Northern 3 VCT PLC Application Form - Clubfinance

Part I – The Company
Introduction
Investors who subscribe for Offer Shares benefit from having immediate exposure to the Company's existing mature
venture capital portfolio, which as at 31 December 2011 consisted of 45 different investments, with an unaudited
aggregatecarryingvalueof£28.5million.
Income
The Board has a stated objective of paying annual dividends of at least 5.0p per Share, subject to the availability of
sufficientdistributableprofits.SetoutbelowisatableillustratingthereturnstoShareholdersonOfferSharesassumingan
annualdividendof5.0pperOfferShareispaid.Investorsshouldnotethatthetargetminimumannualdividendof5.0pper
OfferShareisanobjectiveandisnotguaranteed.
IllustrativeyieldperOfferShare(after30%incometaxrelief)
Netoftaxoffer Targetannual Taxfree
Grossequivalentyield
price 1
dividends
yield
40%taxpayer 2 50%taxpayer 2
69.3p 5.0p 7.2%p.a. 9.6%p.a. 11.3%p.a.
1
ThereturnslistedarebasedontheInitialOfferPriceof99.0pmultipliedby70%,toreflectinitialincometaxreliefof30%.Investorsshouldnotethat
theywillberequiredtopaythefullOfferPriceandclaimtheincometaxreliefseparately.
2
ThegrossequivalentyieldistheyieldonanonVCTUKdividendthatwouldresultinanetyieldof7.2%(beinga5.0pdividenddividedby99.0p,the
InitialOfferPrice,less30%toreflectinitialincometaxrelief),assuminga40%taxpayerand50%taxpayerrespectively.
Subscribers under the Offer will be eligible forthe final dividend in respect ofthe year ended31 March 2012, which is
expectedtobepaidinJuly2012.TheCompanypaysdividendsbiannually,usuallyinJanuaryandJulyeachyear.
Taxation benefits to Investors (see Part III for further details)
TheprincipalUKtaxreliefs,whichareavailableonamaximuminvestmentof£200,000perindividualinthe2011/12tax
year,areasfollows:
Incometaxreliefat30%oftheamountsubscribedprovidedthattheVCTsharesareheldforatleastfiveyears.Relief
isrestrictedtotheamountwhichreducestheInvestor’sincometaxliabilitytonil.
Taxfreedividends,whichmayincludecapitaldistributions,fromaVCT.
CapitalgainstaxexemptiononanygainsarisingonthedisposalofVCTshares.
Thetablebelowshowstheeffectoftheinitial30%incometaxrelief(basedontheInitialOfferPriceof99.0p):
Effectoftheinitialincometaxrelief
perShare
Costofinvestment
Grossinvestment 99.0p
30%incometaxrelief (29.7p)
Netoftaxcostofinvestment 69.3p
Initialvalueofinvestment
GrosssubscriptionbyInvestor 99.0p
EffectofissuecostsandtheroundingupoftheInitialOfferPrice (5.5p)
InitialNetAssetValue 93.5p
Initial“uplift”(pence) +24.2p
Initial“uplift”(%) +34.9%
Theabovetableshowsthat,basedontheInitialOfferPriceof99.0p per Offer Share and incometaxreliefat30%,theInvestor’snetoftaxcostof
investmentis69.3pperOfferShareandtheinitialNAVis93.5p(at31December2011,adjustingfortheinterimdividend)perOfferShare,an“uplift”of
24.2pperOfferShareor34.9%.InvestorsarerequiredtoholdOfferSharesforatleastfiveyearsinordertoretaintheincometaxreliefand,assuch,
thisinitialupliftcannotbeimmediatelyrealised.ItshouldbenotedthatthepriceachievableonthesaleoftheOfferSharesislikelytobelowerthan
theapplicableNAVbecausetheCompany’sSharestradeatadiscounttoitsNAV.
(Source:Downing)
Northern 3 VCT PLC 3