Northern 3 VCT PLC Application Form - Clubfinance

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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
OnlyaverybriefsummaryoftheUKtaxpositionofinvestorsinVCTs,basedontheCompany'sunderstandingofcurrent law and practice, is provided on the page opposite. Further details are set out in Part III of this document. Potential Investorsarerecommendedtoconsulttheirownappropriateprofessionaladvisersastothetaxationconsequencesof theirinvestinginaVCT.Inaddition,theavailabilityoftaxreliefsdependsontheinvesteecompaniesmaintainingtheir VCTqualifyingstatus. VCTs to assist in retirement planning TheBoardbelievesthataninvestmentintheCompanycouldbeusedinconjunctionwithpensionsforretirementplanning forcertainInvestorsforthefollowingreasons: i) IncomereceivedfromtheCompanywillbetaxfree. ii) FromApril2011,theannualpensioncontributionallowancewasreducedto£50,000forallindividuals.Fulltaxreliefat anindividual'smarginalrateisallowableonthecontributionpaiduptothisannualallowance. ThetablebelowprovidesacomparisonofthetaxreliefsofVCTsandpensionsforillustrativepurposesonly. ComparisonofVCTsandPensions VCT Pension Effectivetaxrelief 30% 20%50% Income Taxfree 25%offundcanbetakenasataxfreecashsum when benefits are taken (no requirement to retire).Balanceoffundusedtoprovidepension income, which is subject to tax as earned income Capitalgains Taxfree Taxfreewithinpensionfund Minimumholdingperiod Shares can be sold at any time, however,a5yearholdingperiodis required to retain tax reliefs obtainedonsubscription Individual cannot receive benefits (e.g. taxfree cash or taxed income) until at least age 55, as setoutonthebasisabove Accesstocapital Yes Not untilbenefitsaretaken Maximumannualinvestment £200,000 Up to £50,000 per tax year with the ability to carry forward any unused relief from the previousthreeyears. Maximumtotalinvestment Nolimit £1,800,000 (reduces to £1,500,000 in April 2012) TheabovefiguresassumethattheShareholderandtheVCTqualifyforallapplicabletaxreliefs. ItshouldbenotedthatVCTsarehigherriskinvestmentsandshouldnotbeconsideredasareplacementforpensions. Investorsshouldtakeindependentfinancialadvicebeforemakinganyinvestmentdecision. The Manager: NVM Private Equity Introduction The Company’s venture capital investment portfolio is managed by NVM, which specialises in investing in smaller UK companiesofthetypequalifyingundertheVCTlegislation.NVMwasestablishedin1988bytheexecutiveteampreviously employeddirectlybyNorthernInvestorsCompanyandcurrentlymanagesfundsinexcessof£200millionthroughitsoffices inNewcastleuponTyne,ReadingandManchester. NVM’s11investmentexecutiveshavetogetheratotalofover185years’experienceintheventurecapitalindustry.NVMis authorisedandregulatedbytheFinancialServicesAuthorityundernumber141943andisamemberoftheBVCA.NVM’s teamofinvestmentprofessionalsaimstoensurethattheCompanygainsaccesstosomeofthebestopportunitiesavailable totheindustryand,bycarryingoutextensiveduediligenceprocedures,seekstoidentifythosecompanieswhichpotentially offerthebestpossiblerisk/returnscenarios.NVMgeneratesover200investmentopportunitiesayearbutlessthan2%of theseopportunitiesareinvestedinbytheCompanyandtheotherfundsmanagedbyNVM(source:NVM). Northern 3 VCT PLC 4
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Northern 3 VCT PLC Application Form - Clubfinance

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