Half-yearly report

4 NOVEMBER 2009 NORTHERN 3 VCT PLC UNAUDITED HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009 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 2008 in italics) 2009 2008 Net assets £26.2m £24.9m Net asset value per share 90.5p 86.1p Return per share Revenue 1.5p 1.5p Capital 6.9p (11.8)p Total 8.4p (10.3)p Interim dividend per share in respect of the period Revenue 1.4p 1.4p Capital 0.6p 0.6p Total 2.0p 2.0p Cumulative returns to shareholders since launch Net asset value per share 90.5p 86.1p Dividends paid per share* 22.9p 18.9p Net asset value plus dividends paid per share 113.4p 105.0p Share price at end of period 55.5p 85.5p *Excludes interim dividend declared but not yet paid For further information, please contact: NVM Private Equity Limited Alastair Conn/Christopher Mellor 0191 244 6000 Website: www.nvm.co.uk HALF-YEARLY MANAGEMENT REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009 The past six months have seen a continuation of the adverse conditions in the UK economy and financial markets. Against this background we are pleased to report that our company has made good progress during the period. Results The unaudited net asset value (NAV) per share at 30 September 2009 was 90.5p, which represents an increase of 10.1% over the audited figure of 84.0p at 31 March 2009 (after adjusting for the dividend paid during the period). Your directors consider that this is a satisfactory result given the harsh environment in which many of our investee companies are operating. The cumulative return to shareholders (latest NAV plus total dividends paid since launch) is 113.4p at 30 September 2009 compared with 105.0p a year earlier. The revenue return per share for the half year was unchanged at 1.5p. Income from the investment portfolio was slightly higher than in the corresponding period, although we expect the income in the second half of the year to be adversely affected by the continuing low level of interest rates. The board has declared an unchanged interim dividend of 2.0p per share, comprising a revenue dividend of 1.4p and a capital dividend of 0.6p. The interim dividend will be paid on 15 January 2010 to shareholders on the register at the close of business on 11 December 2009. We are aware of the importance which our shareholders attach to a consistent flow of tax-free dividends, especially with the prospect of higher income tax rates in the near future. Investment portfolio New investment activity has remained subdued. £995,000 was invested in Phusion Healthcare, a company formed to acquire businesses supplying pharmaceutical medicines to the healthcare sector, and a further tranche of £104,000 was drawn down by Wear Inns which continues to add to its estate of managed public houses. Given the difficult economic climate our managers have taken a cautious approach to making new commitments, although there are currently some indications that the quality of potential opportunities is beginning to improve. Encouragingly there were two successful exits during the period. DxS, the Manchester-based molecular diagnostics business, was sold to Qiagen NV in September 2009 on terms which enabled us to recognise sale proceeds of £3.3 million and a realised gain over original cost of £2.9 million, with the possibility of up to a further £2.5 million becoming receivable over the next three years depending on the achievement of certain milestones. Our investment in the public sector software developer Liquidlogic was sold to the AIM-quoted System C Healthcare for £363,000, realising a gain of £314,000. However conditions have remained very challenging for some of our companies and the engineering consultancy Foreman Roberts Group continued to perform poorly in a very difficult market, eventually undergoing a financial re-structuring as a result of which our investment was effectively written off. Your directors have continued to take a prudent view when valuing the portfolio of venture capital investments, and as before we are prepared to provide additional funding where there is a good business case to help our companies overcome the effects of the recession and also the difficulty of obtaining funding from the clearing banks on acceptable terms. Ordinary shares In the annual report six months ago, reference was made to the board's decision that the company should in principle continue to buy back its shares in the market, although in the prevailing market conditions it was not considered feasible to maintain a fixed 10% discount to NAV. In May 2009 Singer Capital Markets was appointed as the company's broker, as well as making a market in the company's shares. Subsequently the mid-market share price has risen from its low point of 45p, reaching 64p by early November. The latter figure still represents a discount to NAV of almost 30% and the directors are currently considering measures with the objective of reducing the discount further. We are also planning to launch a further issue of ordinary shares in the first quarter of 2010, with the objective of raising approximately £10 million of new funds. This would bring about a step change in the company's size, which we believe would have a positive effect in terms of allowing a wider spread of investments, reducing the running costs per share and helping improve the market liquidity of our shares. It would also provide an additional reserve of funds giving the company greater scope to take advantage of the attractively valued investment opportunities which are now beginning to emerge. A further announcement on this subject will be made in due course. VAT on management fees Following the European Court decision in the JPMorgan Claverhouse case, management fees paid to NVM Private Equity have been exempt from VAT since July 2008. We have also been able to recover some VAT paid in earlier periods, in respect of which a total of £280,000 has been recognised in our financial statements to date. Negotiations are continuing with HM Revenue & Customs over possible further repayments. 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 with the help of 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 2009, including those resulting from the size and relative illiquidity of the unquoted and AIM-quoted investments held by the company. Prospects We see no reason at this stage to revise our cautious view of the outlook for UK businesses in the short to medium term. The recent buoyancy of the financial markets cannot disguise the fundamental challenges facing the UK economy, which will inevitably have an impact on the type of small private company in which venture capital trusts invest. This means that careful selection and screening of new investments will remain crucial. However, our company has the benefit of a robust balance sheet and an experienced management team, as well as a maturing portfolio of investments which should be well placed to take advantage of any upturn in the economy. On behalf of the Board James Ferguson Chairman The unaudited half-yearly financial statements for the six months ended 30 September 2009 are set out below. INCOME STATEMENT (unaudited) for the six months ended 30 September 2009 Six months ended Six months ended 30 September 2009 30 September 2008 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Gain on disposal of investments - 787 787 - 458 458 Movements in fair value of investments - 1,365 1,365 - (3,917) (3,917) ------ ------ ------ ------ ------ ------ - 2,152 2,152 - (3,459) (3,459) Income 732 - 732 686 - 686 Investment (63) (207) (270) (78) (234) (312) management fee Recoverable VAT - - - 72 228 300 Other expenses (100) - (100) (109) - (109) ------ ------ ------ ------ ------ ------ Return on ordinary activities before tax 569 1,945 2,514 571 (3,465) (2,894) Tax on return on ordinary (129) 60 (69) (128) - (128) activities ------ ------ ------ ------ ------ ------ Return on ordinary activities 440 2,005 2,445 443 (3,465) (3,022) after tax ------ ------ ------ ------ ------ ------ Return per share 1.5p 6.9p 8.4p 1.5p (11.8)p (10.3)p Dividend per 1.4p 0.6p 2.0p 1.4p 0.6p 2.0p share Year ended 31 March 2009 Revenue Capital Total £000 £000 £000 Gain on disposal of investments - 814 814 Movements in fair value of investments - (4,460) (4,460) ------ ------ ------ - (3,646) (3,646) Income 1,249 - 1,249 Investment management fee (140) (420) (560) Recoverable VAT 67 213 280 Other expenses (213) - (213) ------ ------ ------ Return on ordinary activities before tax 963 (3,853) (2,890) Tax on return on ordinary activities (208) 61 (147) ------ ------ ------ Return on ordinary activities after tax 755 (3,792) (3,037) ------ ------ ------ Return per share 2.6p (13.0)p (10.4)p Dividend per share 2.5p 1.5p 4.0p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited) for the six months ended 30 September 2009 Six months ended Six months Year ended 30 September ended 31 March 2009 30 September 2009 2008 £000 £000 £000 Equity shareholders' funds at 1 April 2009 24,323 28,645 28,645 Return on ordinary activities after tax 2,445 (3,022) (3,037) Dividends recognised in the (580) 3 (575) period Net proceeds of share issues 55 - 63 Shares purchased for (41) (772) (773) cancellation ------ ------ ------ Equity shareholders' funds at 30 September 2009 26,202 24,854 24,323 ------ ------ ------ BALANCE SHEET (unaudited) as at 30 September 2009 30 September 30 September 31 March 2009 2008 2009 £000 £000 £000 Fixed asset investments: Venture capital investments Unquoted 11,933 13,778 13,606 Quoted 2,468 1,910 1,603 ------ ------ ------ Total venture capital 14,401 15,688 15,209 investments Listed fixed-interest 3,971 7,423 5,700 investments ------ ------ ------ Total fixed asset 18,372 23,111 20,909 investments ------ ------ ------ Current assets: Debtors 843 566 848 Cash and deposits 7,282 1,385 2,785 ------ ------ ------ 8,125 1,951 3,633 Creditors (amounts falling due within one year) (295) (208) (219) ------ ------ ------ Net current assets 7,830 1,743 3,414 ------ ------ ------ Net assets 26,202 24,854 24,323 ------ ------ ------ Capital and reserves: Called-up equity share 1,447 1,443 1,447 capital Share premium 8,140 8,031 8,089 Capital redemption 192 188 188 reserve Capital reserve 18,232 15,779 16,432 Revaluation reserve (2,522) (1,270) (2,424) Revenue reserve 713 683 591 ------ ------ ------ Total equity 26,202 24,854 24,323 shareholders' funds ------ ------ ------ Net asset value per 90.5p 86.1p 84.0p share CASH FLOW STATEMENT (unaudited) for the six months ended 30 September 2009 Six months Six months Year ended ended ended 31 March 2009 30 September 30 September 2009 2008 £000 £000 £000 £000 £000 £000 Net cash inflow from operating 374 113 42 activities Taxation: Corporation tax paid - (115) (143) Financial investment: Purchase of (1,237) (4,246) (2,234) investments Sale/repayment of 5,926 4,876 4,879 investments ------ ------ ------ Net cash inflow from financial 4,689 630 2,645 investment Equity dividends paid (580) 3 (575) ------ ------ ------ Net cash inflow before financing 4,483 631 1,969 Financing: Issue of ordinary 70 - 72 shares Share issue expenses (15) - (9) Purchase of ordinary shares for cancellation (41) (772) (773) ------ ------ ------ Net cash inflow/(outflow) from financing 14 (772) (710) ------ ------ ------ Increase/(decrease) in cash at bank 4,497 (141) 1,259 ------ ------ ------ Reconciliation of return before tax to net cash flow from operating activities Return on ordinary activities before tax 2,514 (2,894) (2,890) Gain on disposal of (787) (458) (814) investments Movements in fair value of investments (1,365) 3,917 4,460 (Increase)/decrease 5 (301) (583) in debtors Increase/(decrease) 7 (151) (131) in creditors ------ ------ ------ Net cash inflow from operating 374 113 42 activities ------ ------ ------ Analysis of movement in net funds 1 April 2009 Cash flows 30 September 2009 £000 £000 £000 Cash at bank 2,785 4,497 7,282 ------ ------ ------ INVESTMENT PORTFOLIO SUMMARY as at 30 September 2009 Cost Valuation % of net assets £000 £000 by valuation 15 largest investments: Axial Systems Holdings 1,004 1,215 4.6 Paladin Group 861 1,190 4.5 Phusion Healthcare 995 995 3.8 Advanced Computer Software* 429 947 3.6 Optilan Group 1,000 821 3.1 Envirotec 456 818 3.1 Promanex Group Holdings 1,000 750 2.9 CloserStill Holdings 743 743 2.8 Britspace Holdings 1,201 735 2.8 Crantock Bakery 442 656 2.5 Abermed 375 642 2.5 Arleigh International 210 437 1.7 Promatic Group 568 426 1.6 Wear Inns 490 414 1.6 IDOX* 298 387 1.5 ------ ------ ----- 10,072 11,176 42.6 Other venture capital investments 6,820 3,225 12.3 ------ ------ ----- Total venture capital investments 16,892 14,401 54.9 Listed fixed-interest investments 4,001 3,971 15.2 ------ ------ ----- Total fixed asset investments 20,893 18,372 70.1 ------ Net current assets 7,830 29.9 ------ ----- Net assets 26,202 100.0 ------ ----- *Quoted on AIM The above half-yearly financial statements for the six months ended 30 September 2009 do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 March 2009 have been extracted from the audited financial statements for that period, which have been delivered to the Registrar of Companies; the independent auditors' report on those financial statements under Section 235 of the Companies Act 1985 was unqualified. The half-yearly financial statements have been prepared on the basis of the accounting policies set out in the financial statements for the year ended 31 March 2009. 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 announcement were Mr J G D Ferguson (Chairman), Mr C J Fleetwood, Mr J R Hustler, 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 28,936,373 (2008 29,376,116) 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 2010 will be paid on 15 January 2010 to shareholders on the register at the close of business on 11 December 2009. A copy of the half-yearly financial report for the six months ended 30 September 2009 is expected to be posted to shareholders by 20 November 2009 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. ---END OF MESSAGE--- This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.

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