Source - GNW

17 MAY 2018



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 2017):


 2018 2017
Net assets£84.3m£69.9m
Net asset value per share94.0p106.2p
Return per share:  
Revenue 1.9p2.6p
Capital (4.0)p12.0p
Total (2.1)p14.6p
Dividend per share for the year:  
First interim dividend 2.0p2.0p
Second interim (special) dividend -5.0p
Proposed final dividend 3.5p3.5p
Total 5.5p10.5p
Cumulative return to shareholders since launch:  
Net asset value per share 94.0p106.2p
Dividends paid per share* 85.9p75.4p
Net asset value plus dividends paid per share 179.9p181.6p
Mid-market share price at end of year89.5p101.0p
Share price discount to net asset value4.8%4.9%
Tax-free dividend yield (based on mid-market share price at end of year):  
Including special dividend
Excluding special dividend

*Excluding proposed final dividend payable on 20 July 2018

For further information, please contact:

NVM Private Equity LLP
Simon John/James Bryce                    0191 244 6000



Northern 3 VCT has had a productive year during which ten new VCT-qualifying investments were completed and a successful public share offer was launched and fully subscribed. As a result, your company is well positioned to pursue further investment opportunities and to support its evolving portfolio. 

Results and dividend
The net asset value (NAV) per share at 31 March 2018, after deducting dividends paid during the year, was 94.0p compared with 106.2p as at 31 March 2017. The change in NAV over the year reflects amongst other items, a revenue return per share of 1.9p, realised gains on investment disposals of 0.9p per share and a net downward unrealised revaluation change equivalent to 3.7p per share, as well as the dividends paid of 10.5p per share.  The company's NAV total return over five years remains ahead of the UK equity market total return index which we use as a comparator.

The directors' policy is to set the annual dividend at a level which is sustainable, seeking to smooth out the inevitable fluctuations in annual results.  Since 2012, this has resulted in an annual base dividend of 5.5p per share.  Your company has significant distributable reserves brought forward from previous periods and is therefore able to maintain the dividend for the year under review.  We propose an unchanged final dividend of 3.5p in respect of the year, which together with the interim dividend of 2.0p paid in January makes a total of 5.5p. The proposed final dividend will, subject to approval by shareholders at the annual general meeting, be paid on 20 July 2018 to shareholders on the register on 22 June 2018.

Changes in the VCT rules which came into effect from November 2015 have meant that the company is required to invest mainly in relatively young businesses which need funding for growth and development.  Typically, this funding will include a greater proportion of equity rather than income-yielding debt instruments, which will make future returns to the company more dependent on the timing of investment sales.  As a result, future dividend payments by the company may be subject to fluctuation, however we remain conscious of the importance which shareholders attach to a regular flow of tax-free income.

Investment portfolio
The net unrealised revaluation change for the year across our venture capital portfolio was a reduction of £1.8 million, largely driven by the performance of a single AIM-quoted investment, Idox, which more than halved in value during the last five months of our financial year after announcing contract delays.  The company has subsequently made management and organisational changes which we expect to lead to a recovery in the share price as market confidence is rebuilt.  We continue to take a long term view of the potential of our AIM-quoted investments and expect that in some cases, there may be take-overs.  For example, subsequent to the year end an agreed bid has been made for Cityfibre Infrastructure Holdings at approximately twice the 31 March 2018 market price.

Overall, the valuation of the portfolio of unquoted investments has increased modestly during the period. Excellent progress has been made by many companies and positive underlying trading trends have been reported.  A small number of investments with an exposure to the UK retail and consumer sectors have faced a more challenging environment and our valuation reflects this. 

The rate of new investment has been encouraging over the past year with ten new VCT-qualifying investments completed at a total cost of £8.6 million.  Taken with follow-on investments totalling £1.2 million, the overall venture capital investment rate approached £10 million for the year.  As mentioned above, the composition of the portfolio is shifting towards earlier stage investments.  This is expected to generate greater fluctuations in valuations over time given the nature of early stage investments.

Cash proceeds from the realisation of venture capital investments totalled £7.1 million, much of which was represented by investment redemptions at or close to cost.  Optilan Group was sold in April 2017 and consequently the valuation had been marked up in the previous year.

In the AIM-quoted portfolio, the modest remaining investment in Gear4music (Holdings) was sold in the market for over four times the original cost and the holding in Hayward Tyler was sold following an agreed take-over bid. 

Shareholder issues
In November 2017, the company raised £20 million of new capital through a public offer of ordinary shares, launched in conjunction with similar offers by Northern Venture Trust and Northern 2 VCT.  The offer was fully subscribed in a matter of weeks and we thank all investors for the vote of confidence shown in Northern 3 VCT.

We have maintained our policy of buying back our shares in the market, where necessary to maintain market liquidity, at a discount of 5% to NAV.  During the year 1,165,000 shares, equivalent to approximately 1.8% of the opening share capital, were re-purchased for cancellation at an average cost of 93p per share.

Our investment scheme, under which dividends can be re-invested in new ordinary shares free of dealing costs and with the benefit of the tax reliefs available on new VCT share subscriptions, continues to operate.  Shareholders who wish to join the scheme or amend their current participation in the scheme may obtain an updated scheme mandate form from NVM's website at

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.  The board reviews the company's compliance position on a regular basis with the manager.  Philip Hare & Associates LLP continues to act as independent adviser to the company on VCT taxation matters.

VCT legislation and regulation
Frequent legislative change has unfortunately come to be expected by the VCT industry and the Government again took the opportunity to introduce amendments to the VCT rules as part of the most recent Autumn Budget Statement.  The rules governing permitted investment structures will make the provision of debt finance by VCTs to investee companies more difficult as the Government attempts to ensure that VCT capital is genuinely at risk.  Barriers to accessing capital for so-called knowledge intensive companies may be reduced with a doubling of the annual and lifetime investment limits for these businesses.  VCTs will be required to invest 30% of new funds by the end of the year following the year they are raised, which is likely to encourage smaller and more frequent share issues in future.  We welcome the authorities' declared intention to speed up the advanced assurance process and hope to see a tangible difference in this regard. 

The company is required to comply with the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, which came into effect from January 2018.  A key information document (KID) has been prepared to summarise the purpose, costs and illustrative performance of Northern 3 VCT for interested market participants.  Investment managers have very little discretion to amend the basis of preparation of the KID, which is strictly mandated by the relevant regulations.  We welcome increased transparency across the sector but note the risks of basing future expectations on past performance.

Company secretary
Chris Mellor retired as company secretary of Northern 3 VCT on 31 March 2018, having held that position since the company's formation in 2001.  I would like to thank him on your behalf for the expert and unobtrusive manner in which he has carried out his duties; we are very grateful to him.  James Bryce, who has joined NVM as head of legal and compliance, is our new company secretary and we look forward to working with him.

Our manager's reaction to the recent changes to the VCT legislation has been constructive. They have recruited additional members to their investment team and they will continue to apply the rigorous investment principles established over many years.  Whilst there was a reduction in investment realisations for the year under review, our manager is currently considering several promising opportunities for sales and we remain confident in their ability to deliver good results for shareholders in the medium to long term.

James Ferguson

Extracts from the audited financial statements for the year ended 31 March 2018 are set out below.                                                                                                                                        

for the year ended 31 March 2018

 Year ended 31 March 2018Year ended 31 March 2017
Gain on disposal of investments 698  698  1,775  1,775 
Movements in fair value of investments (2,892)  (2,892)  7,785  7,785 
  ----------  ----------  ----------  ----------  ----------  ---------- 
  (2,194)  (2,194)  9,560  9,560 
Income 2,436  2,436  2,626  2,626 
Investment management fee (384) (1,150) (1,534) (354) (1,951) (2,305)
Other expenses (335) (11)  (346) (306) (306)
  ----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary activities before tax 1,717  (3,355)  (1,638)  1,966  7,609  9,575 
Tax on return on ordinary activities (209) 209  (274) 274 
  ----------  ----------  ----------  ----------  ----------  ---------- 
Return on ordinary activities after tax 1,508  (3,146)  (1,638)  1,692  7,883  9,575 
  ----------  ----------  ----------  ----------  ----------  ---------- 
Return per share 1.9p (4.0)p (2.1)p 2.6p 12.0p 14.6p
Dividend per share 1.5p 4.0p 5.5p 2.0p 8.5p 10.5p

as at 31 March 2018

 31 March 2018 
31 March 2017 
Fixed assets:    
 Investments 62,770  62,717 
  ----------  ---------- 
Current assets:    
 Debtors 167  652 
 Cash and cash equivalents 21,458  11,811 
  ----------  ---------- 
  21,625  12,463 
Creditors (amounts falling due within one year) (135) (5,288)
  ----------  ---------- 
Net current assets 21,490  7,175 
  ----------  ---------- 
Net assets 84,260  69,892 
  ----------  ---------- 
Capital and reserves:    
Called-up equity share capital 4,483  3,290 
Share premium 214  2,223 
Capital redemption reserve 171  113 
Capital reserve 69,721  50,850 
Revaluation reserve 8,463  12,124 
Revenue reserve 1,208  1,292 
  ----------  ---------- 
Total equity shareholders' funds 84,260  69,892 
  ----------  ---------- 
Net asset value per share 94.0p 106.2p

for the year ended 31 March 2018

 ---------------Non-distributable reserves---------------Distributable reservesTotal   





 £000 £000 £000 £000 £000 £000 £000   
At 1 April 2017 3,290  2,223  113  12,124  50,850  1,292  69,892   
Return on ordinary activities                
after tax for the year (3,661)  515  1,508  (1,638) 
Dividends paid (6,127) (1,592) (7,719)  
Net proceeds of share issues 1,251  23,560  24,811   
Re-purchase of shares (58) 58  (1,086) (1,086)  
Cancellation of share premium reserve  







  ----------  ----------  ----------  ----------  ----------  ----------  ----------   
At 31 March 2018 4,483  214  171  8,463  69,721  1,208  84,260   
  ----------  ----------  ----------  ----------  ----------  ----------  ----------   

for the year ended 31 March 2017

 ---------------Non-distributable reserves---------------Distributable reservesTotal 





 £000 £000 £000 £000 £000 £000 £000 
At 1 April 2016 3,277  1,348  76  6,899  54,452  912  66,964 
Return on ordinary activities              
after tax for the year 5,225  2,658  1,692  9,575 
Dividends paid (5,559) (1,312) (6,871)
Net proceeds of share issues 50  875  925 
Re-purchase of shares (37) 37  (701) (701)
  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
At 31 March 2017 3,290  2,223  113  12,124  50,850  1,292  69,892 
  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 

for the year ended 31 March 2018

 Year ended Year ended 
 31 March 2018 31 March 2017 
 £000 £000 
Cash flows from operating activities:    
Return on ordinary activities before tax (1,638)  9,575   
Adjustments for:    
Gain on disposal of investments (698) (1,775)
Movement in fair value of investments 2,892 (7,785)
Decrease/(increase) in debtors 485 (400)
(Decrease)/increase in creditors (872)  387 
  ----------  ---------- 
Net cash inflow from operating activities 169   
  ----------  ---------- 
Cash flows from investing activities:  
Purchase of investments (10,117) (6,856)
Sale/repayment of investments 7,870  12,394 
  ----------  ---------- 
Net cash (outflow)/inflow from investing activities (2,247) 5,538 
  ----------  ---------- 
Cash flows from financing activities:    
Issue of ordinary shares 25,357  951 
Share issue expenses (546) (26)
Share subscriptions held pending allotment (4,281) 4,281 
Purchase of ordinary shares for cancellation (1,086) (701)
Equity dividends paid (7,719) (6,871)
  ----------  ---------- 
Net cash inflow/(outflow) from financing activities 11,725 (2,366)  
  ----------  ---------- 
Net increase in cash/cash equivalents 9,647  3,174 
Cash and cash equivalents at beginning of year 11,811  8,637 
  ----------  ---------- 
Cash and cash equivalents at end of year 21,458  11,811 
  ----------  ---------- 

as at 31 March 2018



% of
net assets
by value
Venture capital investments:      
No 1 Lounges 1,748 2,977 3.5
Lineup Systems 974 2,910 3.5
Entertainment Magpie Group 1,360 2,611 3.1
Sorted Holdings 1,521 2,372 2.8
Agilitas IT Holdings 1,448 2,268 2.7
MSQ Partners Group 1,478 2,226 2.6
Love Saving Group 1,017 2,089 2.5
Closerstill Group 1,520 1,985 2.4
Buoyant Upholstery 907 1,866 2.2
Ideagen* 541 1,695 2.0
Wear Inns 1,406 1,589 1.9
Biological Preparations Group 1,915 1,579 1.9
It's All Good 1,131 1,446 1.7
Volumatic 1,251 1,443 1.7
Medovate 1,432 1,432 1.7
  ---------- ---------- --------
Fifteen largest venture capital investments 19,649 30,488 36.2
Other venture capital investments 27,476 25,408 30.1
  ---------- ---------- --------
Total venture capital investments 47,125 55,896 66.3
Listed equity investments 7,182 6,874 8.2
  ---------- ---------- --------
Total fixed asset investments 54,307 62,770 74.5
Net current assets   21,490 25.5
    ---------- --------
Net assets   84,260 100.0
    ---------- --------

*Quoted on AIM


The board carries out a regular and robust review of the risk environment in which the company operates.  The principal risks and uncertainties identified by the board which might affect the company's business model and future performance, and the steps taken with a view to their mitigation, are as follows:

Investment and liquidity risk: investment in smaller and unquoted companies, such as those in which the company invests, involves a higher degree of risk than investment in larger listed companies because they generally have limited product lines, markets and financial resources and may be more dependent on their management or key individuals. The securities of smaller companies in which the company invests are typically unlisted, making them illiquid, and this may cause difficulties in valuing and disposing of the securities. The company may invest in businesses whose shares are quoted on AIM - the fact that a share is quoted on AIM does not mean that it can be readily traded and the spread between the buying and selling prices of such shares may be wide.  Mitigation: 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 maintaining a wide spread of holdings in terms of financing stage and industry sector.  The board reviews the investment portfolio with the manager on a regular basis.

Financial risk: most of the company's investments involve a medium to long-term commitment and many are relatively illiquid.  Mitigation: 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 and to make follow-on investments in existing portfolio companies.  The company has very little direct exposure to foreign currency risk and does not enter into derivative transactions.

Economic risk: events such as economic recession or general fluctuation in stock markets, exchange rates 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.  Mitigation: the company invests in a diversified portfolio of investments spanning various industry sectors, and maintains sufficient cash reserves to be able to provide additional funding to investee companies where appropriate.

Stock market risk: some of the company's investments are quoted on the London Stock Exchange or AIM and will be subject to market fluctuations upwards and downwards.  External factors such as terrorist activity can negatively impact stock markets worldwide.  In times of adverse sentiment there may be very little, if any, market demand for shares in smaller companies quoted on AIM.  Mitigation: the company's quoted investments are actively managed by specialist managers and the board keeps the portfolio under ongoing review.

Credit risk: the company holds a number of financial instruments and cash deposits and is dependent on the counterparties discharging their commitment.  Mitigation: the directors review the creditworthiness of the counterparties to these instruments and cash deposits and seek to ensure there is no undue concentration of credit risk with any one party.

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, which reflects 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.  Mitigation: the board and the manager monitor political developments and where appropriate seek to make representations either directly or through relevant trade bodies.

Internal control risk: the company's assets could be at risk in the absence of an appropriate internal control regime.  Mitigation: 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: whilst it is the intention of the directors that the company will be managed so as to continue to qualify as a VCT, there can be no guarantee that this status will be maintained. A failure to continue meeting the qualifying requirements could result in the loss of VCT tax relief, the company losing its exemption from corporation tax on capital gains, to shareholders being liable to pay income tax on dividends received from the company and, in certain circumstances, to shareholders being required to repay the initial income tax relief on their investment. Mitigation: the investment manager keeps the company's VCT qualifying status under continual review and its reports are reviewed by the board on a quarterly basis.  The board has also retained Philip Hare & Associates 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 including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".

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;  (iv) assess the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and (v) prepare the financial statements on the going concern basis unless they either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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 are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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 directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.  Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors have confirmed that to the best of their knowledge (i) taken as a whole 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;  and (ii) the directors' report and 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 they face. 

The directors consider that 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 position and performance, business model and strategy.

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 2018 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, does not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the report 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 77,868,025 (2017: 65,796,762) 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 2018 divided by the 89,662,373 (2017: 65,797,970) ordinary shares in issue at that date.

If approved by shareholders, the proposed final dividend of 3.5p per share for the year ended 31 March 2018 will be paid on 20 July 2018 to shareholders on the register at the close of business on 22 June 2018.

The full annual report including financial statements for the year ended 31 March 2018 is expected to be posted to shareholders on 8 June 2018 and will be available to the public at the registered office of the company at Time Central, 32 Gallowgate, Newcastle upon Tyne NE1 4SN and on the NVM Private Equity LLP website,

Neither the contents of the NVM Private Equity LLP website nor the contents of any website accessible from hyperlinks on the NVM Private Equity LLP website (or any other website) is incorporated into, or forms part of, this announcement.

This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq 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

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