Half-yearly report
9 NOVEMBER 2010
NORTHERN 3 VCT PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
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 for the six months ended 30 September 2009 in italics)
         2010         2009
 ·        Net assets £34.7m £26.2m
 ·        Net asset value per share 89.3p 90.5p
 ·        Return per share
    Revenue 0.7p 1.5p
    Capital     0.3p     6.9p
    Total     1.0p     8.4p
 ·        Interim dividend per share
    in respect of the period
    Revenue 0.7p 1.4p
    Capital     1.3p     0.6p
    Total     2.0p     2.0p
 ·        Cumulative return to
    shareholders since launch
    Net asset value per share 89.3p 90.5p
    Dividends paid per share* 26.9p 22.9p
    Net asset value plus dividends
    paid per share 116.2p 113.4p
 ·        Share price at end of period 75.0p 55.5p
* Excluding proposed interim dividend
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
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
Results
The unaudited net asset value (NAV) per share at 30 September 2010, after
deducting the 2009/10 final dividend of 2.0p per share paid during the period,
was 89.3p - a fall of 1.2p, or 1.3%, from the corresponding figure of 90.5p a
year earlier. The valuation of the portfolio of unquoted venture capital
investments has held up relatively well despite the harsh economic climate for
smaller companies. The cumulative return to shareholders (latest NAV plus total
dividends paid since launch) is 116.2p at 30 September 2010, compared with
113.4p a year earlier.
Investment income fell from £732,000 in the corresponding period last year to
£575,000 this time. Interest rates remained depressed and although the new
funds subscribed in the recent share issue generated additional income, the
corresponding period figure included a substantial non-recurring income receipt
from DxS prior to the sale of that investment in September 2009. The revenue
return per share for the half year fell from 1.5p to 0.7p.
In line with our objective of maintaining an annual dividend of 4.0p per share,
the board has declared an unchanged interim dividend of 2.0p per share. This
will be paid on 14 January 2011 to shareholders on the register at the close of
business on 10 December 2010.
Investment portfolio
There were relatively few movements in the unquoted portfolio during the half
year. The process of converting potential new opportunities into completed
investments has been unusually protracted, due in large part to the difficult
market conditions and the reluctance of UK clearing banks to lend money to
smaller companies. There were no significant disposals in the period, although
a further £332,000 was received and credited to the capital column of the income
statement in respect of deferred proceeds from the sale of DxS. In the AIM-
quoted portfolio half of the holding in Andor Technology was sold, realising a
gain of £198,000, but there were no other substantial changes.
The funds awaiting investment in venture capital holdings have largely been
deployed in the listed fixed-interest market, but following the change in
investment policy approved by shareholders at the annual general meeting in July
2010, approximately £4 million has been invested in higher-yielding UK blue chip
listed equities - so far with satisfactory results.
Ordinary shares
As previously reported, the company's latest public offer of new ordinary shares
closed in May 2010 having attracted subscriptions of £12.7 million. We welcome
our new investors and thank them and our longer-standing shareholders for their
support.
The share price has stabilised markedly following the announcement a year ago
that the company would buy back its shares in the market at a 15% discount to
NAV. During the half year 500,000 shares were purchased for cancellation at a
cost of £380,000. Your directors will continue to keep the buy-back policy
under regular review.
Our managers continue to work with their colleagues in the VCT sector, supported
by the Association of Investment Companies, to promote the merits of investing
in VCT shares via secondary market purchases.
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 continue to monitor the position closely, assisted by 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 2010,
including those resulting from the size and relative illiquidity of the unquoted
and AIM-quoted investments held by the company.
Board of directors
John Hustler retired from the board in September 2010 in order to avoid a deemed
conflict with his role as chairman of Northern Venture Trust PLC. This follows
the introduction of new FSA rules relating to the independence of listed company
chairmen. We are very grateful to John for his contribution to the company's
development over the past nine years.
Prospects
The UK economy is slowly emerging from a period of great difficulty and there is
considerable potential for further setbacks, especially when the effects of the
Government's public sector spending review are felt in the private sector.
Nevertheless history shows that excellent growth opportunities can be available
in the aftermath of recession and we hope to see an upturn in the rate of new
investment. We have a well-balanced and maturing portfolio of venture capital
investments which are carefully monitored by our managers and which should be
capable of responding positively to any improvement in the economic environment.
On behalf of the Board
JAMES FERGUSON
Chairman
The unaudited half-yearly financial statements for the six months ended 30
September 2010 are set out below.
INCOME STATEMENT
(unaudited) for the six months ended 30 September 2010
 Six months ended Six months ended
30 September 2010Â 30 September 2009
 Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gain on -Â 477Â 477Â -Â 787Â 787
disposal of
investments
Movements -Â (181) (181) -Â 1,365Â 1,365
in fair
value of
investments
 ---------- ---------- ---------- ---------- ---------- ----------
 - 296 296 - 2,152 2,152
Income 575Â -Â 575Â 732Â -Â 732
Investment (84) (251) (335) (63) (207) (270)
management
fee
Other (137) -Â (137) (100) -Â (100)
expenses
 ---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
  Before 354 45 399 569 1,945 2,514
tax
Tax on (69) 58Â (11) (129) 60Â (69)
return on
ordinary
activities
 ---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
  after tax 285 103 388 440 2,005 2,445
 ---------- ---------- ---------- ---------- ---------- ----------
Return per 0.7p 0.3p 1.0p 1.5p 6.9p 8.4p
share
Dividends 0.7p 1.3p 2.0p 1.4p 0.6p 2.0p
declared
for the
period
 Year ended 31 March 2010
    Revenue Capital Total
   £000 £000 £000
Gain on disposal of investments    - 1,651 1,651
Movements in fair value of investments    - 1,058 1,058
    ---------- ---------- ----------
    - 2,709 2,709
Income    926 - 926
Investment management fee    (130) (390) (520)
Other expenses    (217) - (217)
    ---------- ---------- ----------
Return on ordinary activities
  before tax    579 2,319 2,898
Tax on return on ordinary activities    (93) 93 -
    ---------- ---------- ----------
Return on ordinary activities
  after tax    486 2,412 2,898
    ---------- ---------- ----------
Return per share    1.7p 8.2p 9.9p
Dividends declared for the period    1.5p 2.5p 4.0p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited) for the six months ended 30 September 2010
 Six months ended Six months ended Year ended
30 September 2010Â 30 September 2009Â 31 March 2010
 £000 £000 £000
Equity shareholders' funds
at
  1 April 2010 32,412 24,323 24,323
Return on ordinary 388Â 2,445Â 2,898
activities after tax
Dividends recognised in the (780) (580) (1,157)
period
Net proceeds of share 3,018Â 55Â 9,073
issues
Shares purchased for (380) (41) (2,725)
cancellation
 ---------- ---------- ----------
Equity shareholders' funds
at
  30 September 2010 34,658 26,202 32,412
 ---------- ---------- ----------
BALANCE SHEET
(unaudited) as at 30 September 2010
 30 September 30 September
2010Â 2009Â 31 March 2010
 £000 £000 £000
Fixed asset investments held at fair
value:
Venture capital investments
  Unquoted 15,668 11,933 15,414
  Quoted 2,113 2,468 2,362
 ---------- ---------- ----------
Total venture capital investments 17,781Â 14,401Â 17,776
Listed fixed-interest and equity 10,812Â 3,971Â 5,002
investments
 ---------- ---------- ----------
Total fixed asset investments 28,593Â 18,372Â 22,778
 ---------- ---------- ----------
Current assets:
  Debtors 251 843 317
  Cash and deposits 6,020 7,282 9,510
 ---------- ---------- ----------
 6,271 8,125 9,827
Creditors (amounts falling due within (206) (295) (193)
one year)
 ---------- ---------- ----------
Net current assets 6,065Â 7,830Â 9,634
 ---------- ---------- ----------
Net assets 34,658Â 26,202Â 32,412
 ---------- ---------- ----------
Capital and reserves:
Called-up equity share capital 1,940Â 1,447Â 1,796
Share premium 19,505Â 8,140Â 16,656
Capital redemption reserve 370Â 192Â 345
Capital reserve 13,564Â 18,232Â 14,488
Revaluation reserve (1,321) (2,522) (1,227)
Revenue reserve 600Â 713Â 354
 ---------- ---------- ----------
Total equity shareholders' funds 34,658Â 26,202Â 32,412
 ---------- ---------- ----------
Net asset value per share 89.3p 90.5p 90.2p
CASH FLOW STATEMENT
(unaudited) for the six months ended 30 September 2010
 Six months ended Six months ended Year ended
30 September 2010Â 30 September 2009Â 31 March 2010
 £000 £000 £000 £000 £000 £000
Net cash inflow
from
  operating  171  374  868
activities
Taxation:
Corporation tax  -  -  (174)
paid
Financial
investment:
Purchase of (7,108) Â (1,237) Â (9,818)
investments
Sale/repayment 1,589Â Â 5,926Â Â 10,658
of investments
 ----------  ----------  ----------
Net cash
inflow/(outflow)
  from financial  (5,519)  4,689  840
investment
Equity dividends  (780)  (580)  (1,157)
paid
  ----------  ----------  ----------
Net cash
inflow/(outflow)
  before  (6,128)  4,483  377
financing
Financing:
Issue of 3,202Â Â 70Â Â 9,602
ordinary shares
Share issue (184) Â (15) Â (529)
expenses
Purchase of
ordinary shares
  for (380)  (41)  (2,725)
cancellation
 ----------  ----------  ----------
Net cash inflow  2,638  14  6,348
from financing
  ----------  ----------  ----------
Increase/(decrease) in cash (3,490) Â 4,497Â Â 6,725
and deposits
  ----------  ----------  ----------
Reconciliation
of return before
tax
to net cash flow
from operating
activities
Return on
ordinary
activities
  before tax  399  2,514  2,898
Gain on disposal  (477)  (787)  (1,651)
of investments
Movements in
fair value
  of investments  181  (1,365)  (1,058)
Decrease in  66  5  531
debtors
Increase in  2  7  148
creditors
  ----------  ----------  ----------
Net cash inflow
from
  operating  171  374  868
activities
  ----------  ----------  ----------
Analysis of
movement in net
funds
 1 April 2010 Cash flows 30 September 2010
 £000 £000 £000
Cash and  9,510  (3,490)  6,020
deposits
  ----------  ----------  ----------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2010
 Cost Valuation % of net assets
£000 £000 by valuation
15 largest investments:
Promanex Group Holdings 1,695 1,851 5.3
Kerridge Commercial Systems 1,244 1,244 3.6
Axial Systems Holdings 1,004 1,146 3.3
CloserStill Holdings 743 1,012 2.9
RCC Lifesciences 995 995 2.9
Evolve Investments 995 995 2.9
Wear Inns 839 839 2.4
Advanced Computer Software Group* 381 716 2.1
Paladin Group 861 693 2.0
Crantock Bakery 442 686 2.0
Arleigh International 452 683 2.0
Envirotec 456 664 1.9
IG Doors 404 561 1.6
Promatic Group 701 526 1.5
Optilan Group 1,000 500 1.4
 ---------- ---------- --------
 12,212 13,111 37.8
Other venture capital investments 6,997 4,670 13.5
 ---------- ---------- --------
Total venture capital investments 19,209 17,781 51.3
Listed fixed-interest and equity 10,705 10,812 31.2
investments
 ---------- ---------- --------
Total fixed asset investments 29,914 28,593 82.5
 ----------
Net current assets  6,065 17.5
  ---------- --------
Net assets  34,658 100.0
  ---------- --------
*Quoted on AIM
The above summary of results for the six months ended 30 September 2010 does not
constitute statutory financial statements within the meaning of Section 434 of
the Companies Act 2006, has not been audited or reviewed by the company's
independent auditors and has not been delivered to the Registrar of Companies.
The figures for the year ended 31 March 2010 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 and did not contain a statement under Section 498(2)
or (3) of the Companies Act 2006. The half-yearly financial statements have
been prepared on the basis of the accounting policies set out in the annual
financial statements for the year ended 31 March 2010.
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 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 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 statement 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 period and on 38,793,750 (2009
28,936,373) ordinary shares, being the weighted average number of shares in
issue during the period.
The proposed interim dividend of 2.0p per share for the year ending 31 March
2011 will be paid on 14Â January 2011 to shareholders on the register at the
close of business on 10 December 2010.
A copy of the half-yearly financial report for the six months ended 30 September
2010 is expected to be posted to shareholders on 26 November 2010 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.
[HUG#1460565]
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
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