Northern 3 VCT PLC – Final Results

19th May 2008

RNS Number : 9190U
Northern 3 VCT PLC
20 May 2008

20 MAY 2008



Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by NVM Private
Equity. The trust invests mainly in unquoted venture capital holdings and aims
to provide high long-term tax-free returns to shareholders through a combination
of dividend
yield and capital growth.

Financial highlights – 18 months ended 31 March 2008:
(comparative figures for year ended 30 September 2006 in italics):

31 March 2008 30 September 2006
* Net assets #28.6m #29.3m
* Net asset value per share 96.3p 95.2p
* Return per share: 4.1p 2.4p
Revenue 4.7p 0.5p
Capital 8.8p 2.9p
* Dividend per share declared
in respect of the period: 4.2p 2.0p
Revenue 1.8p 2.0p
Capital 6.0p 4.0p
* Cumulative return to shareholders
since launch: 96.3p 95.2p
Net asset value per share 18.9p 10.9p
Dividends paid per share
Net asset value plus dividends 115.2p 106.1p
paid per share
* Mid-market share price at period end 84.5p 83.0p

For further information, please contact:

NVM Private Equity Limited
Christopher Mellor, 0191 244 6000
Lansons Communications
Karen Mignon 020 7294 3685



Our company has made further progress during the extended 18 month period to 31
March 2008 and we can report a healthy level of new investment activity, an
increasing flow of exit opportunities and an overall increase in net asset value
per share
after recognising dividends paid during the period. The return per share after
tax as shown in the income statement was 8.8p, equivalent to 9.2% of the opening
net asset value. Over the same period the FTSE All-share (total return) index
rose by 0.8%.

Results and dividend
The net asset value (NAV) per share at 31 March 2008 was 96.3p, a pleasing
increase from the corresponding figure of 95.2p as at 30 September 2006 given
that dividends totalling 8.0p per share were paid during the period (including
2.0p relating to
the year ended 30 September 2006). Three interim dividends each of 2.0p per
share were declared and paid in respect of the 18 month period to 31 March 2008,
maintaining the annual rate of 4.0p established in the preceding year. No final
dividend is
proposed. The cumulative return to shareholders since launch, comprising net
asset value plus cumulative dividends paid, increased from 106.1p to 115.2p over
the period. In respect of the financial year ending 31 March 2009, we presently
intend that an
interim dividend will be paid in January 2009 and a final dividend in July 2009.

Investment portfolio
The business review in the annual report gives details of recent developments in
the investment portfolio. The flow of new investment opportunities was strong
for most of the period under review and in total 14 new deals were completed at
a cost of
#8.4 million. A number of our earlier investments are now beginning to mature
and several satisfactory exits were achieved during the period, notably the
sales of Ithaca Holdings to United Business Media plc and KCS Global Holdings to
Group plc. As previously reported, there was also a significant disappointment
in the failure of Nightingales Holdings. We believe that the overall condition
of the portfolio is good although some companies, particularly those involved in
construction-related sectors, are finding current conditions challenging. This
has been taken into account in arriving at investment valuations at the balance
sheet date.

Shareholder issues
The company has continued to buy back shares in the market for cancellation at a
10% discount to net asset value. During the 18 months to 31 March 2008
approximately 1.3 million shares, representing 4.3% of the issued capital at the
beginning of the
period, were re-purchased at an average cost of 86.7p per share. The secondary
market in VCT shares has remained subdued and we intend, subject to periodic
review by the board and to market conditions, to maintain our buy-back policy in
the coming year.
In the longer term, stimulation of market demand for the company’s shares will
depend on our ability to generate an attractive flow of tax-free dividend income
for investors. We are encouraging our managers to communicate the merits of
secondary VCT
investment as widely as possible and through our membership of the Association
of Investment Companies we are contributing to generic marketing efforts. As
reported earlier in the year, following a review of broking arrangements we have
Landsbanki Securities (UK) Limited as brokers to the company; they are also
making a market in the company’s shares which has led to a narrowing in the
quoted bid-offer spread.

Your directors would like to be able to increase the size of the company through
further public offers of new shares in the future, although changes in the rules
defining VCT-qualifying investments together with the reduction in initial
income tax
relief to 30% have restricted recent fund-raising by VCTs. We will continue to
keep the position under review.

The annual general meeting this year will be held in Edinburgh on 3 July 2008
and your directors look forward to meeting shareholders on that occasion.

VCT qualifying status
I am pleased to report that the company has satisfied the requirements laid down
by HM Revenue & Customs for maintaining its approved status as a venture capital
trust as at 31 March 2008. It will be recalled that the directors changed the
company’s year end from 30 September to 31 March in order to allow a full three
years for the investment of the funds raised in our share issue in 2005. The
challenge now is to maintain the required 70% qualifying investment level at a
time when we are
achieving a good level of realisations and sensibly-priced new opportunities are
relatively thin on the ground. Our managers continue to monitor the position
closely and the board is independently advised in relation to VCT taxation
matters by
PricewaterhouseCoopers LLP.

VAT on management fees
The Government has recently announced that VCTs will be exempt from paying VAT
on investment management fees with effect from 1 October 2008. This follows a
European Court of Justice judgment against the Government in a case relating to
VAT payable by
investment trusts. It is not yet clear whether it will be possible to obtain a
repayment of VAT paid on management fees prior to the new measure taking effect,
and we will follow developments with the help of our advisers. However the
future annual saving
in VAT should amount to around #100,000, based on the company’s present level of
net assets and a management fee at the rate of 2% per annum.

Board of directors
In September 2007 Barry Sealey retired from the board, having served since the
company was launched in 2001. On behalf of shareholders I thank him for his
excellent contribution to our business. John Waddell, chief executive of
Archangel Informal
Investment, was appointed to the board on Barry’s retirement and we are
benefiting from his extensive experience of private equity investment.

Your board has agreed that in January 2009 I should stand down as chairman of
Northern 3 VCT, a position I will by then have held for over seven years, in
order to take up the chair of Northern Venture Trust on the retirement of Sir
Fred Holliday. I
will continue to serve as a director and am delighted to report that James
Ferguson has accepted an invitation from the board to become chairman of
Northern 3 VCT in my place.

Future prospects
The company’s investment portfolio is maturing well and there appear to be good
prospects of further profitable realisations, which will contribute to future
dividends. The present depressed state of the UK economy and financial markets
is a cause for
concern, as it may not only have an adverse impact on some of our existing
companies but also affect the availability of attractive new investment
opportunities. However our managers will continue to apply their
well-established procedures and disciplines
to the portfolio and we expect to see the company make further progress over the
next year.

John Hustler

The audited financial statements for the 18 months ended 31 March 2008 are set
out below.

for the 18 months ended 31 March 2008

18 months ended 31 March 2008 Year ended 30 September 2006
Revenue Capital Total Revenue Capital Total
#000 #000 #000 #000 #000 #000
Gain/(loss) on disposal
of investments – 85 85 – (106) (106)
Changes in fair value
of investments – 1,969 1,969 – 605 605
—– —– —– —– —– —–
– 2,054 2,054 – 499 499
Income 2,228 – 2,228 1,372 – 1,372
Investment management fee (259) (903) (1,162) (167) (502)
Other expenses (295) – (295) (180) – (180)
—– —– —– —– —– —–
Return on ordinary
activities before tax 1,674 1,151 2,825 1,025 (3)
Tax on return on
ordinary activities (441) 271 (170) (265) 160 (105)

—– —– —– —– —– —–
Return on ordinary
activities after tax 1,233 1,422 2,655 760 157 917
—– —– —– —– —– —–
Return per share 4.1p 4.7p 8.8p 2.4p 0.5p 2.9p

for the 18 months ended 31 March 2008

18 months ended Year ended
31 March 2008 30
#000 September
Equity shareholders’ funds
at 1 October 2006 29,281 30,136
Return on ordinary
activities after tax 2,655 917
Dividends recognised
in the period (2,418) (1,153)
Net proceeds of share issues 287 126
Shares purchased for
cancellation (1,142) (745)
Expenses charged to capital reserve (18) –
—— ——
Equity shareholders’ funds
at 31 March 2008 28,645 29,281
—— ——

as at 31 March 2008

31 March 30 September
2008 2006
#000 #000
Venture capital investments
Unquoted 17,852 10,012
Quoted 1,851 1,997
—— ——
Total venture capital investments 19,703 12,009
Listed fixed-interest investments 7,497 13,229
—— ——
Total fixed asset investments 27,200 25,238
—— ——
Current assets:
Debtors 265 600
Cash at bank 1,526 3,606
—— ——
1,791 4,206
Creditors (amounts falling due
within one year) (346) (163)
—— ——
Net current assets 1,445 4,043
—— ——

Net assets 28,645 29,281
—— ——

Capital and reserves:
Called-up equity share capital 1,487 1,538
Share premium 8,031 22,759
Capital redemption reserve 143 77
Capital reserve – realised 15,997 3,703
Capital reserve – unrealised 2,749 629
Revenue reserve 238 575
—— ——
Total equity shareholders’ funds 28,645 29,281
—— ——
Net asset value per share 96.3p 95.2p

for the 18 months ended 31 March 2008

18 months ended Year ended
31 March 2008 30 September
#000 #000 #000 #000
Cash flow statement
Net cash inflow from
operating activities 1,206 525
Corporation tax paid (105) (81)
Financial investment:
Purchase of investments (16,041) (9,740)
Sale/repayment of
investments 16,133 9,043
—— ——
Net cash inflow/(outflow)
from financial investment 92 (697)
Equity dividends paid (2,418) (1,153)
—– —–
Net cash outflow
before financing (1,225) (1,406)
Issue of shares 293 145
Share issue expenses (6) (19)
Purchase of shares
for cancellation (1,142) (745)
—– —–
Net cash outflow from financing (855) (619)
—– —–
Decrease in
cash at bank (2,080) (2,025)
—– —–
Reconciliation of return
before tax to net cash flow from
operating activities
Return on ordinary
activities before tax 2,825 1,022
Gain on disposal of investments (85) 106
Changes in fair value of investments (1,969) (605)
Decrease in debtors 335 17
Increase/(decrease) in creditors 118 (15)
Expenses charged to capital reserve (18) –
—– —–
Net cash inflow from
operating activities 1,206 525
—– —–
Reconciliation of movement
in net funds
1 October 2006 Cash flows 31 March 2008
#000 #000 #000
Cash at bank 3,606 (2,080) 1,526
—– —– —–

as at 31 March 2008

Valuation % of net assets
#000 by value
Fifteen largest venture capital investments:
Product Support (Holdings) 1,547 5.4
Paladin Group 1,236 4.3
Britspace Holdings 1,058 3.7
Astbury Marsden Holdings 1,000 3.5
Axial Systems Holdings 1,000 3.5
Foreman Roberts Group 1,000 3.5
Optilan Group 1,000 3.5
Promanex Group Holdings 1,000 3.5
Pivotal Laboratories Holdings 908 3.2
Envirotec 812 2.8
Crantock Bakery 762 2.7
Promatic Group 568 2.0
DxS 561 2.0
Frontier Foods 542 1.9
John Laing Partnership 522 1.8
—— —–
13,516 47.3
Other venture capital investments 6,187 21.5
—— —–
Total venture capital investments 19,703 68.8
Listed fixed-interest investments 7,497 26.2
—— —–
Total fixed asset investments 27,200 95.0
Net current assets 1,445 5.0
—— —–
Net assets 28,645 100.0
—— —–

The above summary of results for the 18 months ended 31 March 2008 does not
constitute statutory financial statements within the meaning of Section 240 of
the Companies Act 1985 and has not been delivered to the Registrar of Companies.
financial statements will be filed with the Registrar of Companies in due
course; the independent auditors’ report on those financial statements under
Section 235 of the Companies Act 1985 is unqualified and does not contain a
statement under Section
237(2) or (3) of the Companies Act 1985.
The full annual report including financial statements for the 18 months ended 31
March 2008 is expected to be posted to shareholders on 30 May 2008 and will be
available to the public at the registered office of the company at
Northumberland House,
Princess Square, Newcastle upon Tyne NE1 8ER and on the NVM Private Equity
Limited website,
This information is provided by RNS
The company news service from the London Stock Exchange