Northern VCTs - Interim Financial Reports

[scotia]

Northern Venture Trust (NVT), Northern VCT 2 (NTV) and Northern VCT 3 (NTN) have all issued their interim financial reports for the period to 30/9/22.
All three have reported a dividend of 2p to be paid on 13/1/23
Taking the change over the past year (to 30/9/22) in their NAV+ total dividends, and dividing this by the current mid price - there is a fall of around 10.5% to 11%.
In both NTV and NTN, there are reported significant falls in the investment income received - which is put down to the disposal of higher yielding investments, with the mix now pivoting to earlier stage investments.
All three reports are available at https://www.mercia.co.uk/vcts/

[Kidman]

I received my Northern VCT 3 annual report yesterday so have been reading it since then.
A drop in NAV mainly accounted for by dividends.

My main concern is the length of service of the directors. Most have been there since the start of the company in 2001. James Ferguson is well known for long directorships although he has at last stepped down from VIP after many years. I have decided to vote against all the four men who have served well over nine years. Surely 22 years is far too much?

[intrepidinvestor]

It looks like Northern are getting ready for a sizeable fund raise (£60m) launching in September. Having not previously invested in this particular stable of funds and looking to increase my holdings in VCT's I am keen to participate. The NAV performance and dividend history looks generally stable and predictible compared to its peers. Does anyone have any comments on the funds from recent years of investment? I can see that Mercia bought them out a couple of years ago - does anyone know if this has resulted in any kinds of obvious adverse effects to the funds and future investment eligibility? I am ideally looking for a well diversified and stable generalist fund to add to other holdings including Albion, Foresight, BSC, Titan, HH etc.

[Mainwaring]

I don’t currently hold a Northern but I have in the past. It did very well for me but that was largely under previous generous investment rules. If you are intent and already hold the handful of houses you have then Northern will add to your diversification. They have had a few notable profitable exits including the last couple of years though Music Magpie has come crashing back to earth. I might add that Mobeus is also notably missing from your collection. I don’t know much about Mercia but they are keen on collecting Funds under management and did reset their manager incentive scheme lower when they failed to earn what they hoped. In theory Northern should get opportunities from their network….I wasn’t thrilled when Gresham took over Baronsmead and Mobeus either.
I’ve been at it since 2005/6 and in my view the best of VCTs has already happened. I’m still selling 5 year matured holdings, except those under water where I think there are some decent profitable companies in top 10s just presently undervalued by Mr Market, and reinvesting proceeds but not pushing it to extinguish all PAYE like I might have done. The portfolio has been withering for 18 months as NAVs went down and dividends were paid out. Most of my non AIM are reporting stable NAVs this year. Not a really really big issue for me now as I’m not earning, just a stipend.
Don’t let the tax tail wag the dog, Pensions, ISAs in various forms might be more useful ahead of VCTs. I guess you know this. Good luck.

[UncleEbenezer]

Like many Fools, I've done nicely from the Northerns. I currently hold N2 and N3 but not N1.

Worth noting, they're not identical. The charges differ (N1 relatively-recently adjusted charges in their own favour - we were not best pleased), and the dividend policies differ. N1 and N2 (like many VCTs) have tended to offer very high yield but diminishing capital, while N3 offers a slightly lower yield but a more stable capital value.

Future performance - as with many VCTs such as Baronsmead and Mobeus - will depend on whether they have successfully adapted to the current rules banning MBOs, which appear to demand rather different expertise to what worked so well for them in the past. You pay your money and take your chances.

Mercia's pages detailing their investment appear to be the Northern VCTs portfolio. I dug into this a little when a startup I invested in through crowdfunding mentioned having secured investment from Mercia, but didn't appear on their pages. Eventually established that it was a different Mercia-managed fund whose investments are not listed.

[Kidman]

Over the last week or two I've been having difficulties accessing and even seeing my Northern 3 VCT holding on Shareview.

I have now spotted the reason. City Registrars took over as registrar on 11 November 2023 and we are due to get notifications in the post soon.

[Karellan]

Many thanks Kidman. City Registrars seem to pick up a lot of business from the others.

[whatafool]

Does anyone have any insight into why the current Northern VCT offering is not a ‘Featured offer’ on Wealthclub? I don’t blindly follow Wealthclubs guidance, but typically the long established VCTs with a good track record (which I think Northern certainly has), get their stamp of approval. It’s normally younger, smaller, less well known VCTs that they offer at the bottom of the page.

Any issues or concerns around Northern that I might have missed? My only red flag is that the NAV didn’t get marked down much during the 2022-2023 interest rate hiking cycle, so maybe they are carrying assets at artificially high valuations? Or maybe they have just been more successful than most.

[UncleEbenezer]

It's a good question and had indeed crossed my mind. Reminds me of how Baronsmead always seemed to miss out on being recommended at H-L (where I bought my first VCTs). Perhaps you could ask, if you're contemplating a Northern subscription right now?

Revisiting wealthclub to check out the status, I have an idea they're not the only one that has been a featured offer in the past but no longer. But I couldn't say for certain that either the Provens or Hargreave Hale were that.

I'd hate to think it might have anything to do with broker commissions that somehow escape the transparency rules!

[Boots]

Does anyone have any insight into why the current Northern VCT offering is not a ‘Featured offer’ on Wealthclub? I don’t blindly follow Wealthclubs guidance, but typically the long established VCTs with a good track record (which I think Northern certainly has), get their stamp of approval. It’s normally younger, smaller, less well known VCTs that they offer at the bottom of the page.

Any issues or concerns around Northern that I might have missed? My only red flag is that the NAV didn’t get marked down much during the 2022-2023 interest rate hiking cycle, so maybe they are carrying assets at artificially high valuations? Or maybe they have just been more successful than most.

Whilst I certainly don't know the answer to your question - I haven't investigated this as I am already fully committed for this Tax Year - the following comments in their conclusions stood out to me:

"Following the raft of recent exits, the investment portfolio is much younger today, so the investments may take time to mature, potentially leading to fewer exits in the short term... Experienced investors should form their own view."

[AndrewInDevon]

Evelyn (aka Best Invest) also rate VCT offerings...Northern VCT rated 2 star (out of3, although many offerings are not rated at all)

The only 3-star offerings are British Smaller Companies and Albion (at time of posting)

https://www.bestinvest.co.uk/vcts/current-launches