Interim Results

Northern 3 VCT PLC 23 May 2006 23 MAY 2006 NORTHERN 3 VCT PLC UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006 Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture Managers. It invests mainly in unquoted venture capital holdings and aims to provide high long-term returns to shareholders through a combination of dividend yield and capital growth. Financial highlights: (comparative figures as at 31 March 2005 in italics) 2006 2005 Re-stated • Net assets* £30,294,000 £25,945,000 • Net asset value per share* 97.2p 94.6p • Investment income £770,000 £437,000 • Return on ordinary activities before tax Revenue £594,000 £280,000 Capital £425,000 £(23,000) Total £1,019,000 £257,000 • Return per share Revenue 1.4p 0.9p Capital 1.7p 0.1p Total 3.1p 1.0p • Interim dividend per share proposed in respect of the period Revenue 1.0p 0.7p Capital 1.0p - Total 2.0p 0.7p • Cumulative return to shareholders since launch Dividends per share** 10.9p 7.2p Net asset value plus dividends 106.1p 101.1p • Share price at end of period 85.0p 87.0p * Before deducting proposed interim dividend **Including proposed interim dividend For further information, please contact: Northern Venture Managers Limited 0191 244 6000 Alastair Conn, Managing Director Website: www.nvm.co.uk Lansons Communications 020 7294 3616 Alison Boucher NORTHERN 3 VCT PLC CHAIRMAN'S STATEMENT The Chairman of Northern 3 VCT PLC, John Hustler, included the following points in his statement to shareholders: During 2005 we achieved our initial objective of increasing the company's asset base to £30 million. The emphasis is now on building up the portfolio of VCT-qualifying investments in order to ensure that the company continues to comply with the conditions for maintaining VCT status. Although the rate of new investment in the six months to 31 March 2006 was lower than expected, the flow of potential new deals is currently strong and we expect an upturn in activity in the second half of the year. Net asset value The unaudited net asset value per share at 31 March 2006 was 97.2p, up by 1.5% from the re-stated figure of 95.8p at 30 September 2005. As explained below, net asset value is now stated before deducting proposed dividends. Revenue and dividend The revenue return per share for the half year was 1.4p, compared with 0.9p for the corresponding six month period to 31 March 2005. The directors have declared an increased interim revenue dividend of 1.0p per share (corresponding period 0.7p), and an interim capital dividend of 1.0p (corresponding period nil). The total interim dividend of 2.0p per share will be paid on 21 July 2006 to shareholders on the register on 23 June 2006. This brings the cumulative total of dividends declared by the company to 10.9p per share. Shareholders may be aware that some VCTs have already announced the suspension of dividend reinvestment schemes following the changes announced in the March 2006 Budget, which include a reduction in the size limits for VCT-qualifying investments made using funds raised after 6 April 2006. We would like to keep the dividend reinvestment facility available to shareholders and will await further guidance from HM Revenue & Customs on the practical implications of the proposed legislation. Shares issued after 6 April 2006 will be subject to the new conditions announced in the Budget, including 30% income tax relief and a five year holding period. Investments During the half year a total of £1.1 million was invested in the following companies: • Inspicio (£100,000) - AIM-quoted provider of inspection and testing services, London • Intercytex Group (£250,000) - AIM-quoted drug development company specialising in human cell therapy, Cambridge • Adept Telecom (£235,000) - AIM-quoted provider of telecommunications services, Tunbridge Wells • Wear Inns (£282,000) - managed public houses, Newcastle upon Tyne • Twenty (£198,000) - AIM-quoted marketing services provider, Hertford Although only one new unquoted investment was completed during the half year, the underlying level of activity in developing and appraising new opportunities has remained high and we expect an increased number of completions in the second half. In early April we completed an investment of £993,000 in Nightingales, a retailer of ladies clothing through mail order and retail outlets, and two further investments totalling £756,000 have been approved and are awaiting completion of due diligence. Most of the companies in the unquoted portfolio are making good progress and in a number of cases this has resulted in increases in valuation. The investment in Omnico Plastics was sold to SIG plc in November 2005 for approximately twice its original cost of £333,000. I reported at the last year end that SMS Agencies was trading behind expectations; regrettably the position deteriorated further and in February 2006 administrators were appointed, resulting in full provision being made against our investment of £500,000. Presentation of financial statements We have adopted the revised Statement of Recommended Practice for investment trust accounting published by the Association of Investment Trust Companies, as a result of which we now publish an Income Statement which is similar in format and content to the Statement of Total Return presented in earlier years. Several new accounting policies have been implemented in order to comply with new UK Financial Reporting Standards. The main consequences are that quoted investments are valued at bid rather than mid-market price; dividends payable to shareholders no longer appear in the Income Statement but are charged directly to reserves; and dividends are not recognised in the accounts until a formal liability to pay has been established. A more detailed explanation of the accounting changes and their financial impact is set out in the notes below. Comparative figures in the financial statements have where appropriate been re-stated on the new basis. Share buybacks At the annual general meeting in January 2006 shareholders renewed the directors' authority to make market purchases of shares for cancellation. During the half year to 31 March 2006 the company bought back for cancellation 377,018 shares, representing approximately 1.2% of the issued capital. The level of secondary market trading in our shares, like those of most VCTs, remains low; our managers are working with their colleagues in the sector to increase investor awareness of the attractions of VCT shares, particularly the tax-free dividend yield. VCT qualifying status Your board continues to monitor progress towards the Inland Revenue qualifying targets, with the help of PricewaterhouseCoopers LLP who have been retained to advise on this and other tax matters. We are satisfied that the company has continued to fulfil the conditions for maintaining VCT status. The Government has made proposals in its 2006 Finance Bill which could adversely affect the way in which VCTs manage their investments to comply with the VCT legislation, and representations are being made to the Government with the objective of ensuring that the resulting legislation does not impact on the commercial operation of our company. Prospects The recent setback to the world's stock markets has interrupted a growth trend which had perhaps run too far. The outlook for the UK economy appears to be generally positive but the road ahead will be bumpy at times. Our company has a good store of liquidity for future investment and the venture capital portfolio is developing well, though not without its challenging moments. The key objective for the next 18 months is to ensure that the 70% qualifying investment target is attained in respect of the funds raised in 2004 and 2005, whilst managing the portfolio carefully with a view to capital growth and dividend generation. On behalf of the board I would like to thank shareholders for their continuing interest and support. We have decided to hold our January 2007 annual general meeting in London and hope this will enable a greater number of shareholders to attend and take part in the meeting. JOHN HUSTLER Chairman The unaudited interim financial statements for the six months ended 31 March 2006 are set out below. INCOME STATEMENT (unaudited) for the six months ended 31 March 2006 Six months ended 31 March 2006 Six months ended 31 March 2005 Re-stated Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 (Loss)/gain on disposal of investments held at fair value - (185) (185) - 9 9 Unrealised adjustments to fair value of investments - 926 926 - 169 169 ------ ------ ------ ------ ------ ------ - 741 741 - 178 178 Income 770 - 770 437 - 437 Investment management fee (80) (316) (396) (67) (201) (268) Other expenses (96) - (96) (90) - (90) ------ ------ ------ ------ ------ ------ Return on ordinary activities before tax 594 425 1,019 280 (23) 257 Tax on return on ordinary activities (158) 100 (58) (65) 54 (11) ------ ------ ------ ------ ------ ------ Return on ordinary activities after tax 436 525 961 215 31 246 ------ ------ ------ ------ ------ ------ Return per share 1.4p 1.7p 3.1p 0.9p 0.1p 1.0p Year ended 30 September 2005 Re-stated Revenue Capital Total £000 £000 £000 Gain on disposal of investments held at fair value - 29 29 Unrealised adjustments to fair value of investments - 491 491 ------ ------ ------ - 520 520 Income 1,232 - 1,232 Investment management fee (158) (475) (633) Other expenses (180) - (180) ------ ------ ------ Return on ordinary activities before tax 894 45 939 Tax on return on ordinary activities (233) 152 (81) ------ ------ ------ Return on ordinary activities after tax 661 197 858 ------ ------ ------ Return per share 2.4p 0.7p 3.1p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited) for the six months ended 31 March 2006 Six months Six months Year ended ended ended 30 31 March 2006 31 March 2005 September 2005 Re-stated Re-stated £000 £000 £000 Equity shareholders' funds at 1 October 2005 As previously reported 29,610 20,802 20,802 Prior year adjustment 526 865 865 ------- ------- ------- As re-stated 30,136 21,667 21,667 Return on ordinary activities 961 246 858 after tax Dividends recognised in the (535) (868) (1,098) period Net proceeds of share issues 56 5,077 9,208 Shares purchased for (324) (177) (499) cancellation ------- ------- ------- Equity shareholders' funds at 31 March 2006 30,294 25,945 30,136 ------- ------- ------- BALANCE SHEET (unaudited) as at 31 March 2006 31 March 31 March 30 2006 2005 September 2005 Re-stated Re-stated £000 £000 £000 Fixed asset investments held at fair value: Venture capital investments Unquoted 8,665 6,760 8,433 Quoted 2,228 1,071 1,301 ------- ------- ------- Total venture capital 10,893 7,831 9,734 investments Quoted fixed-interest 15,466 12,000 14,308 investments ------- ------- ------- Total fixed asset investments 26,359 19,831 24,042 ------- ------- ------- Current assets: Debtors 480 400 617 Cash at bank 3,657 5,878 5,631 ------- ------- ------- 4,137 6,278 6,248 Creditors (amounts falling due (202) (164) (154) within one year) ------- ------- ------- Net current assets 3,935 6,114 6,094 ------- ------- ------- Net assets 30,294 25,945 30,136 ------- ------- ------- Capital and reserves: Called-up equity share capital 1,558 1,371 1,573 Share premium 22,693 18,731 22,641 Capital redemption reserve 53 15 34 Capital reserve - realised 4,291 5,425 5,031 Capital reserve - unrealised 1,139 86 324 Revenue reserve 560 317 533 ------- ------- ------- Total equity shareholders' 30,294 25,945 30,136 funds ------- ------- ------- Net asset value per share 97.2p 94.6p 95.8p CASH FLOW STATEMENT (unaudited) for the six months ended 31 March 2006 Six months ended Six months ended Year ended 31 March 2005 30 September 2005 31 March 2006 Re-stated Re-stated £000 £000 £000 £000 £000 £000 Net cash inflow from operating activities 486 146 204 Taxation: Corporation tax paid (81) - (24) Financial investment: Purchase of investments (4,399) (12,616) (17,372) Sale/repayment of investments 2,823 5,141 6,028 ------ ------ ------ Net cash outflow from financial investment (1,576) (7,475) (11,344) Equity dividends paid (535) (877) (1,098) ------ ------ ------ Net cash outflow before (1,706) (8,206) (12,262) financing Financing: Issue of ordinary shares 70 5,332 9,698 Share issue expenses (14) (255) (490) Purchase of ordinary shares for cancellation (324) (177) (499) ------ ------ ------ Net cash (outflow)/inflow from financing (268) 4,900 8,709 ------ ------ ------ Decrease in cash at bank (1,974) (3,306) (3,553) ------ ------ ------ Reconciliation of return before tax to net cash flow from operating activities Return on ordinary activities before tax 1,019 257 939 Loss/(gain) on disposal of investments held at fair value 185 (9) (29) Unrealised adjustments to fair value of investments (926) (169) (491) Decrease/(increase) in debtors 137 (5) (222) Increase in creditors 71 72 7 ------ ------ ------ Net cash inflow from operating activities 486 146 204 ------ ------ ------ Analysis of movement in net funds 1 October 2005 Cash flows 31 March 2006 £000 £000 £000 Cash at bank 5,631 (1,974) 3,657 ------ ------ ------ INVESTMENT PORTFOLIO SUMMARY as at 31 March 2006 Cost Valuation % of net assets £000 £000 by valuation Venture capital investments: Pivotal Laboratories Holdings 679 679 2.2 IG Doors 500 672 2.2 Envirotec 455 655 2.2 John Laing Partnership 304 639 2.1 Crantock Bakery 442 536 1.8 Longhirst Group 480 495 1.6 Warmseal Windows (Newcastle) 339 440 1.5 Arrow Industrial Group 245 375 1.2 Abermed Group 375 375 1.2 Arleigh International 210 344 1.1 Adept Telecom* 235 340 1.1 KCS Global Holdings 338 338 1.1 Cello Group* 251 321 1.1 Direct Valeting 427 320 1.1 AFI Aerial Platforms 116 313 1.0 ------- ------- ------ Fifteen largest venture capital investments 5,396 6,842 22.5 Other venture capital investments 4,232 4,051 13.4 ------- ------- ------ Total venture capital investments 9,628 10,893 35.9 Quoted fixed-interest investments 15,591 15,466 51.1 ------- ------- ------ Total fixed asset investments 25,219 26,359 87.0 ------- Net current assets 3,935 13.0 ------- ------ Net assets 30,294 100.0 ------- ------ *Quoted on Alternative Investment Market The above summary of results for the six months ended 31 March 2006 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. The figures for the year ended 30 September 2005 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies, adjusted in respect of the changes in accounting policies as stated below; the independent auditors' report on those financial statements under Section 235 of the Companies Act 1985 was unqualified. The company is required to comply with a number of new UK Financial Reporting Standards (FRS), which now represent UK Generally Accepted Accounting Principles (UK GAAP), in presenting its financial statements for the year ending 30 September 2006. These Standards have been introduced as part of the process of aligning UK accounting principles with International Accounting Standards. The revised accounting policies differ from those used in preparing the annual financial statements for the year ended 30 September 2005 in the following respects: • The company's investments have been designated as fair value through profit and loss and accordingly the unrealised gain or loss resulting from the revaluation of investments held at fair value is now recognised in the income statement, as required by FRS 26 'Financial Instruments: Measurement'. • Quoted investments are valued at bid price rather than mid-market price, as required by FRS 26 'Financial Instruments: Measurement'. • Dividends to shareholders are accounted for in the period in which the company is liable to pay them, rather than in the period in respect of which they are declared, as required by FRS 21 'Events after the Balance Sheet Date'. Dividends payable are treated as a charge on reserves and accounted for through the reconciliation of movements in shareholders' funds rather than in the profit and loss account as previously. The comparative figures for the year ended 30 September 2005 and the six months ended 31 March 2005 have been re-stated accordingly. The effect of the above changes on the reported net assets and net asset value per share of the company is as follows: 30 September 2005 31March 2005 Net assets Net asset Net assets Net asset £000 value £000 value per share per share p p As reported under previous 29,610 94.1 25,736 93.8 UK GAAP Less: adjustment in valuation of (9) - (21) - quoted investments to bid price Add: proposed dividends not 535 1.7 230 0.8 accounted for until declared and paid ------- ------- ------- ------- As reported under revised 30,136 95.8 25,945 94.6 UK GAAP ------- ------- ------- ------- The proposed interim dividend of 2.0p per share for the year ending 30 September 2006 will be paid on 21 July 2006 to shareholders on the register at the close of business on 23 June 2006. A copy of the interim report for the six months ended 31 March 2006 is expected to be posted to shareholders on 2 June 2006 and will be available to the public at the registered office of the company at Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER. ENDS This information is provided by RNS The company news service from the London Stock Exchange

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