Northern 3 VCT PLC.

20 MAY 2015



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 (comparative figures as at 31 March 2014):


 2015 2014
Net assets

Net asset value per share

Return per share:  

Dividend per share paid/proposed  
in respect of the year
 (2015 includes 10.0p special dividend)

Cumulative return to shareholders since launch:  
Net asset value per share107.2p108.9p
Dividends paid per share*49.4p43.9p
Net asset value plus dividends paid per share

Mid-market share price at end of year

Share price discount to net asset value

Tax-free dividend yield (based on mid-market share price at end of year):  
 Excluding special dividend
 Including special dividend

*Excluding second interim and proposed final dividend payable on 17 July 2015

For further information, please contact:

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




During the past year our venture capital portfolio saw its highest ever level of activity, in terms both of sale proceeds generated and of new investments completed.  As a result of some outstanding investment realisations, notably Kerridge Commercial Systems and Advanced Computer Software Group, the company has accumulated substantial cash balances and your board is therefore pleased to declare a special dividend of 10p per share as well as maintaining the normal annual dividend at the target rate of 5.5p per share.

Results and dividend
The net asset value per share (NAV) share at 31 March 2015, after deducting dividends paid during the year, was 107.2p - slightly down from the corresponding figure of 108.9p as at 31 March 2014.  The return per share for the year as shown in the income statement was 3.9p (last year 10.5p).  The venture capital portfolio generated a strong flow of income as well as capital proceeds from sales of investments during the year.  However the sale or substantial repayment of four of the eight largest holdings at the beginning of the year, coupled with the high level of new investment, has changed the composition of the portfolio significantly, so that the proportion of holdings less than three years old has increased from approximately one third to over one half.  This has inevitably had a restraining effect on NAV growth in the short term, as our manager integrates new holdings into the portfolio at a time of some uncertainty about the UK's future economic prospects.

It remains our policy to pay an annual dividend that is sustainable, using the company's reserves where necessary to smooth out fluctuations in annual results.  Accordingly we propose an unchanged final dividend of 3.5p in respect of the year ended 31 March 2015, maintaining the total normal dividend for the year at 5.5p.  In recognition of the successful investment sales during the year, which have brought in over £20 million of cash proceeds of which over £11 million represents a net gain over original cost, your board has also decided to pay a special dividend of 10p per share.  This takes the total payable in respect of the year to 15.5 pence.

The special dividend will take the form of a second interim dividend for the year ended 31 March 2015, which will be paid on 17 July 2015 to shareholders on the register on 19 June 2015.  The proposed final dividend of 3.5p per share, subject to approval by shareholders at the annual general meeting, will also be payable on 17 July 2015 to shareholders on the register on 19 June 2015.

As usual shareholders can opt to participate in the company's dividend investment scheme, through which dividends are re-invested in new ordinary shares in the company, at a price equivalent to the latest NAV, with the benefit of the tax reliefs available on new subscriptions to VCTs.  Further details of the scheme are included with the annual report.

Investment portfolio
Six new holdings were added to the unquoted portfolio during the year at a cost of £8.8 million.  A number of sales were completed, of which the most significant was the sale of the investment in Kerridge Commercial Systems for cash proceeds of £7.4 million and a gain over original cost of £5.7 million.  The sale of Closerstill Group was also particularly pleasing.  We have as usual taken a cautious approach to the valuation of the continuing holdings, bearing in mind where appropriate the impact of wider political and economic events - the fluctuation in the price of oil being an obvious example.

Five new holdings were acquired for the AIM-quoted portfolio at a cost of £2.3 million.  Recommended bids were made for four of our holdings, as a result of which Advanced Computer Software Group and Pilat Media Group were sold during the year with Accumuli and Nationwide Accident Repair Group due to follow subsequently.

VCT qualifying status
The company has continued to meet the qualifying conditions laid down by HM Revenue & Customs for maintaining its approval as a VCT.  Our manager monitors the position closely and reports regularly to the board.  During the year we appointed Robertson Hare LLP as our new independent adviser on VCT taxation matters.

Shareholder issues
The company has continued to buy back shares in the market, when necessary in order to maintain liquidity, at a 10% discount to NAV.  During the year 500,000 shares, representing less than 1% of the issued capital at the beginning of the year, were repurchased at an average price of 96.4p.  The board reviews the buy-back policy regularly in the light of the company's cash resources and wider market practice.  As a result of the most recent review we have decided to reduce the discount from 10% to 5% with immediate effect.

The company did not launch a public offer of shares during the 2014/15 tax year, given the success of the £20 million 2013/14 offer and the strong inflow of cash from investment realisations.  The dividends payable in July 2015 will absorb some £8.9 million of cash, reducing the reserve of liquidity, and the board will be considering whether to raise additional funds in the 2015/16 tax year in the light of investment activity in the coming months.

VCT legislation and regulation
The Government has continued to make amendments to the VCT legislation and the task of ensuring the company's compliance becomes ever more complicated.  The Chancellor's Budget announcement in March 2015 included an outline of proposed further changes, which are designed to ensure consistency with the European Commission's state aid guidelines.

We welcome the Government's continuing support for the venture capital trust sector, although we are concerned that the legislation may increasingly tend to rule out some of the small and medium-sized businesses in the manufacturing and service sectors which are creating jobs, generating revenues for the Exchequer and providing a much-needed stimulus to the UK economy.  As the Government has yet to agree its proposals with the European Commission, a process which may take several months, investments made by VCTs in the meantime are subject to some uncertainty as to whether they will ultimately be qualifying investments for the purposes of the VCT legislation.  Your board and manager therefore decided, in conjunction with the other Northern VCTs, to invest in six new companies on 2 April 2015 each of which intends to acquire a trading business in the coming months.  These new qualifying investments were made under the pre-6 April 2015 regulations and Northern 3 VCT has invested a total of £8,248,000 in the six companies.

The result of the UK general election has removed some, but not all, of the uncertainty surrounding the future prospects for the UK economy.  We have cash available to invest, but in an increasingly competitive marketplace the key issue will be to maintain a healthy rate of investment whilst avoiding any erosion of quality standards.  There will be no shortage of challenges over the next 12 months, but your board and manager will continue to apply the principles and procedures developed over many years and we believe that this will continue to produce good results for shareholders.

James Ferguson

The audited financial statements for the year ended 31 March 2015 are set out below.

for the year ended 31 March 2015

 Year ended 31 March 2015 Year ended 31 March 2014 
Gain on disposal of            
 investments 3,429  3,429  1,254  1,254 
Movements in fair value            
 of investments (1,693) (1,693) 4,382  4,382 
  ----------  ----------  ----------  ----------  ----------  ---------- 
  1,736  1,736  5,636  5,636 
Income 2,676  2,676  2,006  2,006 
Investment management fee (364) (1,094) (1,458) (283) (1,181) (1,464)
Other expenses (376) (376) (357) (15) (372)
  ----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary            
 activities before tax 1,936  642  2,578  1,366  4,440  5,806 
Tax on return on            
 ordinary activities (261) 261  (202) 202 
  ----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary            
 activities after tax 1,675  903  2,578  1,164  4,642  5,806 
  ----------  ----------  ----------  ----------  ----------  ---------- 
Return per share 2.5p 1.4p 3.9p 2.1p 8.4p 10.5p
Dividends paid/proposed            
 in respect of the year 2.5p 13.0p 15.5p 1.8p 3.7p 5.5p

for the year ended 31 March 2015

  Year ended 
31 March 2015 
Year ended 
31 March 2014 
Equity shareholders' funds at 1 April 2014 71,297  50,556 
Return on ordinary activities after tax 2,578  5,806 
Dividends recognised in the year   (3,654) (2,999)
Net proceeds of share issues   1,416  18,671 
Shares repurchased for cancellation   (482) (737)
  ----------  ---------- 
Equity shareholders' funds at 31 March 2015 71,155  71,297 
  ----------  ---------- 

as at 31 March 2015

 31 March 2015 
31 March 2014 
Fixed assets:    
 Investments 50,371  58,443 
  ----------  ---------- 
Current assets:    
 Debtors 255  288 
 Cash and deposits 20,726  13,568 
  ----------  ---------- 
  20,981  13,856 
Creditors (amounts falling due within one year) (197) (1,002)
  ----------  ---------- 
Net current assets 20,784  12,854 
  ----------  ---------- 
Net assets 71,155  71,297 
  ----------  ---------- 
Capital and reserves:    
Called-up equity share capital 3,318  3,275 
Share premium 1,348 
Capital redemption reserve 35  10 
Capital reserve 62,884  55,264 
Revaluation reserve 2,393  12,049 
Revenue reserve 1,177  699 
  ----------  ---------- 
Total equity shareholders' funds 71,155  71,297 
  ----------  ---------- 
Net asset value per share 107.2p 108.9p

for the year ended 31 March 2015

  Year ended 
31 March 2015 
Year ended 
31 March 2014 
   £000 £000 £000 £000 
Cash flow statement      
Net cash inflow from operating activities   70    391 
Corporation tax paid        
Financial investment:            
Purchase of investments     (12,986)   (15,437)  
Sale/repayment of investments 22,794    7,162   
      ----------    ----------   
Net cash inflow/(outflow) from financial investment   9,808    (8,275)
Equity dividends paid       (3,654)   (2,999)
        ----------    ---------- 
Net cash inflow/(outflow) before financing   6,224    (10,883)
Issue of shares 1,463    19,122   
Share issue expenses (47)   (451)  
Shares re-purchased for cancellation (482)   (737)  
      ----------    ----------   
Net cash inflow from financing   934    17,934 
        ----------    ---------- 
Increase in cash and deposits     7,158    7,051 
        ----------    ---------- 
Reconciliation of return before tax    
to net cash flow from operating activities    
Return on ordinary activities before tax   2,578    5,806 
Gain on disposal of investments     (3,429)   (1,254)
Movements in fair value of investments     1,693    (4,382)
(Increase)/decrease in debtors     33    (47)
Increase/(decrease) in creditors     (805)   268 
        ----------    ---------- 
Net cash inflow from operating activities   70    391 
        ----------    ---------- 
Reconciliation of movement in net funds     
 1 April 2014 Cash flows 31 March 2015 
  £000  £000  £000 
Cash and deposits   13,568    7,158    20,726 
    ----------    ----------    ---------- 

as at 31 March 2015



% of
net assets
by value
Venture capital investments:      
Volumatic Holdings 2,096 2,028 2.9
Buoyant Upholstery 1,294 1,968 2.8
IDOX* 600 1,956 2.7
Biological Preparations Group 1,915 1,915 2.7
MSQ Partners Group 1,477 1,750 2.5
Silverwing 1,272 1,718 2.4
Wear Inns 1,406 1,558 2.2
Control Risks Group Holdings 746 1,534 2.2
CloserStill Media 1,520 1,520 2.1
Agilitas Holdings 1,448 1,448 2.0
Sinclair IS Pharma* 957 1,388 2.0
Kitwave One 1,001 1,238 1.7
It's All Good 1,131 1,185 1.7
Optilan Group 1,125 1,173 1.6
No 1 Traveller 1,441 1,078 1.5
  ---------- ---------- --------
Fifteen largest venture capital investments 19,429 23,457 33.0
Other venture capital investments 18,139 15,979 22.4
  ---------- ---------- --------
Total venture capital investments 37,568 39,436 55.4
Listed equity investments 8,006 8,528 12.0
Listed interest-bearing investments 2,404 2,407 3.4
  ---------- ---------- --------
Total fixed asset investments 47,978 50,371 70.8
Net current assets   20,784 29.2
    ---------- --------
Net assets   71,155 100.0
    ---------- --------

*Quoted on AIM


The board carries out a regular and robust review of the risk environment in which the company operates.  The principal risks and uncertainties identified by the board which might affect the company's business model and future performance, and the steps taken with a view to their mitigation, are as follows:

Investment and liquidity 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.  Mitigation: the directors aim to limit the risk attaching to the portfolio as a whole by careful selection, close monitoring and timely realisation of investments, by carrying out rigorous due diligence procedures and maintaining a wide spread of holdings in terms of financing stage and industry sector.  The board reviews the investment portfolio with the manager on a regular basis.

Financial risk: most of the company's investments involve a medium- to long-term commitment and many are relatively illiquid.  Mitigation: 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 direct exposure to foreign currency risk and does not enter into derivative transactions.

Economic risk: events such as economic recession or general fluctuation 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.  Mitigation: the company invests in a diversified portfolio of investments spanning various industry sectors, and maintains sufficient cash reserves to be able to provide additional funding to investee companies where appropriate.

Stock market risk: some of the company's investments are quoted on the London Stock Exchange or AIM and will be subject to market fluctuations upwards and downwards.  External factors such as terrorist activity can negatively impact stock markets worldwide.  In times of adverse sentiment there can be very little, if any, market demand for shares in smaller companies quoted on AIM.  Mitigation: the company's quoted investments are actively managed by specialist managers and the board keeps the portfolio under ongoing review.

Credit risk: the company holds a number of financial instruments and cash deposits and is dependent on the counterparties discharging their commitment.  Mitigation: the directors review the creditworthiness of the counterparties to these instruments and cash deposits and seek to ensure there is no undue concentration of credit risk with any one party.

Legislative and regulatory risk: in order to maintain its approval as a VCT, the company is required to comply with current VCT legislation in the UK, which reflects the European Commission's state aid rules.  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.  Mitigation: The board and the manager monitor political developments and where appropriate seek to make representations either directly or through relevant trade bodies.

Internal control risk: the company's assets could be at risk in the absence of an appropriate internal control regime.  Mitigation: 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.  Mitigation: the manager keeps the company's VCT qualifying status under continual review and its reports are reviewed by the board on a quarterly basis.  The board has also retained Robertson Hare LLP to undertake an independent VCT status monitoring role.


The directors are responsible for preparing the annual report and the financial statements 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 and applicable law (UK Generally Accepted Accounting Practice).  Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for the year.

In preparing the 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.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and 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, strategic 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 LLP (NVM) website,  The maintenance and integrity of this website is the responsibility of NVM and not of the company.  The work carried out by KPMG LLP as independent auditor of the company does not involve consideration of the maintenance and integrity of the website and accordingly they accept no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website.  Visitors to the website should be aware that legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

In relation to the financial statements for the year ended 31 March 2015 each of the directors has confirmed that, to the best of his knowledge, (i) the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the company;  (ii) the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's performance, business model and strategy;  and (iii) the directors' report and strategic report include 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 that the company faces.

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 above summary of results for the year ended 31 March 2015 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 auditor's report on those financial statements under Section 495 of the Companies Act 2006 is unqualified, does not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the report and does not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The calculation of the revenue and capital return per share is based on the return on ordinary activities after tax for the year and on 66,416,764 (2014 55,104,185) ordinary shares, being the weighted average number of shares in issue during the year.

The calculation of the net asset value per share is based on the net assets at 31 March 2015 divided by the 66,353,399 (2014 65,499,878) ordinary shares in issue at that date.

The second interim dividend of 10.0p per share and, if approved by shareholders, the proposed final dividend of 3.5p per share for the year ended 31 March 2015 will be paid on 17 July 2015 to shareholders on the register at the close of business on 19 June 2015.

The full annual report including financial statements for the year ended 31 March 2015 is expected to be posted to shareholders by 5 June 2015 and will be available to the public at the registered office of the company at Time Central, 32 Gallowgate, Newcastle upon Tyne NE1 4SN and on the NVM Private Equity LLP website,

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

This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Northern 3 VCT PLC via Globenewswire