Northern 3 VCT PLC : Half-yearly report
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 share 93.4p 89.3p
Return per share after tax:
  Revenue 1.9p 0.7p
  Capital 1.8p 0.3p
  Total 3.7p 1.0p
Dividend per share declared in respect of the 2.0p 2.0p
period
Cumulative return to shareholders since launch:
  Net asset value per share 93.4p 89.3p
  Dividends paid per share* 31.4p 26.9p
  Net asset value plus dividends paid per share 124.8p 116.2p
Mid-market share price at end of period 78.125p 75.0p
Share price discount to net asset value 16.4% 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:Â 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 Six months ended
30 September 2011 30 September 2010
 Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gain on -Â 610Â 610Â -Â 477Â 477
disposal of
investments
Movements -Â 333Â 333Â -Â (181) (181)
in fair
value of
investments
 ---------- ---------- ---------- ---------- ---------- ----------
 - 943 943 - 296 296
Income 1,178Â -Â 1,178Â 575Â -Â 575
Investment (96) (289) (385) (84) (251) (335)
management
fee
Recoverable -Â -Â -Â -Â -Â -
VAT
Other (150) -Â (150) (137) -Â (137)
expenses
 ---------- ---------- ---------- ---------- ---------- ----------
Return on 932Â 654Â 1,586Â 354Â 45Â 399
ordinary
activities
before tax
Tax on (180) 90Â (90) (69) 58Â (11)
return on
ordinary
activities
 ---------- ---------- ---------- ---------- ---------- ----------
Return on 752Â 744Â 1,496Â 285Â 103Â 388
ordinary
activities
after tax
 ---------- ---------- ---------- ---------- ---------- ----------
Return per 1.9p 1.8p 3.7p 0.7p 0.3p 1.0p
share
Dividend 1.0p 1.0p 2.0p 0.7p 1.3p 2.0p
per share
for the
period
  Year ended 31 March 2011
    Revenue Capital Total
£000 £000 £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 Â Â Â 25Â 74Â 99
Other expenses    (268) - (268)
    ---------- ---------- ----------
Return on ordinary activities before    684 1,610 2,294
tax
Tax on return on ordinary activities    (148) 147 (1)
    ---------- ---------- ----------
Return on ordinary activities after    536 1,757 2,293
tax
    ---------- ---------- ----------
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 Six months ended Year ended
30 September 2011Â 30 September 2010Â 31 March 2011
£000 £000 £000
Equity shareholders' funds 37,428Â 32,412Â 32,412
at 1 April 2011
Return on ordinary 1,496Â 388Â 2,293
activities after tax
Dividends recognised in the (1,011) (780) (1,556)
period
Shares issued on merger 5,479Â -Â -
Net proceeds of share -Â 3,018Â 5,002
issues
Shares re-purchased for (211) (380) (723)
cancellation
 ---------- ---------- ----------
Equity shareholders' funds 43,181Â 34,658Â 37,428
at 30 Sept 2011
 ---------- ---------- ----------
BALANCE SHEET
(unaudited) as at 30 September 2011
 30 September 2011 30 September 2010 31 March 2011
£000 £000 £000
Fixed asset investments 36,547Â 28,593Â 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 6,634Â 6,065Â 3,682
 ---------- ---------- ----------
Net assets 43,181Â 34,658Â 37,428
 ---------- ---------- ----------
Capital and reserves
Called-up equity share 2,313Â 1,940Â 2,029
capital
Share premium 26,560Â 19,505Â 21,378
Capital redemption reserve 406Â 370Â 392
Capital reserve 11,492Â 13,564Â 12,307
Revaluation reserve 1,361Â (1,321) 743
Revenue reserve 1,049Â 600Â 579
 ---------- ---------- ----------
Total equity shareholders' 43,181Â 34,658Â 37,428
funds
 ---------- ---------- ----------
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 Six months ended Year ended
30 September 2011Â 30 September 2010Â 31 March 2011
 £000 £000 £000 £000 £000 £000
Cash flow statement
Net cash inflow  645  171  197
from operating
activities
Taxation:
Corporation tax  -  -  -
paid
Financial
investment:
Purchase of (2,243) Â (7,108) Â (12,741)
investments
Sale/repayment of 5,225Â Â 1,589Â Â 4,251
investments
 ----------  ----------  ----------
Net cash inflow/(outflow) from 2,982Â Â (5,519) Â (8,490)
financial investment
Acquisitions:
Cash and deposits acquired on 604Â Â -Â Â -
merger
Equity dividends  (1,011)  (780)  (1,556)
paid
  ----------  ----------  ----------
Net cash inflow/(outflow) 3,220Â Â (6,128) Â (9,849)
before financing
Financing:
Issue of shares -Â Â 3,202Â Â 5,301
Share issue (82) Â (184) Â (299)
expenses
Re-purchase of (211) Â (380) Â (723)
shares for
cancellation
 ----------  ----------  ----------
Net cash inflow/(outflow) from (293) Â 2,638Â Â 4,279
financing
  ----------  ----------  ----------
Increase/(decrease) Â 2,927Â Â (3,490) Â (5,570)
in cash and
deposits
  ----------  ----------  ----------
Reconciliation of
return before tax
to
net cash flow from
operating
activities
Return on ordinary  1,586  399  2,294
activities before
tax
Gain on disposal of  (610)  (477)  (778)
investments
Movements in fair  (333)  181  (1,361)
value of
investments
(Increase)/decrease  (42)  66  (80)
in debtors
Increase/(decrease) Â 44Â Â 2Â Â 122
in creditors
  ----------  ----------  ----------
Net cash inflow from operating 645Â Â 171Â Â 197
activities
  ----------  ----------  ----------
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
Company Cost Valuation % of net assets
£000 £000 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; Â 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.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Northern 3 VCT PLC via Thomson Reuters ONE
[HUG#1561994]
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