DJ Northern Inv. Co PLC Annual Financial Report

13th May 2010


14 MAY 2010



Northern Investors Company PLC is an investment trust managed by NVM Private
Equity. Launched in 1984 and listed on the London Stock Exchange since 1990,
the trust invests mainly in unquoted venture capital holdings and aims to
provide high long-term returns to shareholders through a combination of capital
growth and dividend yield.

Financial highlights - year ended 31 March 2010:
(comparative figures as at 31 March 2009)

2010 2009

- Net assets ÂGBP52.9m ÂGBP47.3m

- Net asset value per share 272.9p 243.9p

- Cash and near cash investments

included in net assets ÂGBP16.9m ÂGBP14.8m

- Revenue return per share 7.7p 7.1p

- Dividend per share declared

in respect of the year 7.7p 7.3p

- Total return for the year:

Pence per share 36.3p (46.5)p

As % of opening net asset value 14.9% (15.6)%

- Share price at end of year 165p 96p

- Discount to net asset value 39.5% 60.6%

For further information, please contact:

NVM Private Equity Limited 0191 244 6000
Alastair Conn/Christopher Mellor
Website: <>



Northern Investors has continued to operate against a challenging backdrop of
financial and economic turbulence over the past year. In this context the
company has had an encouraging year, with an increase in net asset value and
dividend, some good realisations in the portfolio and a partial recovery in the
share price.

Net asset value and share price
The net asset value (NAV) per share at 31 March 2010 was 272.9p, up by 11.9%
from the corresponding figure of 243.9p at 31 March 2009. The total return per
share for the year as shown in the income statement was 36.3p, equivalent to
14.9% of the opening NAV.

The mid-market share price rose from 96p to 165p, a 71.9% increase, over the
course of the year, continuing the recovery from the lows of late 2008 and early
2009. The FTSE All-Share index rose by 46.7% over the same period. The share
price discount to NAV fell from 60.6% to 39.5%, still an excessively high level
which reflects the pattern among private equity investment trusts generally.

Revenue statement and dividend
The revenue return before tax for the year fell from ÂGBP1.75 million to ÂGBP1.62
million, a relatively modest decline given the movement in interest rates since
early 2009. However a lower tax charge meant that the revenue return per share
rose to 7.7p from 7.1p last year.

The directors propose a final dividend of 5.5p per share (last year 5.1p),
increasing the total for the year from 7.3p to 7.7p. Subject to approval by
shareholders at the annual general meeting, the final dividend will be paid on
2 July 2010 to shareholders on the register on 11 June 2010. The directors
intend to pay part of the final dividend (2.4p per share) in the form of an
interest distribution, taking advantage of new regulations introduced in
September 2009 whereby investment companies with a high proportion of interest
income from investments can "stream" this income and pass it on to shareholders
without charge to tax within the company. This will save approximately ÂGBP130,000
in corporation tax, enhance the revenue return per share by approximately 0.6p
and permit a higher level of dividend distribution than would otherwise have
been the case.

This is the thirteenth consecutive year in which the dividend has been
increased. The current economic uncertainty means that it is difficult to
project the level of future investment income with great confidence, but it
remains the board's objective so far as possible to maintain a progressive
distribution policy. This may involve making use of the company's accumulated
revenue reserves.

Investment portfolio
The Business Review in the annual report gives detailed information about
developments in the investment portfolio during the year. The amount committed
to new holdings was relatively low by historical standards at ÂGBP7.2 million, with
a further ÂGBP3.0 million invested in existing portfolio companies. Past
experience suggests that we should see an upturn in new investment activity, at
reasonable entry prices, if the recovery from economic recession is sustained.

As in the previous year, an encouraging level of exit activity has been
maintained, with almost ÂGBP13 million generated from investment sales during the
year. The most notable realisation was that of the diagnostics company DxS,
which we originally backed as a very early stage business in 2001, where an
investment of ÂGBP841,000 produced initial proceeds of ÂGBP5.9 million with the
possibility of further payments in future depending on performance. It is very
pleasing to record that this success was publicly recognised when NVM Private
Equity received the prestigious BVCA/Real Deals Deal of the Year Award for 2010.

It is worth emphasising that the board has as usual taken a prudent approach to
the valuation of the portfolio in the balance sheet as at 31 March 2010. This
is borne out by the fact that investment realisations generally continue to be
achieved at prices in excess of our book valuations. We have not hesitated to
reduce individual company values where there is cause for concern about future

VAT on management fees
Following the Government's confirmation in 2008 that investment trust management
fees should be exempt from VAT, a further ÂGBP193,000 has been recovered and
credited to the income statement this year in respect of VAT paid in earlier
periods. The cumulative total of VAT recovered in respect of the periods from
1990 to 1996 and from 2002 to 2008 is ÂGBP908,000. It is not expected that any
further repayment will be obtained in the foreseeable future, although a claim
will be pursued against HM Revenue & Customs for compound interest on the VAT

Corporate issues
At the annual general meeting in June 2009, shareholders endorsed the directors'
proposal that the next continuation vote should be postponed by two years, until
June 2012. The continuing economic uncertainty has reinforced our view that
this is not a time for rushing into important long-term decisions. We will be
keeping future strategy under careful review over the next 12 months.

In 2006 the board's management engagement committee reviewed the company's
management fee arrangements with NVM Private Equity, and recommended that a new
structure be put in place based on a lower fixed annual fee but with scope for
an additional performance-related fee to be earned. A further review has
recently taken place in the light of the operation of the new arrangements over
the past four years, a period in which both performance and the shape of the
company's portfolio have been significantly affected by external events. The
committee concluded that whilst the basic concept behind the performance-related
fee arrangements remained valid, a degree of adjustment was required in order to
ensure that the interests of shareholders and managers were properly aligned. A
summary of the changes is given in the annual report. No performance-related
fee is payable in respect of the year ended 31 March 2010.

Shareholders will receive with the annual report a circular giving details of
the business to be transacted at the annual general meeting on 23 June 2010. A
number of amendments are proposed to the company's articles of association,
primarily to implement the Shareholders' Rights Directive and the relevant
provisions of the Companies Act 2006.

Dr Ralph Iley
We were very sorry to hear recently of the death of Dr Ralph Iley at the age of
83. Ralph was one of the founding directors of Northern Investors in 1984,
serving until his retirement in 1996, and the company benefited greatly from his
business acumen and his wide experience of manufacturing industry.

It seems likely that the process of recovery will continue to be slow, with the
inevitable prospect of tax rises and public sector spending cuts. This will not
be an easy environment for our portfolio companies, but we have been encouraged
by the progress which many of them have been able to make. We have a strong
balance sheet and in recent months there has been a gradual improvement in the
quality of new investment propositions available to us. Our managers' priority
for the immediate future will be to make the most of these opportunities whilst
continuing to monitor the existing investments closely.

Peter Haigh

The audited financial statements for the year ended 31 March 2010 are set out

for the year ended 31 March 2010

Year ended 31 March 2010 Year ended 31 March 2009

Revenue Capital Total Revenue Capital Total

Gain on
disposal of

investments - 3,194 3,194 - 2,483 2,483

Movements in
fair value

of - 2,686 2,686 - (12,387) (12,387)

---------- ---------- ---------- ---------- ---------- ----------

- 5,880 5,880 - (9,904) (9,904)

Income 2,138 - 2,138 2,267 - 2,267

Investment (248) (580) (828) (303) (707) (1,010)

Recoverable 69 124 193 115 - 115

Other (340) - (340) (325) - (325)

---------- ---------- ---------- ---------- ---------- ----------

Return on

activities 1,619 5,424 7,043 1,754 (10,611) (8,857)
before tax

Tax on return

ordinary (125) 128 3 (370) 198 (172)

---------- ---------- ---------- ---------- ---------- ----------

Return on

activities 1,494 5,552 7,046 1,384 (10,413) (9,029)
after tax

---------- ---------- ---------- ---------- ---------- ----------

Return per 7.7p 28.6p 36.3p 7.1p (53.6)p (46.5)p

for the year ended 31 March 2010

Year ended Year ended
31 March 2010 31 March 2009

Equity shareholders' funds

at 1 April 2009 47,297 57,755

Return on ordinary

activities after tax 7,046 (9,029)

Dividends recognised

in the year (1,416) (1,399)

Shares purchased for cancellation - (30)

---------- ----------

Equity shareholders' funds

at 31 March 2010 52,927 47,297

---------- ----------

as at 31 March 2010

31 March 2010 31 March 2009

Fixed assets:

Investments 35,579 32,412

---------- ----------

Current assets:

Investments 1,037 2,427

Debtors 563 323

Cash and deposits 15,816 12,420

---------- ----------

17,416 15,170

Creditors (amounts falling due

within one year) (68) (285)

---------- ----------

Net current assets 17,348 14,885

---------- ----------

Net assets 52,927 47,297

---------- ----------

Capital and reserves:

Called-up equity share capital 4,849 4,849

Share premium 12,694 12,694

Capital redemption reserve 306 306

Capital reserve 31,374 31,582

Revaluation reserve 1,236 (4,524)

Revenue reserve 2,468 2,390

---------- ----------

Total equity shareholders' funds 52,927 47,297

---------- ----------

Net asset value per share 272.9p 243.9p

for the year ended 31 March 2010

Year ended Year ended
31 March 2010 31 March 2009


Cash flow

Net cash inflow

operating 1,290 1,580


Corporation tax (176) (98)


Purchase of (10,211) (5,701)


Investments 12,519 15,912

---------- ----------

Net cash inflow

from financial 2,308 10,211

Equity dividends (1,416) (1,399)

---------- ----------

Net cash inflow
before use

of liquid 2,006 10,294
resources and


Purchase of

for - (30)

---------- ----------

Net cash inflow
before use

of liquid 2,006 10,264

Net cash

management of 1,390 (1,566)
liquid resources

---------- ----------

Increase in cash 3,396 8,698
at bank

---------- ----------

Reconciliation of
revenue return

before tax to net
cash flow from


Revenue return on

activities 1,619 1,754
before tax

Decrease in debtors 165 666

Decrease in (38) (133)

Expenses charged to (456) (707)
capital reserve

---------- ----------

Net cash inflow

operating 1,290 1,580

---------- ----------

Reconciliation of

in net funds

1 April 2009 Cash flows 31 March 2010


Cash at bank 12,420 3,396 15,816

Short-term 2,427 (1,390) 1,037

---------- ---------- ----------

Net funds 14,847 2,006 16,853

---------- ---------- ----------

as at 31 March 2010

% of
Cost Valuation net assets
ÂGBP000 ÂGBP000 by value

Weldex (International) Offshore 200 5,410 10.2

Kerridge Commercial Systems 3,978 3,978 7.5

Promanex Group Holdings 3,149 3,149 6.0

Axial Systems Holdings 2,311 2,354 4.5

Crantock Bakery 1,061 1,878 3.6

Britspace Group 2,381 1,786 3.4

Closerstill Holdings 1,234 1,606 3.0

IG Doors 1,185 1,589 3.0

Optilan Group 1,900 1,558 2.9

Arleigh International 1,034 1,551 2.9

---------- ---------- --------

Ten largest investments 18,433 24,859 47.0

Envirotec 1,008 1,455 2.7

Paladin Group 1,407 1,338 2.5

Wear Inns 1,304 1,304 2.5

Longhirst Venues 397 1,033 1.9

S&P Coil Products 510 932 1.8

Lanner Group 891 891 1.7

Direct Valeting 741 741 1.4

Promatic Group 971 728 1.4 480 574 1.1

CGI Group Holdings 1,723 431 0.8

---------- ---------- --------

Twenty largest investments 27,865 34,286 64.8

Other investments 6,478 1,293 2.4

---------- ---------- --------

Total fixed asset investments 34,343 35,579 67.2


Net current assets 17,348 32.8

---------- --------

Net assets 52,927 100.0

---------- --------


The board carries out a regular review of the risk environment in which the
company operates. The main areas of risk identified by the board are as

Investment risk: The majority of the company's investments are in small and
medium-sized unquoted companies, which by their nature entail a higher level of
risk and lower liquidity than investments in large quoted companies. The
directors aim to limit the risk attaching to the portfolio as a whole by careful
selection and timely realisation of investments and by maintaining a wide spread
of holdings in terms of financing stage and industry sector. The board reviews
the investment portfolio with the investment managers on a regular basis.

Financial risk: As most of the company's investments involve a medium to
long-term commitment and many are relatively illiquid, the directors consider
that it is inappropriate to finance the company's activities through borrowing
except on an occasional short-term basis. Accordingly they seek to maintain a
proportion of the company's assets in cash or cash equivalents in order to be in
a position to take advantage of new unquoted investment opportunities. The
company has very little exposure to foreign currency risk and does not enter
into derivative transactions.

Economic risk: events such as economic recession or general fluctuations in
stock markets and interest rates may affect the valuation of investee companies
and their ability to access adequate financial resources, as well as affecting
the company's own share price and discount to net asset value.

Liquidity risk: The company's investments may be difficult to realise. The
fact that a stock is quoted on a recognised stock exchange does not guarantee
its liquidity and there may be a large spread between bid and offer prices.
Unquoted investments are not traded on a recognised stock exchange and are
inherently illiquid.

Internal control risk: The board regularly reviews the system of internal
controls, both financial and non-financial, operated by the company and the
manager. These include controls designed to ensure that the company's assets
are safeguarded and that proper accounting records are maintained.


The directors are responsible for preparing the annual financial report in
accordance with applicable law and regulations. Company law requires the
directors to prepare financial statements for each financial year. Under that
law the directors have elected to prepare the financial statements in accordance
with UK Accounting Standards. The financial statements are required by law to
give a true and fair view of the state of affairs of the company at the end of
the financial period and of the return of the company for that period. In
preparing these financial statements, the directors are required to (i) select
suitable accounting policies and then apply them consistently; (ii) make
judgements and estimates that are reasonable and prudent; (iii) state whether
applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements; and (iv)
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.

In relation to the financial statements for the year ended 31 March 2010, each
of the directors has confirmed that to the best of his or her knowledge (i) the
financial statements, which have been prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company; and (ii) the
directors' report includes a fair review of the development and performance of
the business and the position of the company together with a description of the
principal risks and uncertainties which it faces.

The directors are also responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that its financial statements comply with the
Companies Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the company and to
prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for
preparing a directors' report, directors' remuneration report and corporate
governance statement that comply with that law and those regulations.

The company's financial statements are published on the NVM Private Equity
Limited website. The maintenance and integrity of this website is the
responsibility of NVM and not of the company. Visitors to the website should be
aware that legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other


The above summary of results for the year ended 31 March 2010 does not
constitute statutory financial statements within the meaning of Section 435 of
the Companies Act 2006 and has not been delivered to the Registrar of
Companies. Statutory financial statements will be filed with the Registrar of
Companies in due course; the independent auditors' report on those financial
statements under Section 495 of the Companies Act 2006 is unqualified and does
not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The proposed final dividend of 5.5p per share for the year ended 31 March 2010
will, if approved by shareholders, be paid on 2 July 2010 to shareholders on the
register at the close of business on 11 June 2010.

The full annual report including financial statements for the year ended 31
March 2010 is expected to be posted to shareholders on 21 May 2010 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,


(END) Dow Jones Newswires

May 14, 2010 10:18 ET (14:18 GMT)