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Downing Corporate Finance

Northern Venture Trust C-Share Issue

Type: Venture capital trust

Aim: Income and growth by investing in portfolio of unquoted companies

Minimum investment: Lump sum

Closing date: April 5, 2006

Charges: Initial 5.5%, annual 2%

Commission: Initial 2.5%

Tel: 020 7411 4700

Generalist venture capital trust Northern Venture Trust is aiming to take its total assets to 60 through a C share issue. C shares will merge with the existing portfolio when they are converted into ordinary shares in 2009.

Allenbridge Tax Shelter Research director Richard Allen likes the fact that the VCT is an established fund and points out that it was launched in 1995. The existence of the 30m ordinary share fund means it already has critical mass, with over 50p per share in dividends paid to shareholders to date, he explains.

Allen says the manager, Northern Venture Managers, is one of the largest management teams in the generalist VCT sector. In particular, he likes this VCTs focus on management buy-out focus. Multiple funds under management mean this VCT can participate in larger deals than typical for single VCTs. There is also diversity within portfolio. If fully subscribed, following the C share merger with O shares, the combined portfolio is expected to contain approximately 80 companies, he says.

Switching his attention to the potential drawbacks of the product Allen says: The existence of a management co-investment scheme enables management to gear personal investments using shareholder capital as leverage. This could lead to a situation whereby the management take significantly higher returns than shareholders. However, Northern is not alone in introducing such a scheme. He also notes that while the past performance of the Northern VCTs has been solid, it is not among the best in the sector.

Looking at the rest of the market to spot the main competitors Allen concludes that Baronsmead VCT 4 C-shares, Matrix Income & Growth 3 VCT, Aberdeen Growth Opportunities C-shares, Electra Kingsway VCT 3, ProVen Growth & Income VCT C-shares, Close Technology & General VCT C-shares, Core VCTs II & III and the Noble VCT top up will all compete.


Suitability to market: Good
Investment strategy: Good
Charges: Good
Adviser remuneration: Average

Overall 8/10


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