities taken from the most recent audited accounts, including at least profit before tax, profit or loss for the period, total assets and total equity and liabilities;

2. (2)

   details of:

   1. (a)

      the total of provisions made against unlisted investments;

   2. (b)

      the amounts written off such investments in each of the latest three financial years; and

   3. (c)

      any individual provision or write off which exceeded 5% of the total assets of the venture capital trust;

3. (3)

   a full description of the methods of valuation used including a justification of any method of valuation which does not conform with the Guidelines for the Valuation and Disclosure of Venture Capital Portfolios issued by the British Venture Capital Association; and

4. (4)

   details of any investments made in any company in which other funds managed by the same investment manager have also invested.

A venture capital trust must notify the FSA as soon as possible if it loses its tax status under section 842AA of the Income and Corporations Taxes Act 1988.

LR 10 (significant transactions) applies to venture capital trusts except for transactions which fall within the stated investment policies of the venture capital trust.

LR 11 (Related party transactions) applies to venture capital trusts with the following modifications.

In addition to the definition in LR 11.1.4 R a related party includes any investment manager of the venture capital trust.

In addition to the definition in LR 11.1.5 R a related party transaction includes:

1. (1)

   any arrangement by which a venture capital trust takes an interest in a company in which its investment manager has invested or intends to invest on its own account, unless the investment is made either at the same time and on the same terms or in accordance with a pre-existing agreement between the venture capital trust and the investment manager; and

2. (2)

   a venture capital trust that enters into a transaction with another fund managed by the same investment manager.

Where a venture capital trust intends to invest in a company in which another fund managed by the same investment manager has invested or intends to invest, the investment must be approved by the directors of the venture capital trust who are independent of the investment manager unless the investment is made either at the same time and on the same terms or in accordance with a pre-existing agreement between the venture capital trust and the investment manager.

A venture capital trust which is also an investment trust and which either has or is seeking a listing, must comply with the requirements set out in this chapter and with the following provisions:

1. (1)

   the following requirements for listing:

   1. (a)

      LR 15.2.2 R (2), (3) and (4);

   2. (b)

      LR 15.2.11 R (1); and

   3. (c)

      the requirements laid down for investment trusts in section 842 of the Income and Corporation Taxes Act 1988; and

2. (2)

   the continuing obligations set out in:

   1. (a)

      LR 15.4.14 R;

   2. (b)

      LR 15.4.12 R (3); and

   3. (c)

      LR 15.4.21 R (1), (2), (4) and (5).