Northern 3 VCT PLC.




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 2011):

       2012       2011
Net assets£47.2m£43.2m
Net asset value per share96.8p93.4p
Return per share after tax: 
Interim dividend per share declared
in respect of the period


Cumulative return to shareholders since launch: 
Net asset value per share
Dividends paid per share*
Net asset value plus dividends paid per share
Mid-market share price at end of period82.1p78.1p
Share price discount to net asset value15.2%16.4%

*Excluding interim dividend payable on 11 January 2013

For further information, please contact:

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



Results and dividend
The unaudited net asset value (NAV) per share at 30 September 2012, after deducting the 2011/12 final dividend of 3.0p per share paid during the period, was 96.8p - an increase of 0.1p over the audited NAV of 96.7p as at 31 March 2012.  The return per share for the period before dividends, as shown in the income statement, was 2.9p compared with 3.7p in the corresponding six month period to 30 September 2011.

Investment income for the period was £0.8 million, compared with £1.2 million in the corresponding period last year.  The reduction was due to a non-recurring receipt of £0.5 million last year on the sale of Promanex Group Holdings.  The revenue return per share was 1.0p (corresponding period 1.9p).

Your board has declared an unchanged interim dividend of 2.0p per share, which will be paid on 11 January 2013 to shareholders on the register at the close of business on 7 December 2012.  As announced in February 2012, we now aim to maintain the annual dividend at not less than 5.0p per share and so we expect, subject to unforeseen circumstances, to propose in due course a final dividend for the current financial year of at least 3.0p, which will be payable in July 2013.

Investment portfolio
During the six months ended 30 September 2012 the following holdings were acquired for the venture capital portfolio:

Advanced Computer Software Group (£273,000) - additional investment in AIM-quoted developer of computer software for the healthcare market, London

Silverwing (£1,272,000) - developer of non-destructive testing solutions for the oil and gas industry, Swansea

Tinglobal Holdings (£1,000,000) - additional investment in supplier of refurbished mid-range computer equipment, Cirencester

Vectura Group (£247,000) - LSE-listed developer of therapies for the treatment of respiratory diseases, Chippenham

Wear Inns (£567,000) - additional investment in owner of an estate of community pubs in the North East and Yorkshire

In May the company's investment in Closerstill Holdings, the business-to-business exhibition organiser, was sold to Phoenix Equity Partners for £2.2 million in cash, realising a gain of £1.5 million over original cost.  The related investment in Closer2 Investments was at the same time exchanged for a holding of equivalent value in Closerstill Group, a new exhibitions group funded by Phoenix.  There were a number of smaller disposals and loan stock repayments which took the total cash proceeds in the half year to £3.6 million.

Market interest rates seem likely to remain low for the foreseeable future and we have continued with our policy of holding part of the company's funds in higher-yielding blue-chip listed equities, which have returned a satisfactory yield as well as some capital appreciation.

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 2012, 537,000 shares (representing 1.3% of the company's issued capital) were purchased at an average price of 80.9p per share.  The mid-market share price ranged between 78p and 82p, maintaining the discount to NAV at around 15%.

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.

VCT legislation and regulation
Reference was made in the March 2012 annual report to the Government's 2012 Budget proposals to relax the limits on the size of VCT-qualifying companies and increase the amount of funding which companies can raise from VCTs to £10 million per annum.  The funding limit in any 12 month period was subsequently reduced from £10 million to £5 million at the insistence of the European Commission.  The Government has also introduced potentially alarming penalties for any VCT which invests in a company which exceeds the fund-raising limit.  Our managers and their advisers are still working out the practical implications of the new regime.

The FSA's Retail Distribution Review is likely to bring about significant changes in the way VCTs raise funds through new share issues.  The FSA has also published a consultation paper on the retail distribution of unregulated collective investment schemes, which has the unwelcome aim of restricting the categories of retail investors to whom financial advisers can promote VCT share offers.  As listed companies, VCTs are already subject to a wide range of regulatory requirements and investor safeguards, and your board believes that the proposed changes are inappropriate.  We have made a robust response to the consultation paper jointly with the other Northern VCTs and must now await the outcome.

The investment portfolio continues to make good overall progress despite the persistent difficulties in the UK economy.  Over the past three years it has been possible to increase the annual dividend whilst also achieving an increase in the underlying net asset value, and your board and managers are focussed on continuing to provide an attractive total return to shareholders.

On behalf of the Board

James Ferguson

The unaudited half-yearly financial statements for the six months ended 30 September 2012 are set out below.

(unaudited) for the six months ended 30 September 2012

Six months ended
30 September 2012
Six months ended
30 September 2011
Gain on disposal of investments 546  546  610  610 
Movements in fair value of investments 697  697  333  333 
----------  ----------  ----------  ----------  ----------  ---------- 
1,243  1,243  943  943 
Income 812  812  1,178  1,178 
Investment management fee (126) (378) (504) (96) (289) (385)
Other expenses (145) (145) (150) (150)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary activities before tax 541  865  1,406  932  654  1,586 
Tax on return on ordinary activities (53) 53  (180) 90  (90)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary activities after tax 488  918  1,406  752  744  1,496 
----------  ----------  ----------  ----------  ----------  ---------- 
Return per share 1.0p 1.9p 2.9p 1.9p 1.8p 3.7p
Dividend per share for the period 1.0p 1.0p 2.0p 1.0p 1.0p 2.0p

Year ended 31 March 2012
Gain on disposal of investments 628  628 
Movements in fair value of investments 3,023  3,023 
----------  ----------  ---------- 
3,651  3,651 
Income 1,746  1,746 
Investment management fee (208) (894) (1,102)
Other expenses (283) (11)  (294)
----------  ----------  ---------- 
Return on ordinary activities before tax 1,255  2,746  4,001 
Tax on return on ordinary activities (210) 210 
----------  ----------  ---------- 
Return on ordinary activities after tax 1,045  2,956  4,001 
----------  ----------  ---------- 
Return per share 2.4p 6.8p 9.2p
Dividend per share for the period 2.2p 2.8p 5.0p

(unaudited) for the six months ended 30 September 2012

Six months ended 
30 September 2012 
Six months ended 
30 September 2011 
Year ended 
31 March 2012 
Equity shareholders' funds at 1 April 2012 47,798  37,428  37,428 
Return on ordinary activities after tax 1,406  1,496  4,001 
Dividends recognised in the period (1,475) (1,011) (1,931)
Shares issued on merger 5,479  5,482 
Net proceeds of share issues 3,418 
Shares re-purchased for cancellation (518) (211) (600)
----------  ----------  ---------- 
Equity shareholders' funds at 30 Sept 2012 47,211  43,181  47,798 
----------  ----------  ---------- 

(unaudited) as at 30 September 2012

30 September 2012 
30 September 2011 
31 March 2012 
Fixed asset investments 40,126  36,547  39,606 
----------  ----------  ---------- 
Current assets:
  Debtors 181  464  192 
  Cash and deposits 7,071  6,867  8,511 
----------  ----------  ---------- 
7,252  7,331  8,703 
Creditors (amounts falling due
  within one year) (167) (697) (511)
----------  ----------  ---------- 
Net current assets 7,085  6,634  8,192 
----------  ----------  ---------- 
Net assets 47,211  43,181  47,798 
----------  ----------  ---------- 
Capital and reserves
Called-up equity share capital 2,438  2,313  2,470 
Share premium 3,220  26,560  3,219 
Capital redemption reserve 462  406  430 
Capital reserve 36,784  11,492  36,756 
Revaluation reserve 3,528  1,361  4,042 
Revenue reserve 779  1,049  881 
----------  ----------  ---------- 
Total equity shareholders' funds 47,211  43,181  47,798 
----------  ----------  ---------- 
Net asset value per share 96.8p 93.4p 96.7p

(unaudited) for the six months ended 30 September 2012

Six months ended 
30 September 2012 
Six months ended 
30 September 2011 
Year ended 
31 March 2012 
£000 £000 £000 £000 £000 £000 
Cash flow statement
Net cash inflow/(outflow) from
operating activities (105) 645  528 
Corporation tax paid
Financial investment:
Purchase of investments (3,460) (2,243) (4,798)
Sale/repayment of investments 4,118  5,225  7,429 
----------  ----------  ---------- 
Net cash inflow from financial investment 658  2,982  2,631 
Cash and deposits acquired on merger 604  604 
Equity dividends paid (1,475) (1,011) (1,931)
----------  ----------  ---------- 
Net cash inflow/(outflow) before financing (922) 3,220  1,832 
Issue of shares 3,598 
Share issue expenses (82) (259)
Re-purchase of shares for cancellation (518) (211) (600)
----------  ----------  ---------- 
Net cash inflow/(outflow) from financing (518) (293) 2,739 
----------  ----------  ---------- 
Increase/(decrease) in cash and deposits (1,440) 2,927  4,571 
----------  ----------  ---------- 
Reconciliation of return before tax to
net cash flow from operating activities
Return on ordinary activities before tax 1,406  1,586  4,001 
Gain on disposal of investments (546) (610) (628)
Movements in fair value of investments (697) (333) (3,023)
(Increase)/decrease in debtors 11 (42) 230 
Increase/(decrease) in creditors (279) 44  (52)
----------  ----------  ---------- 
Net cash inflow/(outflow)  from operating activities (105) 645  528 
----------  ----------  ---------- 
Reconciliation of movements in net funds
1 April 2012 Cash flows 30 September 2012 
£000 £000 £000 
Cash and deposits 8,511  (1,440) 7,071 
----------  ----------  ---------- 

as at 30 September 2012

% of net assets
by valuation
Fifteen largest venture capital investments:
Kerridge Commercial Systems 1,663 4,097 8.7
Advanced Computer Software Group* 1,034 2,262 4.8
Volumatic 2,096 2,096 4.4
IDOX* 660 2,072 4.4
Paladin Group 1,013 1,864 4.0
Wear Inns 1,406 1,779 3.8
Tinglobal Holdings 1,988 1,672 3.5
Silverwing 1,272 1,272 2.7
Control Risks Group Holdings 746 1,173 2.5
Kitwave One 1,000 1,014 2.1
Lineup Systems 974 974 2.1
RCC Lifesciences 995 965 2.0
Cawood Scientific 825 915 1.9
Axial Systems Holdings 1,293 827 1.8
Sinclair IS Pharma* 753 757 1.6
---------- ---------- -------
17,718 23,739 50.3
Other venture capital investments 11,286 8,233 17.4
---------- ---------- -------
Total venture capital investments 29,004 31,972 67.7
Listed equity investments 5,000 5,508 11.7
Listed fixed-interest investments 2,594 2,646 5.6
---------- ---------- -------
Total fixed asset investments 36,598 40,126 85.0
Net current assets 7,085 15.0
---------- -------
Net assets 47,211 100.0
---------- -------
*Quoted on AIM


Investment risk:  Many of the company's investments are in small and medium-sized unquoted and AIM-quoted companies which are VCT qualifying holdings and 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, by carrying out rigorous due diligence procedures 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.

Stock market risk:  Some of the company's investments are quoted on the London Stock Exchange or the AIM market and will be subject to market fluctuations upwards and downwards.  External factors such as terrorist activity can negatively impact stock markets worldwide and the AIM market is no exception to this.  In times of adverse sentiment there tends to be very little, if any, market demand for shares in the smaller companies quoted on AIM.

Credit risk:  the company holds a number of financial instruments and cash deposits and is dependent on the counterparties discharging their commitment.  The directors review the creditworthiness of the counterparties to these instruments and cash deposits in addition to ensuring no significant concentration of credit risk is with any one counterparty.

Liquidity risk:  The company's investments may be difficult to realise.  The fact that a stock is quoted on AIM 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.

Political risk:  in order to maintain its approval as a VCT, the company is required to comply with current VCT legislation in the UK as well as the European Commission's State Aid rules.  Politically motivated changes to the UK legislation or the State Aid rules in the future could have an adverse effect on the company's ability to achieve satisfactory investment returns whilst retaining its VCT approval.  The board and the manager monitor political developments and where appropriate seek to make representations either directly or through the relevant trade bodies.

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.

VCT qualifying status risk:  The company is required at all times to observe the conditions laid down in the Income Tax Act 2007 for the maintenance of approved VCT status.  The loss of such approval could lead to the company losing its exemption from corporation tax on capital gains, to investors being liable to pay income tax on dividends received from the company and, in certain circumstances, to investors being required to repay the initial income tax relief on their investment.  The manager keeps the company's VCT qualifying status under continual review and reports to the board on a quarterly basis.  The board has also retained PricewaterhouseCoopers LLP to undertake an independent VCT status monitoring role.


The above summary of results for the six months ended 30 September 2012 does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006, has not been audited or reviewed by the company's independent auditor and has not been delivered to the Registrar of Companies.  The figures for the year ended 31 March 2012 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies;  the independent auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.  The half-yearly financial statements have been prepared on the basis of the accounting policies set out in the annual financial statements for the year ended 31 March 2012.

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 period and on 49,068,638 (2011 40,626,406) ordinary shares, being the weighted average number of shares in issue during the period.

The calculation of the net asset value per share is based on the net assets at 30 September 2012 divided by the 48,767,103 (2011 46,255,261) ordinary shares in issue at that date.

The interim dividend of 2.0p per share for the year ending 31 March 2013 will be paid on 11 January 2013 to shareholders on the register at the close of business on 7 December 2012.

A copy of the half-yearly financial report for the six months ended 30 September 2012 is expected to be posted to shareholders by 23 November 2012 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,

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