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No ordinary VCT from Downing and NVM

Downing Corporate Finance and NVM Private Equity are raising up to £13.5m in ordinary shares for the Northern 3 venture capital trust.

This generalist VCT was established in 2001 to provide income and growth by investing manly in unquoted smaller UK companies. Money raised from this share issue will initially be invested in cash and near cash, including fixed interest securities managed by Sarasin & Partners, before suitable unquoted investments are found. Around 20 per cent will remain in cash and near cash to provide a reserve of liquidity.

The VCT will target a minimum annual dividend of 4p for each share, but this is not guaranteed.

The directors of the VCT say that an ordinary share issue will benefit both existing and new investors. Expanding the portfolio will provide current shareholders with increased diversity, lower fixed running costs because they will be spread over a wider asset base and potentially increase liquidity in the secondary market over the long term.

New investors will benefit from access to a mature portfolio from day one, unlike the use of other share classes to keep investment pools separate. The VCT’s ability to co-invest with the three other NVM VCTs and its investment trust also allows this VCT to take part in bigger deals.

NVM says that investment opportunities are attractive because unquoted companies that have survived the recession are in a stronger position to grow, and are more likely to turn to VCTs due to a lack of funding from the banks

It also thinks investors will turn to VCTs for retirement planning, as pensions are less attractive to high earners following recent legislation.

However, competition may come from other generalist VCTs, such as Baronsmead, and limited life VCTs.



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