Northern 3 VCT PLC.

30 MAY 2014



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 2013):

            2014             2013
Net assets£71.3m£50.6m
Net asset value per share108.9p104.6p
Return per share:
Dividend per share proposed
in respect of the year5.5p5.5p
Cumulative return to shareholders since launch:
Net asset value per share108.9p104.6p
Dividends paid per share*43.9p38.4p
Net asset value plus dividends paid per share152.8p143.0p
Mid-market share price at end of year97.0p89.3p
Share price discount to net asset value10.9%14.7%
Tax-free dividend yield (based on mid-market
share price at end of year5.7%6.2%

*Excluding proposed final dividend

For further information, please contact:

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



There have been some changes to the format and content of the annual report, reflecting the current requirements of the Companies Act, the AIC Code of Corporate Governance and the remuneration regulations.  We are required to ensure that the annual report and financial statements are fair, balanced and understandable;  you will see from the Directors' Responsibilities Statement that we believe that this is the case.

I am glad to report that Northern 3 VCT has continued to make good progress.  Net asset value (NAV) per share has increased for the fifth successive year and £20 million was raised through a public offer of new ordinary shares.  Our company now has net assets of over £70 million and is well placed for the future.

Results and dividend
The NAV per share at 31 March 2014 was 108.9p, an increase of 4.1% over the corresponding figure of 104.6p as at 31 March 2013.  The return per share for the year as shown in the income statement, before taking account of dividends payable, was 10.5p (last year 12.5p), equivalent to 10.0% of the opening NAV.  As in the preceding year, investment performance was strong in both the quoted and the unquoted portfolios.  Income from investments increased from £1.5 million to £2.0 million, enabling the company to report an improvement in revenue return per share from 1.8p to 2.1p.

The company's encouraging performance in recent years has enabled your board to increase its rate of annual dividend progressively, from 4.0p in 2010 to 5.5p last year.  Our objective is to pay a dividend that is sustainable, using our reserves, should it be necessary, to iron out fluctuations in annual results.  Implicit in this is a balance between maximising cash distributions to shareholders, which of course are tax-free, and preserving the company's capital base, which supports the acquisition of the new investments that will generate returns in the future.  We believe that the current level of dividend achieves this balance and should be maintained.

An interim dividend of 2.0p per share was paid in January 2014 and in accordance with our objective we propose an unchanged final dividend of 3.5p per share, making a total of 5.5p for the year.  Subject to approval by shareholders at the annual general meeting, the final dividend will be paid on 25 July 2014 to shareholders on the register on 4 July 2014.  The dividend investment scheme which was re-introduced in 2013 continues to operate, giving shareholders the opportunity to re-invest their dividends in new ordinary shares with the benefit of the tax reliefs available on new subscriptions to VCTs.

Investment portfolio
Five new unquoted holdings were added to the portfolio during the year at a cost of £5.6 million, with a further £0.9 million invested in existing portfolio companies.  Successful sales were achieved by IG Doors and

Four new holdings were acquired for the AIM-quoted portfolio and we sold the holdings in Andor Technology and Vianet.  After a long period of moderate performance the AIM market has made better progress over the past year;  we have maintained a significant exposure to this market since the merger with Northern AIM VCT in 2011 and our NAV has benefitted accordingly.

With interest rates remaining at a low level an additional £3 million of our surplus liquidity was allocated to the portfolio of listed blue-chip equities, which has continued to produce a growing income yield as well as maintaining its capital value.

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 managers monitor the position closely and the board receives regular reports from the managers as well as from PricewaterhouseCoopers LLP, whom we retain as independent advisers on VCT taxation matters.

Share offer and buy-back policy
The £20 million top-up offer of new ordinary shares launched in July 2013, in conjunction with smaller offers by Northern Venture Trust and Northern 2 VCT, was fully subscribed by the end of November and the final allotment of shares has recently been completed.  On behalf of the board I would like to thank all of our investors for their continuing support.  As a result of the offer we have substantial funds available for future investment and it is encouraging to note that our managers are currently seeing a strong flow of new opportunities.

The company's share buy-back policy is kept under regular review by the board and we have continued to buy back shares in the market, when necessary in order to maintain liquidity, at a 10% discount to NAV.  During the year 783,000 shares were repurchased at an average price of 93.6p, representing less than 2% of the number of shares in issue at the start of the year.

VCT legislation and regulation
The 2014 Finance Bill, published following the Chancellor's Budget announcement in March, includes measures to prevent "enhanced" share buy-backs, where a VCT offers to buy back shares from investors at a narrow discount on condition that the proceeds are applied in subscribing for a fresh issue of shares.  This was widely expected.  The Government is also proposing that where new VCT shares are allotted on or after 6 April 2014, VCTs will be prevented for a specified period from paying dividends to shareholders out of distributable reserves created by cancelling the share premium account arising on the allotment of the shares.  Our balance sheet already has ample distributable reserves and we do not expect the new rules to have any impact on future dividend distributions.

The European Commission is in the process of reviewing the rules relating to state aid for businesses in member countries, which in the UK includes VCTs, and it is to be hoped that there will be no change in the positioning of VCTs as an important part of the UK government's strategy for supporting small and medium-sized enterprises.

The Commission's Alternative Investment Fund Managers Directive (AIFMD) became part of UK law in July 2013, with a 12 month transitional period to July 2014.  The Directive regulates the management of alternative investment funds, including venture capital funds such as VCTs.  As previously indicated, your directors have decided to appoint our existing managers, NVM Private Equity, as Northern 3 VCT's AIFM for the purposes of the Directive.

After a year which has seen considerable activity on a number of fronts, we expect that the main focus over the next 12 months will be on nurturing our existing portfolio and deploying the proceeds of the recent share offer into new investments.  Our managers have been strengthening their resources in anticipation of an increased level of activity, and the new financial year has started with an encouraging number of opportunities in the course of development.  We look forward to maintaining good progress in the future.

James Ferguson

The audited financial statements for the year ended 31 March 2014 are set out below.

for the year ended 31 March 2014

Year ended 31 March 2014 Year ended 31 March 2013 
Gain on disposal of
  investments 1,254  1,254  1,375  1,375 
Movements in fair value
  of investments 4,382  4,382  5,096  5,096 
----------  ----------  ----------  ----------  ----------  ---------- 
5,636  5,636  6,471  6,471 
Income 2,006  2,006  1,523  1,523 
Investment management fee (283) (1,181) (1,464) (245) (1,341) (1,586)
Other expenses (357) (15) (372) (297) (297)
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary
  activities before tax 1,366  4,440  5,806  981  5,130  6,111 
Tax on return on
  ordinary activities (202) 202  (113) 113 
----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary
  activities after tax 1,164  4,642  5,806  868  5,243  6,111 
----------  ----------  ----------  ----------  ----------  ---------- 
Return per share 2.1p 8.4p 10.5p 1.8p 10.7p 12.5p
Dividends paid/proposed
  in respect of the year 1.8p 3.7p 5.5p 2.0p 3.5p 5.5p

for the year ended 31 March 2014

Year ended 
31 March 2014 
Year ended 
31 March 2013 
Equity shareholders' funds at 1 April 2013 50,556  47,798 
Return on ordinary activities after tax 5,806  6,111 
Dividends recognised in the year (2,999) (2,446)
Net proceeds of share issues 18,671 
Shares repurchased for cancellation (737) (907)
----------  ---------- 
Equity shareholders' funds at 31 March 2014 71,297  50,556 
----------  ---------- 

as at 31 March 2014

31 March 2014 
31 March 2013 
Fixed assets:
  Investments 58,443  44,532 
----------  ---------- 
Current assets:
  Debtors 288  241 
  Cash and deposits 13,568  6,517 
----------  ---------- 
13,856  6,758 
Creditors (amounts falling due within one year) (1,002) (734)
----------  ---------- 
Net current assets 12,854  6,024 
----------  ---------- 
Net assets 71,297  50,556 
----------  ---------- 
Capital and reserves:
Called-up equity share capital 3,275  2,416 
Share premium 3,219 
Capital redemption reserve 10  484 
Capital reserve 55,264  36,083 
Revaluation reserve 12,049  7,681 
Revenue reserve 699  673 
----------  ---------- 
Total equity shareholders' funds 71,297  50,556 
----------  ---------- 
Net asset value per share 108.9p 104.6p

for the year ended 31 March 2014

Year ended 
31 March 2014 
Year ended 
31 March 2013 
£000 £000 £000 £000 
Cash flow statement
Net cash inflow/(outflow) from operating activities 391  (122)
Corporation tax paid
Financial investment:
Purchase of investments (15,437) (5,794)
Sale/repayment of investments 7,162  7,275 
----------  ---------- 
Net cash inflow/(outflow) from financial investment (8,275) 1,481 
Equity dividends paid (2,999) (2,446)
----------  ---------- 
Net cash outflow before financing (10,883) (1,087)
Issue of shares 19,122 
Share issue expenses (451)
Shares re-purchased for cancellation (737) (907)
----------  ---------- 
Net cash inflow/(outflow) from financing 17,934  (907)
----------  ---------- 
Increase/(decrease) in cash and deposits 7,051  (1,994)
----------  ---------- 
Reconciliation of return before tax
to net cash flow from operating activities
Return on ordinary activities before tax 5,806  6,111 
Gain on disposal of investments (1,254) (1,375)
Movements in fair value of investments (4,382) (5,096)
Increase in debtors (47) (49)
Increase in creditors 268  287 
----------  ---------- 
Net cash inflow/(outflow) from operating activities 391  (122)
----------  ---------- 
Reconciliation of movement in net funds
1 April 2013 Cash flows 31 March 2014 
£000 £000 £000 
Cash and deposits 6,517  7,051  13,568 
----------  ----------  ---------- 

as at 31 March 2014

% of
net assets
by value
Venture capital investments:
Kerridge Commercial Systems 1,537 6,512 9.1
Advanced Computer Software Group* 1,035 4,536 6.4
Volumatic Holdings 2,096 3,188 4.5
Tinglobal Holdings 1,812 1,941 2.7
IDOX* 600 1,882 2.6
Silverwing 1,272 1,858 2.6
Wear Inns 1,406 1,795 2.5
Pilat Media Global* 641 1,528 2.2
No 1 Traveller 1,441 1,441 2.0
Control Risks Group Holdings 746 1,363 1.9
Intuitive Holding 1,293 1,315 1.8
Buoyant Upholstery 1,294 1,294 1.8
Sinclair IS Pharma* 957 1,182 1.7
It's All Good 1,131 1,131 1.6
Cawood Scientific 825 1,077 1.5
---------- ---------- --------
Fifteen largest venture capital investments 18,086 32,043 44.9
Other venture capital investments 16,957 14,582 20.5
---------- ---------- --------
Total venture capital investments 35,043 46,625 65.4
Listed equity investments 8,338 8,796 12.3
Listed interest-bearing investments 3,013 3,022 4.3
---------- ---------- --------
Total fixed asset investments 46,394 58,443 82.0
Net current assets 12,854 18.0
---------- --------
Net assets 71,297 100.0
---------- --------

*Quoted on AIM


The board carries out a regular review of the risk environment in which the company operates.  The main areas of risk identified by the board are as follows:

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, close monitoring 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 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 and seek to ensure there is no significant concentration of credit risk 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.

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 as well as 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.  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 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 Limited (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 2014 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 the 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 2014 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 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 55,104,185 (2013 48,852,114) 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 2014 divided by the 65,499,878 (2013 48,318,262) ordinary shares in issue at that date.

The proposed final dividend of 3.5p per share for the year ended 31 March 2014 will, if approved by shareholders, be paid on 25 July 2014 to shareholders on the register at the close of business on 4 July 2014.

The full annual report including financial statements for the year ended 31 March 2014 is expected to be posted to shareholders by 13 June 2014 and will be available to the public at the registered office of the company at St Ann's Wharf, 112 Quayside, Newcastle upon Tyne NE1 3DX 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.

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