Annual report and financial statements - NVM Private Equity Ltd.

2003Northern Venture Trust PLCAnnual Report and Accounts 30 September 2003

ContentsFinancial summary 1Chairman’s statement 2Directors 4Advisers 5Shareholder information 6Investment manager’s review 7Investment portfolio 10Fifteen largest venture capital investments 11Directors’ report 16Directors’ remuneration report 18Corporate governance 20Profit and loss account 22Statement of total recognised gains and losses 22Balance sheet 23Cash flow statement 24Notes to the financial statements 25Independent auditors’ report 34Unaudited statement of total return 35Notice of annual general meeting 36Proxy formNorthern Venture Trust is a Venture Capital Trust (VCT) managed byNorthern Venture Managers. The trust was one of the first VCTs launchedon the London Stock Exchange and has to date raised a total of £44 millionfrom private investors. It invests mainly in unquoted venture capitalsituations and aims to provide high long-term returns to shareholdersthrough a combination of dividend yield and capital growth.

Financial SummaryYear ended 30 September 2003 2002Net assets £34,000,000 £32,632,000Net asset value per share 85.7p 80.1pProfit on ordinary activities before tax £920,000 £150,000Earnings per share 2.3p 0.4pDividend per share 5.0p 2.0pCumulative returns to shareholders since launch:Dividends per share 32.0p 27.0pNet asset value plus dividends per share 117.7p 107.1pNet asset value per shareAs at 30 SeptemberDividend per shareYear ended 30 SeptemberCapitalRevenue90.1p131.8p91.0p80.1p85.7p2.4p8.0p3.5p2.0p5.0p1999200020012002200319992000200120022003PAGE 1 Northern Venture Trust PLC Annual Report and Accounts 2003

Chairman’s Statementincome, at £1,269,000, was 2.3% lower than in thepreceding year, but a 7.2% fall in revenue expensesmeant that the revenue surplus before tax was onlyslightly lower at £823,000.Professor Sir Frederick HollidayAfter two years during which our company’s resultswere heavily influenced by economic uncertaintyand falling stock markets, it is encouraging to beable to report on a year in which better progress hasbeen made and some capital growth achieved.Whilst the level of new investment was relativelylow by comparison with previous years, there hasbeen a welcome upturn in the number of saleopportunities: several profitable disposals haveenabled us not only to pay a capital dividend for thefirst time since 2001 but also to accumulate liquidresources for new investment in the future.The revenue element of earnings per share wasunchanged at 1.8p. While the revenue dividend forthe year is, at 1.7p, slightly lower than last year(2.0p), I am pleased to report that the directors areable to propose a capital dividend of 3.3p per shareout of profits made on investment sales, making atotal dividend for the year of 5.0p.Including the proposed final dividend, subscribers inthe original share issue eight years ago will havereceived cash dividends (including repayable taxcredits) of 32p per share. An investor claiming initialincome tax relief at 20% and capital gains taxdeferral at 40% will therefore have received fourfifths of his 40p net investment back by way of taxfreecash dividends. Since 1995 the company hasdistributed a total of over £10.6 million toshareholders.Net asset valueThe net asset value per share at 30 September 2003,after providing for dividends totalling 5.0p pershare, was 85.7p. This is an increase of 7.0% fromthe corresponding figure of 80.1p a year ago. Thetable on page 19 shows the net asset value and shareprice total return to shareholders over the past fiveyears compared with the movement in the FTSE All-Share index: it will be seen that the net asset valuereturn in particular has tracked the index closely inrecent years.Earnings and dividendTotal earnings per share for the year amounted to2.3p, compared with 0.4p in the correspondingperiod. I should again remind shareholders thatreported earnings are liable to fluctuation becauserealised gains, net of previously unrealisedrevaluation adjustments, are included in the earningsfigures under the accounting rules which we follownow that our company is no longer an investmentcompany for Companies Act purposes. InvestmentInvestment portfolioThe Manager’s Review on pages 7 and 9 givesdetails of developments in the investment portfolioduring the year. Additions to venture capitalinvestments during the year amounted to£2.7 million and sale proceeds were £5.8 million, areversal of last year’s outcome where thecorresponding figures were £4.6 million and£2.8 million. As a result, and taking into accountthe reduction in the Chiswell Associates portfolioreferred to later in this report, the cash flowstatement for the year shows a net cash inflow of£5.2 million. We are particularly pleased by thesuccess of SML Technologies, which has become amarket leader in electronic vessel tracking andoffshore rig safety systems and is a fine example ofthe kind of business which VCTs were created toinvest in. Our holding in the company, thought to bethe first investment ever made by a VCT, was sold toUltra Electronics in July 2003 for £1.3 million andproduced a compound return of 20% per annumover eight years.PAGE 2 Northern Venture Trust PLC Annual Report and Accounts 2003

Chairman’s StatementAt 30 September 2003 the venture capital portfoliocomprised 55 holdings with an aggregate value of£27.2 million. The investments cover a wide rangeof industry sectors and stages of maturity and yourboard believes that there are a number of excellentprospects for future growth and profitable exit indue course.We have continued to draw funds down from thelisted fixed-interest and equity holdings managed byChiswell Associates, the total value of whichdecreased from £6.2 million to £3.8 million over thecourse of the year. Realised and unrealised gains inthis portfolio during the year totalled £497,000.VCT qualifying statusYour board and managers monitor closely thecompany’s continuing observance of the InlandRevenue’s VCT rules and the board receives annualcompliance reports from PricewaterhouseCoopersLLP, who were appointed as tax advisors to thecompany in 2002. We are satisfied that the companycontinues to meet the relevant requirements.Shareholder issuesDuring the year the company bought back andcancelled just over one million ordinary shares,equivalent to 2.6% of the issued share capital at thestart of the year. The secondary market for VCTshares generally continues to suffer from thintrading, and we will continue to re-purchase sharesas appropriate.Northern Venture ManagersIn September 2003 Edinburgh Fund ManagersGroup, the parent company of Northern VentureManagers, announced an agreed takeover byAberdeen Asset Management which hassubsequently been declared unconditional. NVMcontinues to operate as a discrete business unitunder the new group ownership and your board iscommitted to ensuring that there is no adversechange to the management of our company.Future prospectsNorthern Venture Trust has now been in operationfor eight years, during which time the company hasinvested almost £50 million in small and mediumsizedcompanies in the UK – many of which mightotherwise have been unable to raise the long-termfinance necessary to implement their business plans.Whilst building the portfolio, we have been able toachieve a return for our shareholders – before takingany account of the generous VCT tax reliefs andincentives – broadly in line with the return on a fundtracking the FTSE All-Share index. The challengefacing the company now is to build on thisfoundation and begin to out-perform the index asthe portfolio continues to mature. I believe we arewell placed to meet this challenge.Professor Sir Frederick HollidayChairmanYour directors are mindful that in two years’ time,at the 2005 annual general meeting, there will be anopportunity for shareholders to vote on the futurecontinuation of the company. While we keep thismatter under regular review, we consider it is rightto indicate to shareholders at this stage that wepresently expect to recommend continuation for afurther five years. Venture capital investment is along-term business and it takes time to realise thefull potential of unquoted investments. Manyshareholders have benefited from capital gains taxdeferral and continuation of the company willenable this position to be preserved.PAGE 3 Northern Venture Trust PLC Annual Report and Accounts 2003

DirectorsProfessor Sir FrederickHolliday CBE FRSE (Chairman),aged 68, is chairman ofNorthumbrian Water GroupPLC and Brewin DolphinHoldings PLC and a nonexecutivedirector of Northern2 VCT PLC. He is a marinescientist and was vicechancellorof the University ofDurham from 1980 to 1990.Michael Denny MSI,aged 60, is the chairman ofNorthern Venture ManagersLimited and was previouslyNorth-East region director ofthe National Enterprise Board.He is a non-executive directorof Northern InvestorsCompany PLC, Northern 2 VCTPLC, Deep-Sea Leisure PLC andPostern Fund ManagementLimited and is a past chairmanof the British Venture CapitalAssociation.John Hustler FCA MSI, aged57, was for ten years acorporate finance partner atKPMG, where he was head ofventure capital; he formedHustler Venture PartnersLimited, a specialist adviser tosmall firms, in 1993. He ischairman of Northern 3 VCTPLC and a non-executivedirector of ATA Group plc andof a number of othercompanies.Tim Levett MBA, aged 54, isthe investment director ofNorthern Venture ManagersLimited. He is a non-executivedirector of Northern 3 VCT PLCand of several unquotedcompanies.Ross Peters MA, aged 60, wasa director of MurrayJohnstone Limited for fifteenyears and chief executive andfounder of their venturecapital activities. He formedStevenson Stewart, an advisorto technology basedcompanies, in 1992. He is anon-executive director of anumber of other public andprivate companies.Primrose Scott CA, aged 63,was formerly head of qualityreview at the Institute ofChartered Accountants ofScotland (ICAS) and seniorpartner of The McCabePartnership, and is a pastpresident of ICAS. She is vicechairman of the DunfermlineBuilding Society.PAGE 4 Northern Venture Trust PLC Annual Report and Accounts 2003

AdvisersSecretary and Registered OfficeChristopher Mellor FCA MSINorthumberland HousePrincess SquareNewcastle upon Tyne NE1 8ERTelephone: 0191 244 6000Fax: 0191 244 6001E-mail: nvt@nvm.co.ukRegistered Number3090163Investment ManagerNorthern Venture Managers LimitedNorthumberland HousePrincess SquareNewcastle upon Tyne NE1 8ERQuoted Investment AdvisersChiswell Associates Limited4 Chiswell StreetFinsbury SquareLondon EC1Y 4UPIndependent AuditorsKPMG Audit PlcSaltire Court20 Castle TerraceEdinburgh EH1 2EGSolicitorsDickinson DeesSt Ann’s Wharf112 QuaysideNewcastle upon Tyne NE99 1SBS J Berwin222 Gray’s Inn RoadLondon WC1X 8XFStockbrokersBrewin Dolphin Securities LtdCommercial Union House39 Pilgrim StreetNewcastle upon Tyne NE1 6RQBankersBank of ScotlandHead OfficeThe MoundEdinburgh EH1 1YZRegistrarsLloyds TSB Registrars ScotlandPO Box 28448Finance HouseOrchard BraeEdinburgh EH4 1WQShareholder helpline: 0870 601 5366Taxation AdvisersPricewaterhouseCoopers LLP1 Embankment PlaceLondon WC2N 6RHPAGE 5 Northern Venture Trust PLC Annual Report and Accounts 2003

Investment Manager’s ReviewInvestment activityDuring the year to 30 September 2003 NorthernVenture Trust completed six new venture capitalinvestments at a total cost of £1.5 million. Tenexisting investments received follow-on fundingtotalling £1.2 million.The new investments completed during the year were:RBF Industries (£250,000) – manufacturer ofhealthcare products and flexible heat shields,Southend-on-SeaCrabtree of Gateshead (£350,000) –manufacturer of metal printing machinery,GatesheadComputer Software Group (£331,000) –computer software for ticketing and accountingapplications, LondonSurvey Inspection Systems (£153,000) – providerof ground and airborne surveying services,Stockton-on-TeesGSM-Central (£92,000) – provision of mobiletelephone call routing services, OxfordJohn Laing Partnership (£350,000) –management buy-out of the social housingdivision of John Laing plc, ElstreeInvestment activity was at a relatively low levelcompared with previous years. For most of the yearthe company’s liquid resources were limited, and inany case the venture capital market was relativelyquiet during the first six months of 2003. Morerecently there has been an improvement in the flow ofnew investment opportunities, as well as an increasein available liquidity resulting from investmentrealisations in both the venture capital and the listedfixed-interest portfolios. This should lead to asatisfactory number of investment completions in thefirst half of the new financial year.Portfolio reviewThe venture capital investment portfolio at30 September 2003 comprised 55 holdings with anaggregate value of £27.2 million. A listing of theholdings in the portfolio is given on page 10, withinformation on the fifteen largest investments onpages 11 to 15. The charts at the foot of pages 8 and9 give an analysis of the portfolio by age, industrysector, financing stage and whether listed or unlisted.After two years in which the portfolio was adverselyaffected by the fall in the stock markets, the year toSeptember 2003 saw overall growth in our quotedventure capital investments. The best performer wasAlizyme, which announced positive trial results fromtwo of its drug development projects; the company’sshare price rose from 28 1 / 2 p to 140p over the courseof the year and we were able to realise some profits,receiving proceeds of £1.1 million against a bookcost of £474,000. Since 30 September Alizyme’sshare price has made further progress and we havecontinued to take profits. There were also strongshare price advances for XKO Group (up 133%over the year), ComputerLand UK (up 125%) andATA Group (up 55%). However BioFocus fell by33% over the year on disappointing trading results,with some of its customers in the biotech andpharmaceutical sectors cutting or delaying projectexpenditure.The unquoted portfolio is becoming more matureand there was an increase in the number of exitopportunities during the year. SML Technologies(Northern Venture Trust’s first ever investment) wassold to Ultra Electronics, with proceeds of£1.3 million and a gain over original cost of£712,000. The investment in T&D Packaging wassold for £1.0 million and a gain of £105,000, withfurther proceeds expected in the future, and the saleof SECO Aluminium gave rise to proceeds ofPAGE 7 Northern Venture Trust PLC Annual Report and Accounts 2003

Investment Manager’s Review£233,000 and a gain of £158,000. ChorusApplication Software was acquired in a share-forsharedeal by the AiM-listed Computer SoftwareGroup, whose share price subsequently more thandoubled. Two investee companies, Box Carton andCLM Building Services, went into receivership andwere written off at a total cost of £825,000.As a result of the profitable disposals during theyear, the company is able to declare a tax-freecapital dividend of 3.3p per share.Chiswell Associates portfolioAt the beginning of the year the portfolio of listedinvestments managed by Chiswell Associates wasvalued at £6.2 million, of which £2.5 million wasallocated to fixed-interest holdings (governmentstocks and corporate bonds) and £3.7 million toequities. In July 2003 the board of NorthernVenture Trust instructed Chiswell to liquidate thefixed-interest portfolio and to commence a gradualreduction in the equity portfolio so as to releaseadditional funds for investing in VCT-qualifyingholdings. At 30 September the remaining equityholdings were valued at £3.8 million.Valuation policyUnlisted investments are valued in accordance withthe accounting policy set out on page 25, whichcomplies with the revised guidelines for thevaluation of venture capital investments recentlypublished by the British Venture CapitalAssociation. Where an investee company issignificantly under-performing, its value is writtendown by between 25% and 100% as soon aspossible. Investments are not normally revaluedupwards within 12 months of acquisition, andrevaluations resulting from earnings performance areprudently based on historic figures rather than onprospective results.As at 30 September 2003 the number of venturecapital investments falling into each valuationcategory was as follows:Number ofCategoryinvestmentsListed investments at market value:London Stock Exchange 2AiM 7Unlisted investments:at cost 20at cost less provision 17at valuation based on historic earnings 9Total 55VCT qualifying statusThe company’s ongoing compliance with the InlandRevenue’s conditions for VCT approval is closelymonitored by NVM and the board, andPricewaterhouseCoopers LLP have been retained toreport regularly to the board on VCT status. Themain continuing requirement is that not less than70% of the value of the company’s investmentsshould comprise qualifying holdings. The board issatisfied that the company has continued to meet therelevant qualifying conditions and has maintainedits VCT status.Age of investmentIndustry sector5+ years26.9%Up to 1 year4.4%Other0.9%Healthcare/biotechnology17.7%Computer/electronics22.6%3-5 years31.6%1-3 years37.1%Services14.4%Industrial/manufacturing23.4%Construction18.2%Consumer2.8%PAGE 8 Northern Venture Trust PLC Annual Report and Accounts 2003

Investment Manager’s ReviewOutlookThe recent upturn in the financial markets iswelcome, but we have yet to see whether it issustainable. Although the UK economy isperforming well, the current level of consumerspending and borrowing seems overdone and maybe reined in by higher interest rates before long.This suggests that smaller UK companies willcontinue to face challenging conditions. Howeverbusiness confidence seems to be resilient and weexpect to see further progress from the portfolioover the next year.Alastair ConnManaging Director,Northern Venture Managers LimitedFinancing stageListing analysisLondon Stock Exchange7.3%MBO/MBI61.8%Early25.7%Expansion12.5%AiM10.6%Unlisted82.1%PAGE 9 Northern Venture Trust PLC Annual Report and Accounts 2003

Investment Portfolioas at 30 September 2003% ofCost Valuation net assets£000 £000 by valueFifteen largest investments (see pages 11 to 15)TFB Group 1,000 2,132 6.3CGI International 226 1,969 5.8T J Brent 1,000 1,917 5.6John Fredericks Plastics 995 1,835 5.4Alizyme* 460 1,792 5.3DMN Installations 286 1,098 3.2Weldex (International) Offshore 200 857 2.5ComputerLand UK** 535 817 2.4Remsdaq 789 789 2.3C & D Industrial Services 100 775 2.3Alaric Systems 1,523 761 2.2Tolwood 1,000 750 2.2Interlube Systems 946 710 2.1Cyclacel 683 683 2.0Computer Software Group** 331 649 1.910,074 17,534 51.5Other venture capital investmentsBioFocus** 191 634 1.9DxS 835 627 1.8CQC 602 602 1.8BBI Holdings 516 516 1.5Keith Prowse 500 500 1.5West’s Engineering Design 495 495 1.5ATA Group** 435 476 1.4Union Snack 121 449 1.3Cedalion 400 400 1.2Stainton Metal Company 250 392 1.2Intec Holdings 387 387 1.1Aiza 386 386 1.1WM Engineering 743 371 1.1Crabtree of Gateshead 350 350 1.0John Laing Partnership 350 350 1.0Vectura 345 345 1.0Prospect & Peachgate Group 667 334 1.0Barony Universal Products 315 315 0.9RBF Industries 250 250 0.8Others (valuation less than £250,000) 7,179 1,513 4.5Total venture capital investments 25,391 27,226 80.1Other listed investments 4,783 3,750 11.0Total fixed asset investments 30,174 30,976 91.1Net current assets 3,024 8.9Net assets 34,000 100.0* Listed on London Stock Exchange** Traded on Alternative Investment MarketPAGE 10 Northern Venture Trust PLC Annual Report and Accounts 2003

Fifteen Largest Venture Capital InvestmentsTFB GROUP LIMITEDCost £1,000,000Valuation £2,132,000Basis of valuation Earnings multiple (based on draftunaudited financial statements for yearended 30 September 2003)Equity held 20.8%Business/location Development of software forprofessional practice administration,FarehamHistoryManagement buy-out from privateownership, May 1999, led by NVMOther NVM funds Northern Investors Company,investingNorthern 2 VCTDividends in year NilAudited financial information:Year ended 30 September 2002 2001£m £mSales 7.0 5.4Profit/(loss) before tax 0.1 (1.1)Retained profit/(loss) — (0.9)Net liabilities (0.2) (0.2)CGI INTERNATIONAL LIMITEDCost £226,000Valuation £1,969,000Basis of valuationEquity held 17.2%Business/locationHistoryEarnings multipleManufacture of fire-resistant and safetyglass, WarringtonManagement buy-out from Colebrand ofLondon, February 1999, led by DunedinCapitalAudited financial information:Year ended 31 December 2002 2001£m £mSales 8.7 7.6Profit before tax 2.1 1.8Retained profit 1.4 1.2Net assets 5.5 5.3Other NVM fundsinvestingNorthern Investors CompanyDividends in year £101,000T J BRENT LIMITEDCost £1,000,000Valuation £1,917,000Basis of valuationEquity held 8.5%Business/locationHistoryEarnings multipleSub-contract civil engineering services toutility companies, BodminManagement buy-out from PennonGroup, December 2000, led by NVMAudited financial information:Year ended 31 March 2003 2002£m £mSales 73.9 63.8Profit before tax 1.4 0.8Retained profit 0.8 0.3Net assets 1.6 1.1Other NVM fundsinvestingNorthern Investors Company,Northern 2 VCT, Northern AIM VCTDividends in year £16,000PAGE 11 Northern Venture Trust PLC Annual Report and Accounts 2003

Fifteen Largest Venture Capital InvestmentsJOHN FREDERICKS PLASTICS LIMITEDCost £995,000Valuation £1,835,000Basis of valuationEquity held 11.9%Business/locationHistoryEarnings multipleManufacture of uPVC windows, doorsand conservatories, HuddersfieldManagement buy-in from privateownership, October 2001, led by NVMAudited financial information:Period ended 31 October 2002*£mSales 22.5Profit before tax 2.1Retained profit 1.3Net assets 3.6*17 months ended 31 OctoberOther NVM fundsinvestingNorthern Investors Company,Northern 2 VCTDividends in year £14,000ALIZYME PLCCost £460,000Valuation £1,792,000Basis of valuationEquity held 0.9%Business/locationMid-market price(London Stock Exchange)Biotechnology research anddevelopment, CambridgeAudited financial information:Year ended 31 December 2002 2001£m £mSales — —Loss before tax (10.5) (7.8)Retained loss (9.8) (6.6)Net assets 4.4 14.1HistoryOther NVM fundsinvestingDividends in yearFloated on AiM in 1996; NorthernVenture Trust invested in a share placingin May 1998; moved to London StockExchange in October 2000Northern Investors Company,Northern 2 VCT, Northern 3 VCTNilDMN INSTALLATIONS LIMITEDCost £286,000Valuation £1,098,000Basis of valuationEquity held 3.4%Business/locationHistoryEarnings multipleInfrastructure installation for mobiletelephone operators, ShrivenhamManagement buy-out from privateownership, September 2001, led by NVMAudited financial information:Year ended 31 December 2002 2001*£m £mSales 19.4 3.2Profit before tax 3.9 0.6Retained profit 2.5 0.4Net assets 2.0 1.0*4 months ended 31 DecemberOther NVM fundsinvestingNorthern Investors Company,Northern 2 VCT, Northern AIM VCTDividends in year £20,000PAGE 12 Northern Venture Trust PLC Annual Report and Accounts 2003

Fifteen Largest Venture Capital InvestmentsWELDEX (INTERNATIONAL) OFFSHORE LIMITEDCost £200,000Valuation £857,000Basis of valuationEquity held 15.0%Business/locationHistoryEarnings multipleCrawler crane hire company, InvernessDevelopment capital investment in May1996Audited financial information:Year ended 30 November 2002 2001£m £mSales 11.7 12.8Profit before tax 0.7 1.4Retained profit 0.4 1.0Net assets 4.2 4.1Other NVM fundsinvestingNorthern Investors CompanyDividends in year £21,000COMPUTERLAND UK PLCCost £535,000Valuation £817,000Basis of valuation Mid-market price (AiM)Equity held 4.5%Business/location Provision of information technologyservices, NottinghamHistoryThe company floated on AiM inSeptember 1997Other NVM funds —investingDividends in year £15,000Audited financial information:Year ended 30 April 2003 2002£m £mSales 54.8 37.6Profit before tax 1.5 0.6Retained profit 1.0 0.5Net assets 3.3 2.6REMSDAQ LIMITEDCost £789,000Valuation £789,000Basis of valuation CostEquity held 27.5%Business/location Manufacture of electronic securitysystems and remote monitoringequipment, DeesideAudited financial information:Year ended 31 May 2003 2002£m £mSales 8.7 7.5Profit/(loss) before tax 0.3 (0.8)Retained profit/(loss) 0.3 (0.6)Net assets 1.9 1.7HistoryManagement buy-out in from DaqElectronics, March 1998, led by NVMOther NVM funds Northern Investors CompanyinvestingDividends in year £32,000PAGE 13 Northern Venture Trust PLC Annual Report and Accounts 2003

Fifteen Largest Venture Capital InvestmentsC & D INDUSTRIAL SERVICES LIMITEDCost £100,000Valuation £775,000Basis of valuation Earnings multipleEquity held 20.0%Business/location Provider of specialist industrial services,Jarrow/MansfieldHistoryManagement buy-out from privateownership, March 1996, led by NVMOther NVM funds Northern Investors CompanyinvestingDividends in year £13,000Audited financial information:Year ended 31 March 2002 2001£m £mSales 17.2 16.7Profit before tax 0.2 0.3Retained profit 0.1 0.1Net assets 1.3 1.4ALARIC SYSTEMS LIMITEDCost £1,523,000Valuation £761,000Basis of valuationEquity held 13.5%Business/locationHistoryCost less provisionDeveloper of electronic paymentprotection software, LondonDevelopment capital financing inNovember 2000, led by NVMAudited financial information:Year ended 31 March 2002 2001£m £mSales 1.9 1.6Loss before tax (2.1) (0.6)Retained loss (2.2) (0.6)Net assets 1.6 1.6Other NVM fundsinvestingDividends in yearNorthern Investors Company,Northern 2 VCTNilTOLWOOD LIMITEDCost £1,000,000Valuation £750,000Basis of valuationEquity held 16.0%Business/locationHistoryCost less provisionManufacture of pressed steel componentsfor automotive industry, Newton AycliffeManagement buy-in/buy-out from privateownership, December 1999, led by NVMAudited financial information:Year ended 31 July 2002 2001*£m £mSales 9.6 11.3Profit/(loss) before tax 0.2 (0.1)Retained profit/(loss) 0.1 (0.1)Net assets 0.7 0.6*15 months ended 31 JulyOther NVM fundsinvestingDividends in yearNorthern Investors Company,Northern 2 VCTNilPAGE 14 Northern Venture Trust PLC Annual Report and Accounts 2003

Fifteen Largest Venture Capital InvestmentsINTERLUBE SYSTEMS LIMITEDCost £946,000Valuation £710,000Basis of valuation Cost less provisionEquity held 17.6%Business/location Centralised lubrication systems forautomotive and industrial use, PlymouthHistoryManagement buy-in/buy-out fromInvensys plc, August 2000, led by NVMOther NVM funds Northern Investors Company,investingNorthern 2 VCTDividends in year NilAudited financial information:Year ended 31 March 2003 2002£m £mSales 4.8 4.2Loss before tax (0.3) (0.5)Retained loss (0.3) (0.5)Net liabilities (1.1) (0.8)CYCLACEL LIMITEDCost £683,000Valuation £683,000Basis of valuationCostEquity held 1.1%Business/locationHistoryDiscovery and development oftherapeutics for cancer, DundeeEarly stage investment in May 1999, ledby Merlin BiosciencesAudited financial information:Year ended 31 March 2002 2001£m £mSales 0.8 —Loss before tax (8.9) (6.9)Retained loss (8.9) (6.9)Net assets/(liabilities) 22.3 (1.8)Other NVM fundsinvestingDividends in yearNorthern Investors CompanyNilCOMPUTER SOFTWARE GROUP PLCCost £331,000Valuation £649,000Basis of valuationEquity held 5.1%Business/locationHistoryMid-market price (AiM)Computer software for ticketing andaccounting applications, LondonHolding acquired through share-for-shareoffer for Chorus Application SoftwareLimited, May 2003Audited financial information:Year ended 28 February 2003 2002£m £mSales 3.6 3.0Loss before tax (1.4) (1.6)Retained loss (1.4) (1.6)Net assets 2.5 3.6Other NVM fundsinvestingDividends in yearNorthern Investors Company,Northern 2 VCTNilPAGE 15 Northern Venture Trust PLC Annual Report and Accounts 2003

Directors’ ReportThe directors present their report and the auditedfinancial statements for the year ended30 September 2003.Activities and statusThe principal activity of the company during theyear was the making of long-term equity and loaninvestments, mainly in unlisted companies. Thecompany has been listed on the London StockExchange since November 1995 and has beenapproved as a venture capital trust by the InlandRevenue. The Chairman’s Statement on pages 2 and3 includes a review of developments during the yearand of future prospects.The directors have managed the affairs of thecompany with the intention of maintaining its statusas an approved venture capital trust for the purposesof Section 842AA of the Income and CorporationTaxes Act 1988. The directors consider that thecompany was not at any time up to the date of thisreport a close company within the meaning ofSection 414 of the Act.The company was an investment company asdefined in Section 266 of the Companies Act 1985until 3 November 2000 when investment companystatus was revoked so as to permit the payment of adividend out of capital profits.The directors are required by the Articles ofAssociation to convene an extraordinary generalmeeting immediately after the tenth annual generalmeeting of the company, and, if applicable, inevery fifth year thereafter, to consider and voteon a special resolution that the company be woundup voluntarily.Results and dividendProfit on ordinary activitiesafter taxation £920,000Appropriated as follows:Interim dividend paid - 0.7p per share 281,000Final dividend proposed - 4.3p per share 1,706,000Transferred from reserves (1,067,000)£920,000DirectorsThe directors of the company during the year andtheir interests in the issued ordinary shares of 25p ofthe company were as follows:30 September 1 October2003 2002Sir Frederick Holliday (Chairman) 10,000 10,000E M P Denny 50,000 50,000J R Hustler 50,000 50,000T R Levett 54,000 54,000R S Peters 10,000 —P S Scott 10,000 10,000All of the directors’ share interests shown abovewere held beneficially. There have been no changesin the directors’ share interests between30 September 2003 and the date of this report.Mr E M P Denny and Mr T R Levett may becomeentitled to be granted options to subscribe forshares under the Subscription Rights Agreementreferred to in Note 16 to the financial statements.Brief biographical notes on the directors are givenon page 4. Mr J R Hustler and Mr R S Peters retirefrom the board by rotation in accordance with thearticles of association and offer themselves for reelection.None of the directors has a contract of service withthe company and, except as mentioned below underthe heading “Management”, no contract subsistedduring or at the end of the year in which anydirector was materially interested and which wassignificant in relation to the company’s business.Directors’ and officers’ liability insuranceThe company has, as permitted by Section 310(3) ofthe Companies Act 1985, maintained insurancecover on behalf of the directors and secretaryindemnifying them against certain liabilities whichmay be incurred by them in relation to the company.PAGE 16 Northern Venture Trust PLC Annual Report and Accounts 2003

Directors’ ReportCreditor payment policyThe company’s payment policy for the forthcomingfinancial year is to agree terms of payment beforebusiness is transacted and to settle accounts inaccordance with those terms. There were no amountsowing to trade creditors at 30 September 2003.ManagementNorthern Venture Managers Limited (NVM) hasacted as investment adviser and manager to thecompany since October 1995. The principal termsof the company’s management agreement withNVM are set out in Note 4 to the financialstatements. Mr E M P Denny and Mr T R Levett areexecutive directors of NVM and shareholders in itsultimate parent company, Aberdeen AssetManagement PLC.Fixed assetsMovements in fixed asset investments during theyear are set out in Note 10 to the financialstatements.Annual general meetingResolutions will be proposed as special business atthe annual general meeting to:renew the authority of the directors, in certainlimited circumstances, to allot equity shares forcash otherwise than pro rata to existingshareholders, andrenew the authority of the directors to makemarket purchases of the company’s shares forcancellation.It is the intention of the directors to seek to renewthese authorities at each subsequent annual generalmeeting.Independent auditorsKPMG Audit Plc are willing to continue in officeand resolutions to re-appoint them and to authorisethe directors to fix their remuneration will beproposed at the annual general meeting.Purchase and cancellation of own sharesDuring the year the company purchased forcancellation 1,045,887 of its own shares with anominal value of £261,472, representingapproximately 2.64% of the called-up share capitalof the company, for a consideration of £580,000.By order of the BoardC D MellorSecretary 12 November 2003Substantial shareholdingsSo far as the directors are aware, there were noindividual shareholdings representing 3% or more ofthe company’s issued share capital at the date of thisreport.Employees of NVM (including Mr E M P Dennyand Mr T R Levett) held a total of 398,339 shares,representing 1.0% of the company’s issued sharecapital, at the date of this report.PAGE 17 Northern Venture Trust PLC Annual Report and Accounts 2003

Directors’ Remuneration ReportThis report has been prepared by the directors inaccordance with the requirements of Schedule 7Ato the Companies Act 1985, which applies to thecompany for the first time this year. A resolution toapprove the report will be proposed at the annualgeneral meeting.The company’s independent auditors, KPMG AuditPlc, are required to give their opinion on certaininformation included in this report, as indicatedbelow. Their report on these and other matters isset out on page 34.Board of directorsThe board currently comprises six directors, all ofwhom are non-executive. The board has establisheda Nomination Committee, comprising all thedirectors, which considers the selection andappointment of directors and makesrecommendations to the board as to the level ofdirectors’ fees. The board has not retained externaladvisors in relation to remuneration matters but hasaccess to information about directors’ fees paid byother companies of a similar size and type.30 September 2004. The articles of association placean overall limit (currently £100,000 per annum) ondirectors’ remuneration.Directors’ fees (audited information)The following fees were paid to individual directorsin respect of the years ended 30 September 2003 and2002:Year ended Year ended30 September 30 September2003 2002£ £Sir Frederick Holliday (Chairman) 17,000 17,000E M P Denny 14,000 14,000J R Hustler 14,000 14,000T R Levett — —R S Peters 14,000 14,000P S Scott 14,000 14,000Mr T R Levett waived his entitlement to directors’fees in respect of both years.Remuneration policyThe board considers that directors’ fees shouldreflect the time commitment required and the highlevel of responsibility borne by directors, and shouldbe broadly comparable to those paid by similarcompanies. It is not considered appropriate thatdirectors’ remuneration should be performancerelated,and none of the directors is eligible forbonuses, pension benefits, share options, long-termincentive schemes or other benefits in respect of theirservices as non-executive directors of the company.Mr E M P Denny and Mr T R Levett may becomeentitled to be granted share options under the termsof an incentive scheme established for the benefit ofcertain executives of Northern Venture Managers, asdescribed in Note 16 to the financial statements.Terms of appointmentThe articles of association provide that directorsshall retire and be subject to re-election at the firstannual general meeting after their appointment andat least every three years thereafter. None of thedirectors has a service contract with the company.On being appointed or re-elected, directors receive aletter from the company setting out the terms oftheir appointment and their specific duties andresponsibilities. A director’s appointment may beterminated on three months’ notice being given bythe company and in certain other circumstances.Directors’ fees were reviewed by the NominationCommittee during its meeting in September 2003,when it was recommended that fees should beincreased to £18,000 per annum for the chairmanand £15,000 for other directors for the year endingPAGE 18 Northern Venture Trust PLC Annual Report and Accounts 2003

Directors’ Remuneration ReportCompany performanceThe graph below compares the total return(assuming all dividends are re-invested) to ordinaryshareholders in the company over the five yearsended 30 September 2003 with the total return froma notional investment in the FTSE All-Share indexover the same period. This index is considered to bethe most appropriate broad equity market index forcomparative purposes.By order of the BoardC D MellorSecretary 12 November 2003Return to shareholders in Northern Venture Trust PLCFive years to September 2003 (September 1998 = 100)1601501401301201101009080Sept 1998 Sept 1999 Sept 2000 Sept 2001 Sept 2002 Sept 2003Northern Venture Trust NAV total returnNorthern Venture Trust share price total returnFTSE All-Share index total returnPAGE 19 Northern Venture Trust PLC Annual Report and Accounts 2003

Corporate GovernanceThe company is committed to maintaining highstandards in corporate governance. The directorsconsider that the company has throughout the yearunder review complied in all material respects withthe provisions set out in Section 1 of the CombinedCode on Corporate Governance published by theUK Listing Authority in June 1998.Board of directorsThe company has a board of six non-executivedirectors, the majority of whom are considered to beindependent of the company’s investment manager.The board has six scheduled meetings per year, andmeets on other occasions as required, to receive andconsider recommendations from the manager, andtakes all decisions concerning the acquisition ordisposal of investments. A brief biographicalsummary of each director is given on page 4.The board has appointed three standing committeesto make recommendations to the board in specificareas:Audit CommitteeMr J R Hustler (Chairman)Mr R S PetersMiss P S Scott– deals with matters relating to audit, financialreporting and internal control systems. Thecommittee meets three times per year and has directaccess to KPMG Audit Plc, the company’sindependent auditors.Nomination CommitteeMiss P S Scott (Chairman)Mr E M P DennyProfessor Sir Frederick HollidayMr J R HustlerMr T R LevettMr R S Peters– considers the selection and appointment ofdirectors and makes recommendations to the boardas to the level of directors’ fees. The board does nothave a separate Remuneration Committee, as thecompany has no employees or executive directors.Detailed information relating to the remuneration ofdirectors is given in the directors’ remunerationreport on page 18.Management Engagement CommitteeProfessor Sir Frederick Holliday (Chairman)Mr J R HustlerMr R S PetersMiss P S Scott– undertakes a periodic review of the terms of themanagement agreement with Northern VentureManagers (NVM).All of the directors have access to the advice andservices of Mr C D Mellor, the company secretary,who has administrative responsibility for themeetings of the board and its committees. Directorsmay also take independent professional advice at thecompany’s expense where necessary in theperformance of their duties. As all of the directorsare non-executive, it is not considered appropriate toidentify a member of the board as the senior nonexecutivedirector of the company.The company’s Articles of Association require thatone third of the directors should retire by rotationeach year and seek re-election at the annual generalmeeting, and that directors appointed by the boardshould seek re-appointment at the next annualgeneral meeting. The board complies with therequirement of the Combined Code that all directorsare required to submit themselves for re-election atleast every three years. It is the board’s policy thatdirectors will retire from office at the conclusion ofthe next annual general meeting following theirattaining the age of 70 years.Investor relationsThe board recognises the value of maintainingregular communications with shareholders. Formalreports are sent to shareholders at the interim andyear-end stages, and an opportunity is given at theannual general meeting to question the board andthe investment manager. Proxy voting figures foreach resolution are announced at the annual generalmeeting.PAGE 20 Northern Venture Trust PLC Annual Report and Accounts 2003

Corporate GovernanceInternal controlThe directors have overall responsibility for keepingunder review the effectiveness of the company’ssystems of internal controls. The purpose of thesecontrols is to ensure that proper accounting recordsare maintained, the company’s assets aresafeguarded and the financial information usedwithin the business and for publication is accurateand reliable; such a system can provide onlyreasonable and not absolute assurance againstmaterial misstatement or loss. The board regularlyreviews financial results and investment performancewith the directors of the investment manager.Responsibility for accounting, secretarial servicesand physical custody of documents of title relatingto investments has been contractually delegated toNVM under the management agreement. NVM hasestablished its own system of internal controls inrelation to these matters, details of which have beenreviewed by the Audit Committee.The directors confirm that by means of theprocedures set out above, and in accordance with“Internal Controls: Guidance for Directors on theCombined Code”, published by the Institute ofChartered Accountants in England and Wales, theyhave established a continuing process for identifying,evaluating and managing the significant potentialrisks faced by the company and have reviewed theeffectiveness of the internal control systems. Thisprocess has been in place throughout andsubsequent to the accounting period under review.Risk managementThe company aims to provide long-term returns toshareholders through a combination of income yieldand capital growth. In order to achieve this objectivethe company invests its funds primarily in unlistedequity holdings, which by their nature may entail ahigher degree of risk than investments in large listedcompanies. The directors aim to limit the riskattaching to the portfolio as a whole by carefulselection of investments and by maintaining a widespread of investments in terms of financing stage,industry sector and geographical location.Management of the company’s liquid funds iscarried out by external managers, in accordancewith policy guidelines laid down and regularlyreviewed by the directors. The company has littleexposure to foreign currency risk.The company has not entered into any derivativetransactions and does not expect to do so in theforeseeable future.Directors’ responsibilitiesThe directors are required by law to preparefinancial statements which give a true and fair viewboth of the financial position of the company at theend of the financial year and of the results for thatyear. The financial statements must comply withapplicable Accounting Standards and with theprescribed statutory formats and disclosures.The directors confirm that the financial statementsfor the year ended 30 September 2003 comply withthe requirements set out above and that suitableaccounting policies, consistently applied andsupported by reasonable and prudent judgement,have been used in their preparation.The directors are also responsible for ensuring thatproper accounting records are maintained and fortaking such steps as are reasonably open to them toensure that the assets of the company aresafeguarded and that fraud and other irregularitiesare prevented.Going concernAfter making enquiries, the directors believe that itis appropriate to continue to apply the goingconcern basis in preparing the financial statements.PAGE 21 Northern Venture Trust PLC Annual Report and Accounts 2003

Profit and Loss Accountfor the year ended 30 September 2003Year ended 30 September 2003 Year ended 30 September 2002Revenue Capital Total Revenue Capital TotalNotes £000 £000 £000 £000 £000 £000Losses on realisation of investments — (1,460) (1,460) — (1,928) (1,928)Revaluation losses previously recognised — 2,113 2,113 — 1,902 1,902Profit/(loss) recognised in the year onrealisation of investments 12 — 653 653 — (26) (26)Income 3 1,269 — 1,269 1,299 — 1,299Investment management fee 4 (185) (556) (741) (223) (670) (893)Other expenses 5 (214) — (214) (207) — (207)Profit/(loss) on ordinary activities before interest and tax 870 97 967 869 (696) 173Interest payable 6 (47) — (47) (23) — (23)Profit/(loss) on ordinary activities before tax 823 97 920 846 (696) 150Tax on profit/(loss) on ordinary activities 7 (118) 118 — (126) 126 —Profit/(loss) on ordinary activities after tax 705 215 920 720 (570) 150Dividends 8 (678) (1,309) (1,987) (817) — (817)Retained profit/(loss) for the year 27 (1,094) (1,067) (97) (570) (667)Earnings/(loss) per share 9 1.8p 0.5p 2.3p 1.8p (1.4)p 0.4pDividend per share 8 1.7p 3.3p 5.0p 2.0p — 2.0pThe accompanying notes are an integral part of this statementAll items in the above statement derive from continuing operationsStatement of Total Recognised Gains and Lossesfor the year ended 30 September 2003Year ended 30 September 2003 Year ended 30 September 2002Revenue Capital Total Revenue Capital TotalNotes £000 £000 £000 £000 £000 £000Profit/(loss) on ordinary activities after tax 705 215 920 720 (570) 150Unrealised gains/(losses) on revaluation of investments 17 — 3,015 3,015 — (3,853) (3,853)Total recognised gains and losses during the year 705 3,230 3,935 720 (4,423) (3,703)PAGE 22 Northern Venture Trust PLC Annual Report and Accounts 2003

Balance Sheetas at 30 September 2003Notes 30 September 2003 30 September 2002£000 £000Fixed assetsInvestments 10 30,976 33,410Current assetsDebtors 14 313 436Cash at bank 4,500 2564,813 692Creditors (amounts falling due within one year) 15 (1,789) (1,470)Net current assets/(liabilities) 3,024 (778)Net assets 34,000 32,632Capital and reservesCalled-up equity share capital 16 9,922 10,183Share premium 17 14,286 14,286Capital redemption reserve 17 524 263Revaluation reserve 17 802 (4,326)Profit and loss account 17 8,466 12,226Total equity shareholders’ funds 19 34,000 32,632Net asset value per share 18 85.7p 80.1pThe financial statements on pages 22 to 33 were approved by the directors on 12 November 2003 and are signed ontheir behalf by:Professor Sir Frederick HollidayDirectorJ R HustlerDirectorPAGE 23 23 Northern Venture Trust PLC Annual Report and Accounts 2003

Cash Flow Statementfor the year ended 30 September 2003Year endedYear ended30 September 2003 30 September 2002£000 £000 £000 £000Cash flow statementNet cash inflow/(outflow) from operating activities 383 (82)TaxationCorporation tax recovered — 211Financial investmentPurchase of investments (3,063) (7,484)Sale/repayment of investments 9,165 4,499Net cash inflow/(outflow) from financial investment 6,102 (2,985)Equity dividends paid (688) (822)Net cash inflow/(outflow) before financing 5,797 (3,678)FinancingIssue of ordinary shares — 30Purchase of ordinary shares for cancellation (580) (368)Net cash outflow from financing (580) (338)Increase/(decrease) in cash at bank 5,217 (4,016)Reconciliation of profit before taxto net cash flow from operating activitiesProfit on ordinary activities before tax 920 150Decrease/(increase) in debtors 123 (217)Decrease in creditors (7) (41)(Profit)/loss recognised on realisation of investments (653) 26Net cash inflow/(outflow) from operating activities 383 (82)Reconciliation of movement in net funds1 October 2002 Cash flows 30 September 2003£000 £000 £000Cash at bank 256 4,244 4,500Bank overdraft (973) 973 —Net funds (717) 5,217 4,500PAGE 24 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 20031 Accounting policiesA summary of the principal accounting policies, all of which have been applied consistently throughout the yearand with the preceding year, is set out below.aBasis of accountingThe financial statements have been prepared under the historical cost convention, modified to include therevaluation of fixed asset investments, and in accordance with applicable accounting standards (see Note 2).bInvestmentsListed investments are stated at middle market prices, discounted where necessary to reflect lack of liquidity.Unlisted investments are stated at directors’ valuation. The directors’ policy in valuing unlisted investments is tocarry them at fair value. The determination of fair value is initially based on cost but will be modified in thefollowing circumstances:where a company’s under-performance against plan indicates an impairment in the value of the investment:provision against cost is made as appropriate. Normally this will be in bands of 25%.where a company is well-established and profitable: the shares may be valued by applying a suitable priceearningsratio to the company’s historic post-tax earnings. The ratio used is based on a comparable listedcompany or sector but discounted by 25-50% to reflect unmarketability.where a value is indicated by a material arm’s length transaction by a third party in the shares of a company.Unlisted investments will not normally be revalued upwards for a period of at least twelve months from the dateof acquisition.Realised profits and losses on investments and permanent diminutions in value are dealt with in the profit and lossaccount.Unrealised gains and losses on investments are dealt with in the revaluation reserve.cIncomeInvestment income includes income tax withheld at source. Dividend income is shown net of any related tax credit.Dividends receivable on listed equity shares are brought into account on the ex-dividend date. Dividendsreceivable on unlisted equity shares are brought into account when the company’s right to receive payment isestablished and there is no reasonable doubt that payment will be received. Fixed returns on non-equity sharesand debt securities are recognised on a time apportionment basis so as to reflect the effective yield, providedthere is no reasonable doubt that payment will be received in due course.dExpensesAll expenses are accounted for on an accruals basis. Expenses are charged wholly to the profit and loss accountwith the exception of expenses incidental to the acquisition or disposal of an investment, which are includedwithin the cost of the investment or deducted from the disposal proceeds as appropriate. Within the profit andloss account the investment management fee is allocated 25% to revenue and 75% to capital.eTaxationDeferred tax is recognised in respect of all timing differences which have originated but not yet reversed by thebalance sheet date.PAGE 25 25 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 20032 Presentation of financial statementsThe company is no longer an investment company as defined by Section 266 of the Companies Act 1985, asinvestment company status was revoked on 3 November 2000 in order to permit the distribution of capital profits.The financial statements therefore include a statutory profit and loss account and a statement of total recognisedgains and losses in accordance with Schedule 4 of the Companies Act 1985 and Financial Reporting Standard 3“Reporting Financial Performance”. These statements differ from the statement of total return usually presentedby investment trust companies in the following respects:gains and losses on disposal of investments and permanent diminutions in value are included in the profit andloss account.unrealised gains and losses on disposal are taken direct to the revaluation reserve and included in thestatement of total recognised gains and losses.all investment management fees, other expenses and taxation are charged to the profit and loss account.Year endedYear ended30 September 2003 30 September 20023 Income £000 £000Franked investment incomeListed companies 151 126Unlisted companies 249 275Interest receivableGovernment stocks and bonds 83 150Bank deposits 24 48Loans to unlisted companies 696 699Sundry income 66 11,269 1,299Year ended 30 September 2003 Year ended 30 September 2002Revenue Capital Revenue Capital4 Investment management fee £000 £000 £000 £000Investment management fee 158 473 190 570Irrecoverable VAT thereon 27 83 33 100185 556 223 670Northern Venture Managers Limited (NVM) provides investment management and secretarial services to thecompany under a management agreement which ran for an initial four year period with effect from1November 1995 and may be terminated by not less than twelve months’ notice given by either party at anytime after the third anniversary of the agreement.NVM receives a management fee, payable quarterly in advance, at the rate of 2% of gross assets less currentliabilities, calculated at half-yearly intervals as at 31 March and 30 September.NVM also provides administrative and secretarial services to the company for a fee of £41,000 per annum(linked to the movement in the RPI), which is included in other expenses (note 5).PAGE 26 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 2003Year endedYear ended30 September 2003 30 September 20025 Other expenses £000 £000Administrative and secretarial services 41 41Directors’ remuneration 73 73Auditors’ remuneration – audit services 9 9Legal and professional expenses 31 25Irrecoverable VAT 23 19Other expenses 37 40214 207Year ended 30 September 2003 Year ended 30 September 2002Revenue Capital Revenue Capital6 Interest payable £000 £000 £000 £000Interest payable 47 — 23 —Year ended 30 September 2003 Year ended 30 September 2002Revenue Capital Revenue Capital7 Tax on profit/(loss) on ordinary activities £000 £000 £000 £000(a) Analysis of charge for the yearCorporation tax payable/(recoverable) 118 (118) 126 (126)(b) Tax reconciliationProfit/(loss) on ordinary activities before tax 823 97 846 (696)Profit/(loss) on ordinary activities multipliedby the standard rate of UK corporation tax of30% (2002 30%) 247 29 254 (209)Effect of:UK dividends not subject to tax (120) — (120) —Capital returns not subject to tax — (196) — 8Increase in excess management charges — 40 — 67Other (9) 9 (8) 8Current tax charge/(credit) for the year 118 (118) 126 (126)Year ended 30 September 2003 Year ended 30 September 2002Revenue Capital Revenue Capital8 Dividends £000 £000 £000 £000Interim paid – 0.7p (2002 1.0p) per share 281 — 410 —Final proposed – 4.3p (2002 1.0p) per share 397 1,309 407 —678 1,309 817 —PAGE 27 27 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 20039 Earnings/(loss) per shareThe earnings/(loss) per share is based on the profit on ordinary activities after tax of £920,000 (2002 £150,000) andon 40,271,179 (2002 41,008,605) shares, being the weighted average number of shares in issue during the year.30 September 2003 30 September 200210 Fixed asset investments £000 £000Venture capital investments – unlisted 22,359 24,184– listed 4,867 2,981Other listed investments 3,750 6,24530,976 33,410Movements in investments during the year are summarised as follows:Venture capital Venture capital Other listed– unlisted – listed investments Total£000 £000 £000 £000Book cost at 1 October 2002 25,973 3,672 8,091 37,736Unrealised appreciation at 1 October 2002 (1,789) (691) (1,846) (4,326)Valuation at 1 October 2002 24,184 2,981 6,245 33,410Movements in the year:Purchases at cost 2,347 331 385 3,063Disposals – proceeds (4,527) (1,261) (3,377) (9,165)– net realised (losses)/gains (113) 676 90 653Increase in unrealised appreciation 468 2,140 407 3,015Valuation at 30 September 2003 22,359 4,867 3,750 30,976Comprising:Book cost at 30 September 2003 22,112 3,279 4,783 30,174Unrealised appreciation at 30 September 2003 247 1,588 (1,033) 80222,359 4,867 3,750 30,976At 30 September 2003 there were commitments totalling £562,000 (30 September 2002 £177,000) in respect ofinvestments approved by the board but not completed.11 Unlisted investmentsThe cost and carrying value of material investments in unlisted companies held at 30 September 2003 are shownbelow. For this purpose, any unlisted investment included in the table of the fifteen largest venture capitalinvestments on pages 11 to 15, or in the corresponding table in the previous year’s annual report, is regarded asmaterial.30 September 2003 30 September 2002Total cost Carrying value Total cost Carrying value£000 £000 £000 £000TFB Group LimitedOrdinary shares 167 1,299 167 167Loan stock 833 833 833 8331,000 2,132 1,000 1,000PAGE 28 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 200311 Unlisted investments continued30 September 2003 30 September 2002Total cost Carrying value Total cost Carrying value£000 £000 £000 £000CGI International LimitedOrdinary shares 103 1,846 103 1,582Redeemable preference shares 123 123 528 528226 1,969 631 2,110T J Brent LimitedOrdinary shares 138 1,055 138 687Loan stock 862 862 862 8621,000 1,917 1,000 1,549John Fredericks Plastics LimitedOrdinary shares 89 929 85 85Redeemable preference shares 340 340 340 340Loan stock 566 566 357 357995 1,835 782 782DMN Installations LimitedOrdinary shares 61 873 25 188Loan stock 225 225 225 225286 1,098 250 413Weldex (International) Offshore LimitedOrdinary shares 200 857 200 1,050Remsdaq LimitedOrdinary shares 236 236 236 236Redeemable preference shares 156 156 245 245Loan stock 397 397 397 397789 789 878 878C&D Industrial Services LimitedOrdinary shares 100 775 100 248Alaric Systems LimitedOrdinary shares 1,523 761 1,303 652Tolwood LimitedOrdinary shares 200 — 200 200Loan stock 800 750 800 8001,000 750 1,000 1,000Interlube Systems LimitedOrdinary shares 88 — 88 —Loan stock 858 710 871 719946 710 959 719Cyclacel LimitedOrdinary shares 683 683 683 904PAGE 29 29 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 200311 Unlisted investments continued30 September 2003 30 September 2002Total cost Carrying value Total cost Carrying value£000 £000 £000 £000DxS LimitedOrdinary shares 85 — 85 85Redeemable preference shares 315 192 315 315Loan stock 435 435 435 435835 627 835 835Prospect & Peachgate Group LimitedOrdinary shares 333 — 333 333Loan stock 334 334 334 334667 334 667 667T&D Packaging LimitedOrdinary shares — — 300 300Loan stock — — 600 600— — 900 900Chorus Application Software LimitedOrdinary shares — — 105 105Loan stock — — 630 630— — 735 735SML Technologies LimitedOrdinary shares — — 139 285Redeemable preference shares — — 75 75Loan stock — — 370 370— — 584 730Additional information relating to material investments in unlisted companies is given on pages 11 to 15.CarryingRealisedOriginal value prior Disposal gain/(loss) againstcost to disposal proceeds carrying value12 Investment disposals £000 £000 £000 £000Disposals of venture capital investments duringthe year were as follows:Alizyme plc* 474 377 1,091 714Box-Carton Limited 385 385 — (385)CGI International Limited* 405 405 405 —Chorus Application Software Limited 735 735 735 —CLM Building Services Limited 440 440 — (440)Highland Timber plc 600 600 600 —IndigoVision Group plc 249 209 172 (37)SECO Aluminium Limited 75 75 233 158SML Technologies Limited 584 730 1,296 566T&D Packaging Limited 900 900 1,005 105Other 2,061 369 251 (118)* part disposal6,908 5,225 5,788 563PAGE 30 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 200313 Significant interestsDetails of shareholdings in those companies where the company’s holding represents (1) more than 10% of theallotted equity share capital of any class, (2) more than 10% of the total allotted share capital or (3) more than 10% ofthe assets of the company itself, are given below. All of the companies named are incorporated in Great Britain.Class of shares (nominalProportion ofCompany value £1 unless stated) Number held class heldAiza Limited Ordinary (10p) 25,353 16.2%Alaric Systems Limited Ordinary (1p) 1,077,140 14.2%A ordinary (1p) 186,136 16.7%B ordinary (1p) 186,136 16.7%Preferred ordinary (1p) 270,488 16.7%Barony Universal Products plc Ordinary (10p) 205,800 20.6%C&D Industrial Services Limited Ordinary (10p) 500,000 20.0%Cedalion Ordinary (1p) 762,207 12.2%CGI International Limited A ordinary 103,333 17.2%Redeemable preference 123,016 18.2%Corsair Manufacturing Limited Ordinary (10p) 10,540 13.0%Redeemable preference 107,500 50.0%CQC Limited Ordinary (10p) 28,667 17.2%DxS Limited Ordinary (10p) 44,520 20.5%Redeemable preference 315,000 42.0%Intec Holdings Limited Ordinary (10p) 53,200 16.1%B ordinary (10p) 66,667 66.7%Interlube Systems Limited Ordinary 88,000 17.6%Iris Technology Limited Ordinary (10p) 81,000 14.1%John Fredericks Plastics Limited Ordinary 70,125 11.9%Redeemable preference 340,000 17.0%Prospect & Peachgate Group Limited Ordinary 166,667 17.5%Remsdaq Limited Ordinary (50p) 91,319 27.5%Redeemable preference 155,388 61.1%TFB Group Limited Ordinary (10p) 83,333 20.8%Tolwood Limited Ordinary 72,000 16.0%Union Snack Limited Ordinary (10p) 77,295 11.3%Weldex (International) Offshore Limited Ordinary 3,711 15.0%West's Engineering Design Limited Ordinary 29,700 13.2%PAGE 31 31 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 200330 September 2003 30 September 200214 Debtors £000 £000Corporation tax recoverable 7 7Prepayments and accrued income 306 429313 43630 September 2003 30 September 200215 Creditors (amounts falling due within one year) £000 £000Trade creditors and accruals 83 90Proposed dividend 1,706 407Bank overdraft — 9731,789 1,47030 September 2003 30 September 200216 Called-up equity share capital £000 £000Authorised:50,000,000 (2002 50,000,000) ordinary shares of 25p 12,500 12,500Allotted and fully paid:39,687,541 (2002 40,733,428) ordinary shares of 25p 9,922 10,1831,045,887 shares were repurchased for cancellation during the year, at an average cost of 55.5p per share.Under the terms of a Subscription Rights Agreement dated 5 October 1995, certain executives of NorthernVenture Managers Limited may become entitled to subscribe for new ordinary shares provided that a performancetarget is achieved, i.e. if the mid-market price of an ordinary share on 31 October in 2003 or a subsequent yearexceeds an amount equal to 100p less the cumulative gross amount of distributions and adjusted in line with themovement in the FTSE Actuaries All-Share index (total return) since 1 November 1995. The number of new shareswill be calculated according to a formula contained in the Agreement such that the benefit to the executives willbe equivalent to 10% of the total return to subscribers. The Agreement contains similar provisions in respect ofsubsequent share issues.Share Capital redemption Revaluation Profit and losspremium reserve reserve account17 Reserves £000 £000 £000 £000At 1 October 2002 14,286 263 (4,326) 12,226Shares purchased for cancellation — 261 — (580)Net increase in unrealised appreciation — — 3,015 —Previously recognised losses now realised — — 2,113 (2,113)Retained loss for the year — — — (1,067)At 30 September 2003 14,286 524 802 8,466PAGE 32 Northern Venture Trust PLC Annual Report and Accounts 2003

Notes to the Financial Statementsfor the year ended 30 September 200318 Net asset value per shareThe calculation of net asset value per share as at 30 September 2003 is based on net assets of £34,000,000(2002 £32,632,000) divided by the 39,687,541 (2002 40,733,428) ordinary shares in issue.Year endedYear ended30 September 2003 30 September 200219 Reconciliation of movements in equity shareholders’ funds £000 £000Profit on ordinary activities after tax 920 150Dividends (1,987) (817)Loss retained for the year (1,067) (667)Other recognised gains and losses 3,015 (3,853)Net proceeds of share issues — 30Shares purchased for cancellation (580) (368)Net increase/(decrease) in equity shareholders’ funds 1,368 (4,858)Equity shareholders’ funds at 1 October 2002 32,632 37,490Equity shareholders’ funds at 30 September 2003 34,000 32,632PAGE 33 33 Northern Venture Trust PLC Annual Report and Accounts 2003

Independent Auditors’ ReportTo the members of NORTHERN VENTURE TRUST PLCWe have audited the financial statements on pages22 to 33. We have also audited the information inthe directors’ remuneration report that is describedas having been audited.This report is made solely to the company'smembers, as a body, in accordance with Section 235of the Companies Act 1985. Our audit work hasbeen undertaken so that we might state to thecompany's members those matters we are requiredto state to them in an auditor’s report and for noother purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility toanyone other than the company and the company’smembers as a body, for our audit work, for thisreport, or for the opinions we have formed.Respective responsibilities of directors and auditorsThe directors are responsible for preparing theAnnual Report and the directors’ remunerationreport. As described on page 21, this includesresponsibility for preparing the financial statementsin accordance with applicable United Kingdom lawand accounting standards. Our responsibilities, asindependent auditors, are established in the UnitedKingdom by statute, the Auditing Practices Board,the Listing Rules of the Financial Services Authority,and by our profession’s ethical guidance.We report to you our opinion as to whether thefinancial statements give a true and fair view andwhether the financial statements and the part of thedirectors’ remuneration report to be audited havebeen properly prepared in accordance with theCompanies Act 1985. We also report to you if, inour opinion, the directors’ report is not consistentwith the financial statements, if the company hasnot kept proper accounting records, if we have notreceived all the information and explanations werequire for our audit, or if information specified bylaw regarding directors’ remuneration andtransactions with the company is not disclosed.We review whether the statement on page 21 reflectsthe company’s compliance with the seven provisionsof the Combined Code specified for our review bythe Listing Rules, and we report if it does not. Weare not required to consider whether the board'sstatements on internal control cover all risks andcontrols, or form an opinion on the effectiveness ofthe company’s corporate governance procedures orits risk and control procedures.We read the other information contained in theAnnual Report, including the corporate governancestatement and the unaudited part of the directors'remuneration report, and consider whether it isconsistent with the audited financial statements. Weconsider the implications for our report if webecome aware of any apparent misstatements ormaterial inconsistencies with the financialstatements.Basis of audit opinionWe conducted our audit in accordance with AuditingStandards issued by the Auditing Practices Board. Anaudit includes examination, on a test basis, ofevidence relevant to the amounts and disclosures inthe financial statements and the part of the directors’remuneration report to be audited. It also includesan assessment of the significant estimates andjudgements made by the directors in the preparationof the financial statements, and of whether theaccounting policies are appropriate to the company’scircumstances, consistently applied and adequatelydisclosed.We planned and performed our audit so as to obtainall the information and explanations which weconsidered necessary in order to provide us withsufficient evidence to give reasonable assurance thatthe financial statements and the part of the directors’remuneration report to be audited are free frommaterial misstatement, whether caused by fraud orother irregularity or error. In forming our opinionwe also evaluated the overall adequacy of thepresentation of information in the financialstatements and the part of the directors’remuneration report to be auditedOpinionIn our opinion:the financial statements give a true and fair viewof the state of affairs of the company as at30 September 2003 and of its profit for the yearthen ended; andthe financial statements and the part of thedirectors’ remuneration report to be audited havebeen properly prepared in accordance with theCompanies Act 1985.KPMG AUDIT PlcChartered AccountantsRegistered AuditorsEdinburgh 12 November 2003PAGE 34 Northern Venture Trust PLC Annual Report and Accounts 2003

Unaudited Statement of Total Returnfor the year ended 30 September 2003A pro forma Statement of Total Return in the form set out in the Statement of Recommended Practice “Financial statements ofinvestment trust companies” is shown below for the information of shareholders.Year ended 30 September 2003 Year ended 30 September 2002Revenue Capital Total Revenue Capital Total£000 £000 £000 £000 £000 £000Gains/(losses) on investments — 3,669 3,669 — (3,879) (3,879)Income 1,269 — 1,269 1,299 — 1,299Investment management fee (185) (556) (741) (223) (670) (893)Other expenses (214) — (214) (207) — (207)Return on ordinary activities before interest and tax 870 3,113 3,983 869 (4,549) (3,680)Interest payable (47) — (47) (23) — (23)Return on ordinary activities before tax 823 3,113 3,936 846 (4,549) (3,703)Tax on ordinary activities (118) 118 — (126) 126 —Return on ordinary activities after tax 705 3,231 3,936 720 (4,423) (3,703)Dividends (678) (1,309) (1,987) (817) — (817)Transfer to/(from) reserves 27 1,922 1,949 (97) (4,423) (4,520)Return per share 1.8p 8.0p 9.8p 1.8p (10.8)p (9.0)pDividend per share 1.7p 3.3p 5.0p 2.0p — 2.0pPAGE 35 Northern Venture Trust PLC Annual Report and Accounts 2003

Notice of Annual General MeetingNotice is hereby given that the eighth annualgeneral meeting of Northern Venture Trust PLC willbe held in the Trevor Bennett Room, St James’ Park,Newcastle upon Tyne at 11.30am on Friday12 December 2003 for the following purposes:As ordinary business1. To receive the financial statements for the yearended 30 September 2003 and the directors’ andindependent auditors’ reports thereon.2. To declare a final dividend of 4.3p per share inrespect of the year ended 30 September 2003.3. To approve the directors’ remuneration report inrespect of the year ended 30 September 2003.4. To re-elect as a director Mr J R Hustler whoretires by rotation in accordance with the Articlesof Association and offers himself for re-election.5 To re-elect as a director Mr R S Peters who retiresby rotation in accordance with the Articles ofAssociation and offers himself for re-election.6 To re-appoint KPMG Audit Plc as independentauditors of the company and to authorise thedirectors to fix their remuneration.7 To transact any other ordinary business of thecompany.As special businessTo consider and, if thought fit, to pass the followingresolution as an ordinary resolution:8. “That, in substitution for and to the exclusion ofany power previously conferred on the directorsin this regard, the directors be generally andunconditionally authorised for the purpose ofSection 80 of the Companies Act 1985 toexercise all the powers of the company to allotrelevant securities (within the meaning ofSection 80(2) of that Act) up to an aggregatenominal amount of £2,578,114 provided that:(a) except as provided in paragraph (b) below,this authority shall expire five years after thedate of this resolution, but may bepreviously revoked or varied by an ordinaryresolution of the company; and(b) the company may before such expiry make anoffer or agreement which would or mightrequire relevant securities to be allotted aftersuch expiry and the directors may allotrelevant securities in pursuance of such offer oragreement notwithstanding that the authorityconferred by this resolution has expired.”To consider and, if thought fit, to pass the followingresolution as a special resolution:9. “That, in substitution for and to the exclusion ofany power previously conferred upon the directorsin this regard, the directors be and they are herebyempowered to allot equity securities (as defined inSection 94(2) of the Companies Act 1985)pursuant to the authority conferred by Resolution8 above as if Section 89(1) of that Act did notapply to any such allotment provided that suchpower shall be limited:(a) to the allotment of equity securities inconnection with a rights issue or other offerof securities in favour of ordinaryshareholders where the equity securitiesrespectively attributable to the interests of allordinary shareholders are proportionate (asnearly as may be) to the respective numbersof ordinary shares held by them at a fixedrecord date (but subject to such exclusions orother arrangements as the directors maydeem necessary or expedient in relation tofractional entitlements or legal or practicalproblems under the laws of or therequirements of any recognised regulatorybody or any stock exchange in any territory);(b) to the allotment of equity securities pursuantto the exercise of options granted on or priorto the date hereof; and(c) to the allotment (otherwise than pursuant toparagraph (a) or (b) above) of equitysecurities up to an aggregate nominal valueof £992,188;and shall expire on the conclusion of the nextannual general meeting of the company after thepassing of this resolution or, if earlier, on theexpiry of 15 months from the passing of thisPAGE 36 Northern Venture Trust PLC Annual Report and Accounts 2003

Notice of Annual General Meetingresolution, save that the company may beforesuch expiry make an offer or agreement whichwould or might require equity securities to beallotted after such expiry and the directors mayallot equity securities in pursuance of such offeror agreement as if the power conferred herebyhad not expired.”To consider and, if thought fit, to pass the followingresolution as a special resolution:10. “That the company be and is hereby generallyand unconditionally authorised in accordancewith Section 166 of the Companies Act 1985 tomake one or more market purchases (within themeaning of Section 163(3) of that Act) on theLondon Stock Exchange Limited of ordinaryshares of 25p each in the capital of the companyprovided that:(a) the maximum number of ordinary shareshereby authorised to be purchased is3,968,754, representing 10% of thecompany’s issued ordinary share capital;(b) the minimum price which may be paid for anordinary share shall be 25p per share;(c) the maximum price which may be paid foran ordinary share shall be not more than thelower of (i) net asset value per share and(ii) 105% of the average of the middlemarket quotations for an ordinary share asderived from the Stock Exchange DailyOfficial List for the five business daysimmediately preceding the date on which theordinary shares are purchased; and(d) unless previously renewed, varied or revoked,the authority hereby conferred shall expire onthe conclusion of the next annual generalmeeting of the company or, if earlier, on theexpiry of 15 months from the passing of thisresolution, save that the company may beforesuch expiry enter into a contract to purchaseordinary shares which will or may becompleted wholly or partly after such expiry.”By order of the BoardC D MellorSecretary 12 November 2003Northumberland HousePrincess SquareNewcastle upon Tyne NE1 8ERNOTES1 A member entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attendand, on a poll, to vote in his stead. A proxy need not be a member of the company. The appointment of aproxy does not preclude a member from attending and voting in person at the meeting should hesubsequently decide to do so.2 To be valid, a form of proxy together with, if applicable, the power of attorney or other authority underwhich it is signed, or a certified copy thereof, must be received by Lloyds TSB Registrars at TheCauseway, Worthing BN99 6DA not later than 11.30am on Wednesday 10 December 2003.3 The company pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 specifies thatonly those shareholders registered in the register of members of the company as at 6.00pm on Thursday11 December 2003 shall be entitled to attend or vote (whether on a show of hands or on a poll) at themeeting in respect of the number of shares registered in their name at that time. Changes to entries on theregister after 6.00pm on Thursday 11 December 2003 shall be disregarded in determining the rights ofany person to attend or vote at the meeting.4 None of the directors has a contract of service with the company. The register of directors’ interests willbe available for inspection on the day of the above meeting, at the place of the meeting, from at least 15minutes prior to the meeting until its conclusion.PAGE 37 Northern Venture Trust PLC Annual Report and Accounts 2003