Announcements

Northern 3 VCT PLC.

8 NOVEMBER 2011

NORTHERN 3 VCT PLC

UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by NVM Private Equity.  It 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 (comparative figures are for the six months ended 30 September 2010):

            2011           2010
Net assets£43.2m£34.7m
Net asset value per share93.4p89.3p
Return per share after tax:
  Revenue
  Capital
  Total
1.9p
1.8p
3.7p
0.7p
0.3p
1.0p
Dividend per share declared in respect of the period2.0p2.0p
Cumulative return to shareholders since launch:
  Net asset value per share
  Dividends paid per share*
  Net asset value plus dividends paid per share
93.4p
31.4p
124.8p
89.3p
26.9p
116.2p
Mid-market share price at end of period78.125p75.0p
Share price discount to net asset value16.4%16.0%

*Excluding interim dividend payable on 13 January 2012

For further information, please contact:

NVM Private Equity Limited
Alastair Conn/Christopher Mellor             0191 244 6000

Website:  www.nvm.co.uk

HALF-YEARLY MANAGEMENT REPORT TO SHAREHOLDERS

Results and dividend
The unaudited net asset value (NAV) per share at 30 September 2011, after deducting the 2010/11 final dividend of 2.5p per share paid during the period, was 93.4p - an increase of 1.2p over the audited NAV of 92.2p as at 31 March 2011.  The return per share for the period before dividends, as shown in the income statement, was 3.7p compared with 1.0p in the corresponding six month period to 30 September 2010.

Investment income for the period amounted to £1.2 million, compared with £0.6 million in the corresponding period last year.  The increase was primarily due to a non-recurring receipt of £0.5 million from Promanex Group Holdings, as mentioned below.  The revenue return per share rose from 0.7p to 1.9p.

The board has declared an unchanged interim dividend of 2.0p per share, which will be paid on 13 January 2012 to shareholders on the register at the close of business on 9 December 2011.  It remains our objective to maintain the total annual dividend at not less than 4.5p and accordingly we would expect, subject to unforeseen circumstances, to propose a final dividend of at least 2.5p in due course.

Merger with Northern AIM VCT
In June 2011 it was announced that your directors were holding discussions with the directors of Northern AIM VCT with a view to a merger of the two companies.  Detailed proposals were published during August, and on 26 September we were able to announce that, following approval of the scheme by the shareholders of both companies, the merger had been completed.  The net assets of Northern AIM VCT, valued at £5.6 million, were transferred to Northern 3 VCT in exchange for the issue of 5,950,459 new Northern 3 VCT shares at a price of 93.2p per share.

I would like to welcome our new shareholders and thank both them and our existing investors for their support.  Our company now has net assets of over £43 million and will continue to invest alongside Northern Venture Trust and Northern 2 VCT, the other VCTs managed by NVM Private Equity.  With combined net assets of some £150 million the three funds have a substantial presence in the VCT market.

Investment portfolio
During the six months ended 30 September 2011 the company invested £988,000 in Tinglobal Holdings, a Cirencester-based supplier of refurbished mid-range computer equipment, as well as making small additional investments in two existing portfolio companies.  Further investments totalling £3 million have been approved by our managers and are awaiting completion subject to due diligence.

In August the company's investment in Promanex Group Holdings, the support services and facilities management contractor, was sold to Costain Group PLC.  Cash totalling £2.6 million was received at completion, comprising £2.1 million for the sale of the investment and £0.5 million of accrued investment income not previously recognised in the financial statements.  The realised gain compared with the original cost of the holding was £0.4 million, a satisfactory outcome given that Promanex had experienced some difficulties during our four year period of ownership.

A further £0.6 million was received by way of deferred proceeds from the sale of DxS in September 2009.

Your directors keep the investment portfolio under close review with the managers.  Whilst the business environment for smaller UK companies continues to be challenging, many of our companies have made encouraging progress.

Share buy-back policy
In order to assist in the provision of liquidity to shareholders, the company has maintained its policy of buying back its shares in the market at a 15% discount to the latest published NAV, subject to market conditions and the availability of cash resources and distributable reserves.  During the six months ended 30 September 2011 270,000 shares, representing 0.7% of the company's issued capital, were purchased at an average price of 78.4p per share.  The share price was relatively stable during the period, ranging between a low of 75p and a high of 79.25p, with a discount of approximately 16% to NAV.

VCT qualifying status
The company has continued to comply with the conditions laid down by HM Revenue & Customs for the maintenance of approved venture capital trust status.  Our managers monitor the position closely and the board also receives regular reports from our taxation advisers at PricewaterhouseCoopers LLP.

Risk management
The board carries out a regular review of the risk environment in which the company operates.  There has been no significant change to the key risks discussed on page 10 of the annual report for the year ended 31 March 2011.

Prospects
Events in the global economy and financial markets continue to overshadow the UK's attempted emergence from recession.  There are few grounds for optimism about the future in the short to medium term and we expect conditions to remain difficult for our portfolio companies.  However, many of these companies have achieved creditable results over the past six months and we will continue to support them, with further investment where necessary, as they pursue their long-term objectives.  Our company has a strong balance sheet and ample funds available for further investment as opportunities arise.

On behalf of the Board

James Ferguson
Chairman

The unaudited half-yearly financial statements for the six months ended 30 September 2011 are set out below.

INCOME STATEMENT
(unaudited) for the six months ended 30 September 2011

Six months ended
30 September 2011
Six months ended
30 September 2010
Revenue 
£000 
Capital 
£000 
Total 
£000 
Revenue 
£000 
Capital 
£000 
Total 
£000 
Gain on disposal of investments 610  610  477  477 
Movements in fair value of investments 333  333  (181) (181)
----------  ----------  ----------  ----------  ----------  ---------- 
943  943  296  296 
Income 1,178  1,178  575  575 
Investment management fee (96) (289) (385) (84) (251) (335)
Recoverable VAT
Other expenses (150) (150) (137) (137)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary activities before tax 932  654  1,586  354  45  399 
Tax on return on ordinary activities (180) 90  (90) (69) 58  (11)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary activities after tax 752  744  1,496  285  103  388 
----------  ----------  ----------  ----------  ----------  ---------- 
Return per share 1.9p 1.8p 3.7p 0.7p 0.3p 1.0p
Dividend per share for the period 1.0p 1.0p 2.0p 0.7p 1.3p 2.0p

Year ended 31 March 2011
Revenue 
£000 
Capital 
£000 
Total 
£000 
Gain on disposal of investments 778  778 
Movements in fair value of investments 1,361  1,361 
----------  ----------  ---------- 
2,139  2,139 
Income 1,100  1,100 
Investment management fee (173) (603) (776)
Recoverable VAT 25  74  99 
Other expenses (268) (268)
----------  ----------  ---------- 
Return on ordinary activities before tax 684  1,610  2,294 
Tax on return on ordinary activities (148) 147  (1)
----------  ----------  ---------- 
Return on ordinary activities after tax 536  1,757  2,293 
----------  ----------  ---------- 
Return per share 1.4p 4.5p 5.9p
Dividend per share for the period 1.4p 3.1p 4.5p

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited) for the six months ended 30 September 2011

Six months ended 
30 September 2011 
£000 
Six months ended 
30 September 2010 
£000 
Year ended 
31 March 2011 
£000 
Equity shareholders' funds at 1 April 2011 37,428  32,412  32,412 
Return on ordinary activities after tax 1,496  388  2,293 
Dividends recognised in the period (1,011) (780) (1,556)
Shares issued on merger 5,479 
Net proceeds of share issues 3,018  5,002 
Shares re-purchased for cancellation (211) (380) (723)
----------  ----------  ---------- 
Equity shareholders' funds at 30 Sept 2011 43,181  34,658  37,428 
----------  ----------  ---------- 

BALANCE SHEET
(unaudited) as at 30 September 2011

30 September 2011 
£000 
30 September 2010 
£000 
31 March 2011 
£000 
Fixed asset investments 36,547  28,593  33,746 
----------  ----------  ---------- 
Current assets:
  Debtors 464  251  397 
  Cash and deposits 6,867  6,020  3,940 
----------  ----------  ---------- 
7,331  6,271  4,337 
Creditors (amounts falling due
  within one year) (697) (206) (655)
----------  ----------  ---------- 
Net current assets 6,634  6,065  3,682 
----------  ----------  ---------- 
Net assets 43,181  34,658  37,428 
----------  ----------  ---------- 
Capital and reserves
Called-up equity share capital 2,313  1,940  2,029 
Share premium 26,560  19,505  21,378 
Capital redemption reserve 406  370  392 
Capital reserve 11,492  13,564  12,307 
Revaluation reserve 1,361  (1,321) 743 
Revenue reserve 1,049  600  579 
----------  ----------  ---------- 
Total equity shareholders' funds 43,181  34,658  37,428 
----------  ----------  ---------- 
Net asset value per share 93.4p 89.3p 92.2p

CASH FLOW STATEMENT
(unaudited) for the six months ended 30 September 2011

Six months ended 
30 September 2011 
Six months ended 
30 September 2010 
Year ended 
31 March 2011 
£000 £000 £000 £000 £000 £000 
Cash flow statement
Net cash inflow from operating activities 645  171  197 
Taxation:
Corporation tax paid
Financial investment:
Purchase of investments (2,243) (7,108) (12,741)
Sale/repayment of investments 5,225  1,589  4,251 
----------  ----------  ---------- 
Net cash inflow/(outflow) from financial investment 2,982  (5,519) (8,490)
Acquisitions:
Cash and deposits acquired on merger 604 
Equity dividends paid (1,011) (780) (1,556)
----------  ----------  ---------- 
Net cash inflow/(outflow) before financing 3,220  (6,128) (9,849)
Financing:
Issue of shares 3,202  5,301 
Share issue expenses (82) (184) (299)
Re-purchase of shares for cancellation (211) (380) (723)
----------  ----------  ---------- 
Net cash inflow/(outflow) from financing (293) 2,638  4,279 
----------  ----------  ---------- 
Increase/(decrease) in cash and deposits 2,927  (3,490) (5,570)
----------  ----------  ---------- 
Reconciliation of return before tax to
net cash flow from operating activities
Return on ordinary activities before tax 1,586  399  2,294 
Gain on disposal of investments (610) (477) (778)
Movements in fair value of investments (333) 181  (1,361)
(Increase)/decrease in debtors (42) 66  (80)
Increase/(decrease) in creditors 44  122 
----------  ----------  ---------- 
Net cash inflow from operating activities 645  171  197 
----------  ----------  ---------- 
Reconciliation of movements in net funds
1 April 2011 Cash flows 30 September 2011 
£000 £000 £000 
Cash and deposits 3,940  2,927  6,867 
----------  ----------  ---------- 

INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2011

CompanyCost
£000
Valuation
£000
% of net assets
by valuation
Fifteen largest venture capital investments:
Kerridge Commercial Systems 1,663 2,908 6.7
Axial Systems Holdings 1,293 1,398 3.3
IDOX* 733 1,332 3.1
Advanced Computer Software Group* 761 1,324 3.1
Closerstill Holdings 743 1,285 3.0
IG Doors 798 1,014 2.3
Kitwave One 1,000 1,000 2.3
RCC Lifesciences 995 995 2.3
Evolve Investments 995 995 2.3
Tinglobal Holdings 988 988 2.3
Andor Technology* 596 974 2.3
Paladin Group 1,013 949 2.2
Control Risks Group Holdings 746 896 2.1
Wear Inns 839 839 1.9
Cawood Scientific 825 825 1.9
---------- ---------- -------
13,988 17,722 41.1
Other venture capital investments 11,913 9,419 21.8
---------- ---------- -------
Total venture capital investments 25,901 27,141 62.9
Listed equity investments 4,966 5,200 12.0
Listed fixed-interest investments 4,255 4,206 9.7
---------- ---------- -------
Total fixed asset investments 35,122 36,547 84.6
----------
Net current assets 6,634 15.4
---------- -------
Net assets 43,181 100.0
---------- -------
*Quoted on AIM

The above half-yearly financial statements for the six months ended 30 September 2011 do not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006, have not been reviewed or audited by the company's independent auditors and have not been delivered to the Registrar of Companies.  The figures for the year ended 31 March 2011 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies;  the independent auditors' report on those financial statements was unqualified.  The half-yearly financial statements have been prepared on the basis of the accounting policies set out in the audited financial statements for the year ended 31 March 2011.

Each of the directors confirms that to the best of his knowledge the half-yearly financial statements have been prepared in accordance with the Statement "Half-yearly financial reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by (a) DTR 4.2.7R of the Disclosure Rules and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year, and (b) DTR 4.2.8R of the Disclosure Rules and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

The directors of the company at the date of this announcement were Mr J G D Ferguson (Chairman), Mr C J Fleetwood, Mr T R Levett and Mr J M O Waddell.

The calculation of the revenue and capital return per share is based on the return on ordinary activities after tax for the six months ended 30 September 2011 and on 40,626,406 (2010 38,793,750) ordinary shares, being the weighted average number of shares in issue during the period.

The interim dividend of 2.0p per share for the year ending 31 March 2012 will be paid on 13 January 2012 to shareholders on the register at the close of business on 9 December 2011.

A copy of the half-yearly financial report for the six months ended 30 September 2011 is expected to be posted to shareholders by 25 November 2011 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, www.nvm.co.uk.

Neither the contents of the NVM Private Equity Limited website nor the contents of any website accessible from hyperlinks on the NVM Private Equity Limited website (or any other website) is incorporated into, or forms part of, this announcement.




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Source: Northern 3 VCT PLC via Thomson Reuters ONE

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