Final Results

Northern 3 VCT PLC 08 December 2005 8 DECEMBER 2005 NORTHERN 3 VCT PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005 Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture Managers. The trust was launched in September 2001 and its public share offers have to date raised a total of over £32 million. The trust 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 - year ended 30 September 2005: (comparative figures as at 30 September 2004 in italics) 2005 2004 • Net assets £29,610,000 £20,802,000 • Net asset value per share 94.1p 93.4p • Investment income £1,232,000 £796,000 • Profit/(loss) on ordinary activities before tax: Revenue £894,000 £505,000 Capital £(446,000) £85,000 Total £448,000 £590,000 • Earnings per share: Revenue 2.4p 2.0p Capital (1.1)p 0.9p Total 1.3p 2.9p • Dividend per share: Revenue 2.0p 1.6p Capital 0.4p 2.8p Total 2.4p 4.4p • Cumulative return to shareholders since launch: Dividends per share 8.9p 6.5p Net asset value plus dividends per share 103.0p 99.9p • Share price at end of year 87.0p 90.0p For further information, please contact: Northern Venture Managers Limited Alastair Conn, Managing Director 0191 244 6000 Website: www.nvm.co.uk Lansons Communications Alison Boucher 020 7294 3616 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: The past year has seen further steady progress by Northern 3 VCT. Our series of top-up share issues for the 2004/05 and 2005/06 tax years closed in June 2005 with a total of £10.7 million raised from investors, with the result that the company now has net assets of just under £30 million. The total return to shareholders (year-end net asset value plus cumulative dividends) increased by 3.0% over the year, from 99.9p to 103.0p. New venture capital investments totalled £4.7 million and one of the holdings acquired in earlier years was sold at a satisfactory profit. Net asset value The net asset value (NAV) at 30 September 2005, after providing for dividends totalling 2.4p in respect of the year, was 94.1p per share - a modest increase on the corresponding figure of 93.4p at 30 September 2004. The venture capital portfolio is still relatively immature and is currently valued at a slight overall surplus compared with its original cost. Your directors consider this is a satisfactory position at this stage in the company's development. Investments 15 new investments were completed during the year at a total cost of £4.7 million. The increase in the company's size has brought a corresponding increase in our proportionate entitlement to invest in each new opportunity developed by Northern Venture Managers, and shortly before the year end we completed our largest investment to date, £679,000 in Pivotal Laboratories. A successful exit was achieved from Crabtree of Gateshead, where the original investment of £219,000 produced total cash proceeds (including loan stock redeemed in the preceding year) of £322,000 and a profit of £103,000 over cost. Subsequent to the year end our investment in Omnico Plastics has also been sold for £653,000 in cash, compared with an original cost of £333,000. I am pleased to report that GB Industries, whose valuation was written down to zero last year, is now achieving much improved results and we have been able to restore some value at the year end. However SMS Agencies, a new investment during the year, has been performing behind expectations and this is reflected in a 50% provision against cost. The other investments in the portfolio are generally making encouraging progress. Revenue and dividends Income from investments increased from £796,000 in the preceding year to £1,232,000, and the revenue surplus before tax rose from £505,000 to £894,000. The revenue element of earnings per share rose from 2.0p to 2.4p per share, reflecting the benefit of spreading the company's running costs across a wider capital base. The directors propose a final revenue dividend of 1.3p per share (last year 1.1p), making a total of 2.0p for the year (last year 1.6p). A final capital dividend of 0.4p is also proposed (last year's capital dividend was 2.8p, resulting largely from the gain on the sale of Keith Prowse in September 2004). The total dividend for the year is therefore 2.4p (last year 4.4p). The final dividend of 1.7p will, if approved by shareholders, be paid on 20 January 2006 to shareholders on the register on 16 December 2005. The dividend investment scheme introduced by the company a year ago was taken up by 20% of shareholders, representing approximately 17% of the company's issued capital. £177,000 was reinvested in ordinary shares during the year, with subscribers benefiting from the attractive tax reliefs currently available on new VCT investments. Shareholders who are interested in joining the scheme in respect of the final dividend should contact the company secretary by 23 December 2005 for further information. VCT qualifying status Your board, advised by PricewaterhouseCoopers LLP, has continued to monitor closely the company's progress towards meeting the qualifying investment requirements laid down in the VCT legislation, and we are satisfied that the company's VCT qualifying status has been maintained. Share price There continues to be relatively little trading in the company's shares. We have continued to buy back shares in the market for cancellation, generally at a discount to NAV of 10%, in order to provide liquidity for shareholders - a total of 581,620 shares were re-purchased during the year at an average price of 86p per share. A resolution will be proposed at the annual general meeting to renew the board's powers to purchase shares in the market up to a maximum of 10% of the issued share capital. Management performance incentive In the light of experience gained over the past four years, your board has been considering how best to remunerate and incentivise the company's investment managers in the future whilst aligning their interests with those of shareholders. We believe it is of great importance to the long-term prospects of our company that NVM should be able to recruit and retain high-calibre executives in a competitive market environment. As a result of these discussions, it has been agreed in principle that a co-investment scheme will be established in place of the existing performance incentive scheme. Under the terms of the new scheme investment executives employed by NVM will be required to invest personally, and on the same terms as Northern 3 VCT and NVM's other funds, in the ordinary shares of new investee companies. Your directors are firmly of the view that the change in arrangements will be in the best interests of the company and its shareholders. Future prospects Whilst the outlook for the UK economy is uncertain, the pipeline of venture capital investment opportunities for the company remains encouraging. The size and quality of the team of investment executives at NVM has increased in the period and your directors believe that we are in a good position to achieve our objective of above-average tax-free returns. On your behalf I would like to thank the team at NVM for the good results which I believe they have achieved for us. JOHN HUSTLER Chairman The audited financial statements for the year ended 30 September 2005 will show the results set out below. PROFIT AND LOSS ACCOUNT for the year ended 30 September 2005 Year ended 30 September 2005 Year ended 30 September 2004 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Profits recognised in the year on realisation of investments - 29 29 - 442 442 Income 1,232 - 1,232 796 - 796 Investment management fee (158) (475) (633) (119) (357) (476) Other expenses (180) - (180) (172) - (172) ------ ------ ------ ------ ------ ------ Profit/(loss) on ordinary activities before tax 894 (446) 448 505 85 590 Tax on ordinary activities (233) 152 (81) (116) 94 (22) ------ ------ ------ ------ ------ ------ Profit/(loss) on ordinary activities after tax 661 (294) 367 389 179 568 Dividends (639) (126) (765) (336) (623) (959) ------ ------ ------ ------ ------ ------ Retained profit/(loss) for the year 22 (420) (398) 53 (444) (391) ------ ------ ------ ------ ------ ------ Earnings/(loss) per share 2.4p (1.1)p 1.3p 2.0p 0.9p 2.9p Dividend per share 2.0p 0.4p 2.4p 1.6p 2.8p 4.4p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 30 September 2005 Year ended 30 September 2005 Year ended 30 September 2004 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Profit/(loss) on ordinary activities after tax 661 (294) 367 389 179 568 Unrealised gains on revaluation of investments - 497 497 - 16 16 ------ ------ ------ ------ ------ ------ Total recognised gains and losses during the year 661 203 864 389 195 584 ------ ------ ------ ------ ------ ------ NOTE OF HISTORICAL COST PROFITS AND LOSSES for the year ended 30 September 2005 Year ended 30 September 2005 Year ended 30 September 2004 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Reported profit/(loss) on ordinary activities before tax 894 (446) 448 505 85 590 Realisation of investment revaluation gains of prior years - 103 103 - 173 173 ------ ------ ------ ------ ------ ------ Historical cost profit/(loss) for the year before tax 894 (343) 551 505 258 763 ------ ------ ------ ------ ------ ------ Historical cost profit/(loss) for the year after taxation and dividends 22 (317) (295) 53 (271) (218) ------ ------ ------ ------ ------ ------ BALANCE SHEET as at 30 September 2005 30 September 2005 30 September 2004 £000 £000 Venture capital investments: Unquoted 8,433 4,312 Quoted 1,310 456 ------- ------- 9,743 4,768 Listed fixed-interest 14,308 7,413 investments ------- ------- Total fixed asset 24,051 12,181 investments ------- ------- Current assets: Debtors 617 395 Cash at bank 5,631 9,184 ------- ------- 6,248 9,579 Creditors (amounts falling due within one year) (689) (958) ------- ------- Net current assets 5,559 8,621 ------- ------- Net assets 29,610 20,802 ------- ------- Capital and reserves: Called-up equity 1,573 1,113 share capital Share premium 22,641 13,922 Capital redemption 34 5 reserve Revaluation reserve 333 (61) Profit and loss 5,029 5,823 account ------- ------- Total equity 29,610 20,802 shareholders' funds ------- ------- Net asset value per 94.1p 93.4p share CASH FLOW STATEMENT for the year ended 30 September 2005 Year ended Year ended 30 September 30 September 2005 2004 £000 £000 £000 £000 Cash flow statement Net cash inflow from operating activities 204 192 Taxation: Corporation tax paid (24) (22) Financial investment: Purchase of investments (17,372) (12,015) Sale/repayment of 6,028 13,628 investments ------ ------ Net cash (outflow)/inflow from financial investment (11,344) 1,613 Equity dividends paid (1,098) (282) ------ ------ Net cash (outflow)/inflow before use of liquid resources and (12,262) 1,501 financing Net cash inflow from management of liquid - 2,371 resources Financing: Issue of ordinary shares 9,698 4,776 Share issue expenses (490) (239) Purchase of ordinary shares for cancellation (499) (61) ------ ------ Net cash inflow from 8,709 4,476 financing ------ ------ (Decrease)/increase in cash (3,553) 8,348 at bank ------ ------ Reconciliation of profit before tax to net cash flow from operating activities Profit on ordinary activities before tax 448 590 (Increase)/decrease in (222) 13 debtors Increase in creditors 7 31 Profit recognised on realisation of investments (29) (442) ------ ------ Net cash inflow from operating activities 204 192 ------ ------ Analysis of movement in net funds 1 October Cash flows 30 2004 September 2005 £000 £000 £000 Cash at bank 9,184 (3,553) 5,631 ------ ------ ------ INVESTMENT PORTFOLIO SUMMARY as at 30 September 2005 Valuation % of net assets £000 by valuation Fifteen largest venture capital investments: Pivotal Laboratories 679 2.3 Omnico Plastics 633 2.1 Crantock Bakery 518 1.8 IG Doors 500 1.7 Longhirst Group 495 1.7 Envirotec 455 1.5 Direct Valeting 427 1.4 Warmseal Windows (Newcastle) 396 1.3 LEDA Holdings 385 1.3 Abermed Industrial Doctors 375 1.3 Arrow Industrial Group 366 1.2 KCS Global Holdings 338 1.1 Cello Group* 330 1.1 Ithaca Holdings 307 1.0 John Laing Partnership 300 1.0 ------- ------ 6,504 21.8 Other venture capital investments 3,239 11.0 ------- ------ Total venture capital investments 9,743 32.8 Listed fixed-interest investments 14,308 48.4 ------- ------ Total fixed asset investments 24,051 81.2 Net current assets 5,559 18.8 ------- ------ Net assets 29,610 100.0 ------- ------ *Quoted on the Alternative Investment Market The above summary of results for the year ended 30 September 2005 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. Statutory financial statements will be filed with the Registrar of Companies in due course; the independent auditors' report on those financial statements under Section 235 of the Companies Act 1985 is unqualified and does not contain a statement under Section 237(2) or (3) of the Companies Act 1985. The proposed final dividend of 1.7p per share for the year ended 30 September 2005 will, if approved by shareholders, be paid on 20 January 2006 to shareholders on the register at the close of business on 16 December 2005. The full annual report including financial statements for the year ended 30 September 2005 is expected to be posted to shareholders on 16 December 2005 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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