Annual Financial Report

RNS Number : 2524Z

Maven Income and Growth VCT 3 PLC

13 March 2012

 

Maven Income and Growth VCT 3 PLC

Annual Financial Report for the year ended 30 November 2011

The Directors announce the audited Annual Financial Report for the year ended 30 November 2011 as follows.

Chairman's Statement

Your board is pleased to report a successful year for the Company notwithstanding the continuing, challenging economic conditions affecting the UK and the global economy.  The private equity portfolio continues to develop as the Manager builds investment in attractively priced, later-stage companies with defensive characteristics and reliable earnings, which are well placed to withstand the difficult trading conditions likely to persist in the UK for some time to come.

Your Company's strategy is to build a broadly based portfolio focussed on income generation through the use of investment structures employing loan stock alongside equity finance. The growing income received from loan stock, alongside successful realisations, is central to your Company's ability to provide sustainable dividend income to shareholders.  The proposed final dividend, an increase over previous years, in tandem with growth in the underlying NAV, is indicative of the success of this strategy.

The exposure to AIM has been significantly reduced with further realisations achieved during the past year, to the point where the portfolio is now almost wholly invested in well-established private companies.

Highlights

·      Total Return of 107.5p (2010: 100.34p) per Ordinary share at the year end, up 7.16% over the year.

·      NAV at the year-end of 80.8p (2010: 77.9p) per Ordinary share after payment of interim dividend of 1.75p (2010: 1.5p).

·      Seven new later-stage, income-yielding investments added during the period.

·      Disposal of Walker Technical Resources, for a return of 3.0 x cost.

·      Final dividend proposed of 2.75p per Ordinary share (2010: 2.5p).

The Investment Portfolio

The uplift of 3.7% in NAV during the twelve month period compares with reductions of 9.2% and 18.3% respectively in the FTSE SmallCap Index and the FTSE AIM All-share Index. There are 43 unquoted investments in the portfolio, after6 realisations completed during the year releasing capital of £2.8 million. The most notable sale was of Walker Technical Resources, sold for nearly three times the original investment made only 25 months previously.

During the year seven substantial new transactions were completed, along with eight follow-on investments to support the development of existing portfolio companies. A further investment was completed after the year end.

The private equity portfolio is generally performing well, with most companies trading acceptably or, in some cases, ahead of plan. In the last year the Manager has seen significant acquisition interest in a number of portfolio companies and is currently working on the potential sale of several holdings.

The Manager has also continued the realisation of the AIM portfolio during the year as opportunities have arisen. The process is nearing completion and AIM securities now represent only 2.8% of the asset base (2010: 4.4%).

Your Company also continues to co-invest in each transaction with other Maven client funds, which allows the Manager to invest in a greater range and size of transactions on behalf of VCT clients than would otherwise be the case.

The most important measure of performance for a VCT is the total return, which is the long term record of dividend payments out of income and capital gains combined with the current NAV. The NAV in isolation is a less relevant measure of performance as the underlying investments are long-term in nature and not readily realisable.

Dividends

The Board is proposing a final dividend of 2.75p per Ordinary Share (pps) to be paid on 30 May 2012 to shareholders on the Register at 11 May 2012.

The Company paid an interim dividend of 1.75p (2010:1.5p) to Ordinary Shareholders on 25 August 2011. The proposed final dividend will bring the total dividend for the year to 4.5p (2010: 4.0p) which is equivalent to a gross yield of 7.5% from an equity investment to a higher rate taxpayer, or 8.8% to an Additional Rate taxpayer,  on an effective investment of 80.0p when the initial tax relief of 20% is taken into account. For former C Ordinary shareholders the equivalent yield is 11.9% based on 40% tax relief, or 13.9% for an Additional Rate taxpayer.

Since the Company's launch, Ordinary shareholders have received 26.70pps in tax free dividends. The effect of paying the proposed final dividend of 2.75pps will be to reduce the NAV to 78.05pps. The future level of dividends will depend on performance, and will be consistent with the Board's declared intention of paying not less than 4p per share each year subject to the maintenance of NAV at a suitable level.

Share Buy-back Policy

Shareholders have given the Board authority to buy back shares for cancellation when it is in the interests of the Company and the Shareholders as a whole to do so.  During the year, the discount of the share price to net asset value rose to 37.5% and the Board implemented a series of share buy-backs resulting in the purchase for cancellation of 321,000 shares. By 30 November 2011 the discount had narrowed to 18.6%.  Since then, the Company has been in a close period and no further share buy-backs have taken place. Fuller details of the parameters within which the Company may carry out share buy-backs is given in the Directors' Report on page 24.

Principal risks and uncertainties

The Board has reviewed the principal risks and uncertainties facing the Company, set out in the annual report, which are the risks involved in investment in small and unquoted companies.  In order to reduce the exposure to investment risk, the Company has invested in a broadly-based portfolio of investments in the United Kingdom.

The VCT qualifying status of the Company is reviewed regularly by your Board and monitored on a continuous basis by the Manager in order to ensure that all of the criteria for VCT qualifying status continue to be met. I am pleased to confirm that the results of all tests remain satisfactory.

Investment Strategy

The Manager's underlying investment strategy is to build a large and diversified portfolio of income producing, later stage private companies across a range of sectors and industries. The principal domicile of these companies will generally be in the UK, although some have an export dimension or overseas operations.

Shareholder value is created through a combination of generating revenue from loan stock holdings and capital proceeds arising from profitable realisations, normally via trade sales. To achieve this goal new transactions are typically structured with 70% to 90% in secured, yielding loan stock in companies where an equity stake can also be acquired at a reasonable entry price with the prospect of a capital profit when the business achieves greater scale and maturity.

As in previous years the revised Listing Rules require your Board to ensure that this and subsequent reports carry additional information on investment policy, in particular statements concerning asset mix, the spread of risk and maximum exposures. This information is contained in the Directors' Report and in the tabular analyses of the portfolio.

Valuation Process

Investments held by Maven Income and Growth VCT 3 in unquoted companies are valued in accordance with the International Private Equity And Venture Capital Valuation Guidelines.

Investments quoted or traded on a recognised stock exchange including AIM are valued at their bid prices.

 Recovery of VAT

The Board continues to pursue the recovery of VAT and interest on VAT paid on management fees paid in the years before October 2008. We expect that further sums will be recovered in due course.

Continuation as a VCT

The Board wishes to draw the attention of shareholders to the proposal to continue as a VCT which, in accordance with the Articles of Association, will be put to the AGM in May 2012. The Board believes that it is in the interests of shareholders that the Company maintains its VCT status because that will enable them to continue to:

·      receive tax-free dividends arising from the Company's revenue and capital gains

·      have access to unlisted assets which are not otherwise readily available to private investors

·      participate fully in the Company's long-term prospects.

The consequences of not passing the resolution to continue as a VCT could include one or more of the following:

·      the sale of the portfolio for less than full value

·      the proceeds available to shareholders being reduced by liquidation costs

·      loss of the tax-free status of  dividends paid by the Company

·      loss of initial tax relief on investments in the Company's shares made in the past five years.

The Board believes that the long-term continuation of the Company as a VCT is clearly in the best interests of the shareholders as a whole and recommends that they vote in favour of the resolution at the AGM. It is the Board's intention that this Resolution should be placed before the Shareholders every five years.

New VCT Offers and fund raising

In the period to April 2011, the Maven linked VCT offer resulted in the issue of 1,512,311 new shares, raising an additional £1,206,824 for investment at a cost to the Company of only 5.5% of total funds raised.

Your Board recently announced its intention to offer a further opportunity to acquire New Ordinary Shares in the Company through a top-up Offer aiming to raise £1.25 million before expenses, which is within the maximum permitted under the prospectus rules and avoids the higher costs associated with publishing a full prospectus.  The Company will not be issuing more than 10% of its issued share capital, which is 1,493,428 New Ordinary Shares and is within existing shareholder authorities.  The New Ordinary Shares will be issued at 83.7p which represents the latest NAV per share at the date of publication of the Offers Document plus 5.5% to cover the cost of the Offer so that existing shareholders do not suffer any dilution.

The Company made its Offer in parallel with Maven Income and Growth VCT, Maven Income and Growth VCT 2, and Maven Income and Growth VCT 4, each of which is aiming to raise £1.25 million,. Each investor's subscription will be split equally between the four Companies.

The Company may use the money raised under both the earlier top-up Offers and the latest Offer to pay dividends and general running costs, thereby preserving for investment purposes an equivalent sum of more valuable 'old money' which operates under more advantageous VCT regulations.  The proceeds of the Offer will provide additional liquidity for the Company to make further later-stage investments, and enable it to spread its costs over a larger asset base to the benefit of all Shareholders.

By 1 March 2012, the offer was fully subscribed and closed.

Outlook

Although growth prospects for the UK economy are uncertain, the ongoing scarcity of bank debt available to private companies provides continuing opportunities for well managed generalist VCTs to identify and invest in established, profitable businesses, and to use income derived from these assets to support a sustainable dividend programme.

In the current low interest rate environment, your Board and the Manager recognise that significant, regular payments of tax-free dividend income are highly attractive to many investors, and are a key driver for investing in VCTs.  The strategic focus of your Company will therefore be to continue to invest in a small number of new private companies each year with the potential to provide yield for shareholders through a combination of income generation and profitable realisations.

Investment Manager's Review

Overview

The prospects for the UK economy remain uncertain, with most indicators suggesting low economic growth is likely to persist for a number of years ahead. This view is further supported by the coalition Government's 2011 Autumn Statement which forecasts that the public sector borrowing requirement will increase over the next five years, and an extended period of spending restraint will be required in order to ensure that the UK maintains its current rating with the key credit agencies. This fiscal control and lower discretionary spend capacity is likely to impact on both consumer and investor confidence over the medium term.

Notwithstanding the challenges facing the UK economy, we are encouraged to note that the majority of private company assets in the portfolio are trading in line with expectations, and are creating value for our client investors through a combination of revenue generation and capital growth.

The fundamental strategy pursued by Maven is to use its national presence and local advisory relationships to generate a high level of new transaction introductions each year, and to invest selectively and conservatively in earnings reliable and well managed private companies on prudent entry multiples. This approach has ensured positive shareholder returns have been consistently achieved in recent years and will continue to be at the cornerstone of our investment approach.

We believe there are continuing positive medium term prospects for potential deal flow in our target private equity market, as well resourced generalist VCT managers continue to be introduced to high quality later-stage private companies seeking capital to expand. Maven has been introduced to over 400 private company transactions around the UK in the past 12 months, mainly by a network of long-established contacts across the corporate finance and business community.

Investment Activity

During the year the Maven team completed seven substantial new private equity investments on behalf for your Company, alongside eight follow-on investments in existing portfolio companies. At the year end, the portfolio stood at 61 unlisted and AIM investments at a total cost of £20.2 million. Since 30 November 2011, one new qualifying investment has been completed at a total cost of £0.6 million.

The following new investments have been completed during the period.

Investment	Date	Sector	Investment cost    £'000	Website
Unlisted
ATR Holdings Limited	Feb-11	Oil equipment services	41	www.atrgroup.co.uk
Attraction World Holdings Limited	Dec-10	Travel & leisure	446	www.attractionworld.com
Camwatch Limited	Aug-11	Technology hardware & equipment	241	www.camwatch.co.uk
CHS Engineering Services Limited	Dec-10	Electronic & electrical equipment	409	www.chsservices.com
Claven Holdings Limited	Feb-11	Financial services	81	No website available
Glacier Energy Services Group Limited	Mar-11	Oil equipment services	228	www.glacier.co.uk
Lawrence Recycling & Waste Management	Dec-10	Support services	50	www.lawrenceskiphire.co.uk
LCL Hose Limited	Sep-11	Manufacturer	358	www.dantec.ltd.uk
Lemac No. 1 Limited (trading as John McGavigan)	Dec-10	Automobiles & parts	468	www.mcgavigan.com
Llanllyr Water Company Limited	Mar-11	Beverages	56	www.llanllyrwater.com
Maven Co-invest Exodus LP	Jun-11	Telecommunications	631	No website available
Nessco Group Holdings Limited	Oct-11	Oil equipment services	144	www.nesscogroup.com
Space Student Living Limited	Jun-11	Support services	408	No website available
TC Communications Holdings Limited	May-11	Support services	129	www.tccommunications.co.uk
Torridon Capital Limited	Apr -11	Financial services	286	www.elite-insurance.co.uk
Total Unlisted investment			3,976
AIM
Brookwell Limited	Feb-11	Financial services	88	www.brookwelllimited.com
Marechale Capital PLC	Feb-11	Financial services	8	www.marechalecapital.com
Marwyn Management Partners	Jul-11	Speciality & other finance	84	www.marwyn.com
Total AIM investment			180
Total			4,156

Maven Income and Growth VCT 3 has co-invested in some or all of the above transactions with Maven Income and Growth VCT, Maven Income and Growth VCT 2, Maven Income and Growth VCT 4, Maven Income and Growth VCT 5, Talisman First Venture Capital Trust and Ortus VCT. The Company is expected to continue to co-invest with these as well as other Maven clients, which offers the advantage that, in aggregate, the Companies are able to underwrite a wider range and larger size of transaction than would be the case on a stand-alone basis.

Portfolio Developments

Seven substantial private company investments were added to the portfolio during the period under review:

·     Attraction World Holdings, which offers ticketing solutions to the worldwide travel sector, enjoys exclusive trading partnerships with key UK travel organisations and offers travel agents integrated access to the ticketing systems of major global theme parks

·     CHS Engineering Services, a leading provider of condition monitoring and maintenance services for domestic and international airport terminal operators and major clients in the distribution and materials handling sector

·     John McGavigan, a manufacturer and supplier of decorative assemblies and interior parts to global automotive manufacturers, with a significant share of the Western European market and a strategy to establish a low cost manufacturing operation in China, where it can leverage the overseas experience of its management team to serve the wider Asian markets

·     Glacier Energy Services, a profitable oil and gas service group with two specialist trading subsidiaries, Roberts Pipeline Machining and Wellclad. Roberts designs and manufactures on-site portable cutting machines for blue chip oil and gas clients. Wellclad provides services to the European offshore and sub-sea equipment market. Glacier is focused on growth within its core UK market as well as promoting its technologies to the international oil and gas market

·     Space Student Living, provides contracted property management services to the student housing sector. Space aims to achieve significant growth across its consultancy services operation and to acquire further long term management contracts 

·     Exodus: a new company trading as 6^o, which was established by Penta Capital to implement a buy-and-build strategy in the business telecommunications service sector based on the converging of mobile, fixed-line, broadband, internet and IT technology businesses. Penta is an established private equity firm with which Maven previously co-invested in the successful 2010 management buy-out of esure

·     LCL Hose: which trades as Dantec, is a specialist manufacturer of hand-built composite hoses for the global petrochemical industry. Composite hoses provide the vital flexible connection in many fluid transfer systems and are used worldwide in applications such as unloading road, rail and marine tankers within chemical and oil plants, and in Formula 1 racing. Dantec exports around 70% of its output and is engaged in a number of significant overseas projects.

After the year end a further investment was made in Moriond, a new company set up to acquire an established residential property portfolio at a significant discount to open market value. Maven will work on a joint venture basis with an experienced developer to break up the portfolio into single lots, carry out minor refurbishment, and then implement a structured sale of the individual assets over an 18 to 24 month period. The transaction will provide a 6.5% paid yield throughout the life of the investment, and is also forecast to generate a significant capital gain when all of the assets are sold at the end of the project.

In a number of cases the Manager is also currently engaged with investee companies and prospective acquirers at various stages of a potential exit process. This realisation activity reflects the increasing maturity of a number of holdings, but it should be noted that there can be no certainty that these discussions will ultimately lead to profitable sales.

There was one notable private company exit during the period. The investment in Dalglen 1150 (Walker Technical Resources) was realised in July. Total proceeds over the life of the investment were £1.4m representing an overall 3.0 x return on the initial investment cost. The exit was via a secondary buy-out, funded by Gresham Private Equity, just two years after Maven originally led the management buy-in in June 2009. Walker, which provides some of the most advanced composite repairs technology available for the global oil & gas industry, has consistently traded ahead of budget and has more than doubled earnings since the initial investment.

The table on page 13 gives details of realisations during the reporting period.

Realisations made during the year

	Date first invested	Complete/ partial exit	Cost of shares disposed of	Value at 30 November 2010	Sales proceeds	Realised gain/(loss)	Gain/(loss) over November 2010 value
			£'000	£'000	£'000	£'000	£'000
Unlisted
Ailsa Craig Capital Limited	2009	Complete	298	298	298	-	-
Attraction World Holdings Limited	2010	Partial	106	106	106	-	-
Cash Bases Limited	2004	Partial	194	-	200	6	200
CHS Engineering Services Limited	2010	Partial	21	21	21	-	-
Dalglen (1150) (trading as Walker Technical Resources)	2009	Complete	487	1,160	1,230	743	70
Driver Hire Investments Group	2004	Complete	107	102	103	(4)	1
Dunning Capital Limited	2009	Complete	249	249	249	-	-
Essential Viewing Systems	2001	Complete	219	198	284	65	86
Oliver Kay Holdings	2007	Partial	13	13	13	-	-
Shiskine Capital Limited	2009	Complete	249	249	249	-	-
Others			215	84	95	(120)	10
			2,158	2,480	2,848	690	368
AIM
Brookwell	2008	Partial	15	10	14	(1)	4
Individual Restaurant Company	2006	Complete	124	10	11	(113)	1
OPG Power Ventures	2008	Complete	78	106	113	35	7
Praesepe	2008	Complete	246	61	84	(162)	23
Software Radio Technology	2005	Partial	17	19	23	6	4
Others			-	-	3	3	3
			480	206	248	(232)	42
Total			2,638	2,686	3,096	458	410

One unlisted investment and two AIM companies were struck off the Register during the year resulting in a realised loss of £491,000 (cost £631,000). This had no effect on the NAV as a full provision had been made in earlier years.

In respect of AIM holdings, the Manager has continued its policy of structured exits from this part of the portfolio. Four AIM securities were purchased by a closed ended investment company established to acquire investments which were underperforming or trading below entry price. These transactions incurred realised losses of £316,000 (cost £404,000) during the period.

Outlook

Your Company's underlying investment portfolio has continued to benefit from significant diversification in recent years, with a specific emphasis on identifying and investing in later-stage private companies with income generating characteristics. There is increased competition among providers of alternative capital for access to attractive private equity transactions. However, with one of the most highly resourced and experienced management teams in the industry, Maven has access to a UK-wide network of introducers and is therefore well placed to continue to expand and diversify the investee company portfolio and grow shareholder value.

MAVEN INCOME & GROWTH VCT 3 PLC
INCOME STATEMENT
For the year ended 30 November 2011
		Year ended 30 November 2011			Year ended 30 November 2010
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	8	-	1,846	1,846	-	1,439	1,439
Income from investments	2	1,160	-	1,160	664	-	664
Other income	2	11	-	11	3	-	3
Investment management fees	3	(119)	(474)	(593)	(93)	(371)	(464)
Other expenses	4	(259)	-	(259)	(447)	-	(447)
Net return on ordinary activities		793	1,372	2,165	127	1,068	1,195
before taxation
Tax on ordinary activities	5	(108)	97	(11)	(25)	23	(2)
Return attributable to Equity Shareholders	7	685	1,469	2,154	102	1,091	1,193
Earnings per share (pence)	7	2.28	4.88	7.16	0.36	3.80	4.16

A Statement of Total Recognised Gains and Losses has not been prepared, as all gains and losses are recognised in the Income Statement.
All items in the above statement are derived from continuing operations.  The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.
The total column of this Statement is the Profit and Loss Account of the Company.
Reconciliation of Movements in Shareholders' Funds
For the year ended 30 November 2011
			Year ended 30 November 2011				Year ended 30 November 2010
Opening Shareholders' funds					22,647					21,244
Net return for year					2,154					1,193
Proceeds of share issue					1,148					1,787
Repurchase and cancellation of shares					(192)					(400)
Dividends paid - revenue		6			(306)					(441)
Dividends paid - capital		6			(994)					(736)
Closing Shareholders' funds					24,457					22,647

The accompanying Notes are an integral part of the Financial Statements

BALANCE SHEET
As at 30 November 2011
		30 November 2011	30 November 2010
	Notes	£'000	£'000
Fixed assets
Investments at fair value through profit or loss	8	20,961	18,283
Current assets
Debtors	10	615	1,846
Cash and overnight deposits		2,972	2,721
		3,587	4,567
Creditors: amounts falling due within one year	11	(91)	(203)
Net current assets		3,496	4,364
Net assets		24,457	22,647
Capital and reserves
Called up share capital	12	3,026	2,907
Share premium account	13	997	-
Capital reserve - realised	13	(2,855)	(1,135)
Capital reserve - unrealised	13	773	(1,422)
Distributable reserve	13	21,841	22,033
Capital redemption reserve	13	65	33
Revenue reserve	13	610	231
Net assets attributable to Ordinary Shareholders		24,457	22,647
Net asset value per ordinary share (pence)	14	80.8	77.9

The accompanying notes are an integral part of the financial statements.

The financial statements of Maven Income and Growth VCT 3 PLC, registered number 4283350, were approved by the Board of Directors and were signed on its behalf by:

Gregor Michie

Director

CASH FLOW STATEMENT

For the year ended 30 November 2011

Year ended 30 November 2011

Year ended 30 November 2010

Notes

£'000

£'000

£'000

£'000

Operating activities

Investment income received

974

622

Deposit interest received

11

3

Investment management fees paid

(732)

(132)

Secretarial fees paid

(115)

(65)

Directors expenses paid

(71)

(77)

Other cash payments

(95)

(127)

Net cash (outflow)/inflow from operating activities

15

(28)

224

Taxation

Corporation tax

(5)

(59)

Financial investment

Purchase of investments

(2,750)

(4,027)

Sale of investments

3,340

5,086

Net cash inflow from financial investment

590

1,059

Equity dividends paid

6

(1,300)

(1,177)

Net cash (outflow)/inflow before financing

(743)

47

Financing

Issue of Ordinary Shares

1,148

1,787

Repurchase of Ordinary Shares

(154)

(400)

Net cash inflow from financing

994

1,387

Increase in cash

16

251

1,434

Notes to the Financial Statements

For the year ended 30 November 2011

1 Accounting Policies - UK Generally Accepted Accounting Practice

(a) Basis of preparation

The Financial Statements have been prepared under the historical cost convention, modified to include the

revaluation of investments, and in accordance with the Statement of Recommended Practice

'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the SORP) issued in January 2009.

The disclosures on Going Concern on page 21 of the Directors' Report form part of these financial statements.

(b) Income

Dividends receivable on equity shares and unit trusts are treated as revenue for the period on an ex-dividend

basis.   Where no ex-dividend date is available dividends receivable on or before the year end are treated

as revenue for the period. Provision is made for any dividends not expected to be received.  The fixed returns

on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the

effective interest rate on the debt securities and shares.  Provision is made for any fixed income not expected to be

received.  Interest receivable from cash and short term deposits and interest payable are accrued to the end of

the year.

(c) Expenses

All expenses are accounted for on an accruals basis and charged to the income statement.  Expenses are

charged through the revenue account except as follows:

- expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and

- expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of

the value of the investments can be demonstrated.  In this respect the investment management fee has been

allocated 20% to revenue and 80% to realised capital reserves to reflect the Company's investment policy and

prospective income and capital growth.

(d) Taxation

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the

balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or

right to pay less tax in the future have occurred at the balance sheet date.  This is subject to deferred tax assets

only being recognised if it is considered more likely than not that there will be suitable profits from which the future

reversal of the underlying timing differences can be deducted.  Timing differences are differences arising between

the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in

one or more subsequent periods.

Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods

in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively

enacted at the balance sheet date.

The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and

revenue account on the same basis as the particular item to which it relates using the Company's effective rate

of tax for the period.

UK Corporation tax is provided at amounts expected to be paid/recovered using the tax rates and laws that have been

enacted or substantively enacted at the balance sheet date.

(e) Investments

In valuing unlisted investments the Directors follow the criteria set out below. These procedures comply with the

revised International Private Equity and Venture Capital Valuation Guidelines (IPEVCV) for the valuation of private equity

and venture capital investments. Investments are recognised at their trade date and are designated by the Directors as fair

value through profit and loss. At subsequent reporting dates, investments are valued at fair value, which represents the

Directors' view of the amount for which an asset could be exchanged between knowledgeable and willing parties in an

arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that

its current shareholders have an intention to sell their holding in the near future.

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled

or expires.

1. For Investments completed within the 12 months prior to the reporting date, fair value is determined using the

Price of Recent Investment Method, except that adjustments are made when there has been a material change in the

trading circumstances of the company or a substantial movement in the relevant sector of the stock market.

2. Whenever practical, recent investments will be valued by reference to a material arm's length transaction or a quoted.

price.

3. Mature companies are valued by applying a multiple to their fully taxed prospective earnings to

determine the enterprise value of the company.

3.1 To obtain a valuation of the total ordinary share capital held by management and

the institutional investors, the value of third party debt, institutional loan stock, debentures and

preference share capital is deducted from the enterprise value. The effect of any performance

related mechanisms is taken into account when determining the value of the ordinary share

capital.

3.2 Preference shares, debentures and loan stock are valued using the Price of Recent Investment Method.

When a redemption premium has accrued, this will only be valued if there is a reasonable prospect of it being

paid. Preference shares which carry a right to convert into ordinary share capital are valued at the higher of the

Price of Recent Investment Method basis and the price/earnings basis.

4. Where there is evidence of impairment, a provision may be taken against the previous valuation of the investment.

5. In the absence of evidence of a deterioration, or strong defensible evidence of an increase in value, the fair value

is determined to be that reported at the previous balance sheet date.

6. All unlisted investments are valued individually by Maven Capital Partners' Portfolio Management Team.

The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

7. In accordance with normal market practice, investments listed on the Alternative Investment Market or

a recognised stock exchange are valued at their bid market price.

(f) Fair Value Measurement

Fair value is defined as the price that the Company would receive upon selling an investment in a timely transaction

to an independent buyer in the principal or the most advantageous market of the investment.  A three-tier hierarchy

has been established to maximise the use of observable market data and minimise the use of unobservable inputs

and to establish classification of fair value measurements for disclosure purposes.  Inputs refer broadly to the

assumptions that market participants would use in pricing the asset or liability, including assumptions about risk,

for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing

model and/or the risk inherent in the inputs to the valuation technique.  Inputs may be observable or unobservable.

Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or

liability developed based on market data obtained from sources independent of the reporting entity.

Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions

market participants would use in pricing the asset or liability developed based on best information available in

the circumstances

The three-tier hierarchy of inputs is summarised in the three broad levels listed below.

-

Level 1 - quoted prices in active markets for identical investments ;

-

Level 2 - other significant observable inputs (included quoted prices for similar investments, interest rates, prepayment speeds, credit risk etc) ; and

-

Level 3 - significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments).

(g) Gains and losses on investments

When the Company sells or revalues its investments during the year, any gains or losses arising are credited/charged

to the Income Statement.

		Year ended 30 November 2011			Year ended 30 November 2010
				£'000			£'000
2	Income
	Income from investments:
	UK franked investment income			16			21
	UK unfranked investment income			1,080			643
	Income from unlisted participating interests			64			-
				1,160			664
	Other income:
	Deposit interest			11			3
	Total income			1,171			667

		Year ended 30 November 2011			Year ended 30 November 2010
		Revenue	Capital	Total	Revenue	Capital	Total
3	Investment management fees	£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fees at 2.5%	119	474	593	109	437	546
	VAT Reclaimed	-	-	-	(16)	(66)	(82)
		119	474	593	93	371	464
	Details of the fee basis are contained in the Director's Report on pages 21 and 22.

				Year ended 30 November 2011			Year ended 30 November 2010
		Revenue	Capital	Total	Revenue	Capital	Total
4	Other expenses	£'000	£'000	£'000	£'000	£'000	£'000
	Secretarial fees	93	-	93	87	-	87
	Directors' remuneration	71	-	71	71	-	71
	Fees to Auditor - audit services	16	-	16	15	-	15
	Fees to Auditor - tax services	4	-	4	3	-	3
	Bad debts written off	-	-	-	158	-	158
	Miscellaneous expenses	75	-	75	113	-	113
		259	-	259	447	-	447

		Year ended 30 November 2011			Year ended 30 November 2010
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
5	Tax on ordinary activities
	Corporation tax	(108)	97	(11)	(25)	23	(2)
	The tax assessed for the period is lower than the standard rate of corporation tax 26% (2010: 28%).  The differences are explained below:

		Year ended 30 November 2011			Year ended 30 November 2010
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Return on ordinary activities before tax	793	1,372	2,165	127	1,068	1,195
	Revenue return on ordinary activities multiplied by standard rate of corporation tax	212	365	577	36	299	335
	Non taxable UK dividend income	(4)	-	(4)	(6)	-	(6)
	Gains on investments	-	(480)	(480)	-	(403)	(403)
	Adjustment in respect of prior year	-	-	-	2	-	2
	Utilisation of taxable losses	(66)	-	(66)	-	-	-
	Smaller Companies relief	(34)	18	(16)	(7)	81	74
		108	(97)	11	25	(23)	2

Losses with a tax value of Nil (2010: £15,555) are available to carry forward against future trading profits.  These have not been

recognised as a deferred tax asset as recoverability is not sufficiently certain.

				Year ended 30 November 2011	Year ended 30 November 2010
6	Dividends			£'000	£'000
	Amounts recognised as distributions to Shareholders in the year:
	Revenue dividends
	Final revenue dividend for the year ended 30 November 2010 of Nil
	(2009: 0.5p)			-	147
	Interim revenue dividend for the year ended 30 November 2011 of 1.0p
	paid on 25 August 2011 (2010: 1.0p)			306	294
				306	441
	Capital dividends
	Final capital dividend for the year end 30 November 2010 of 2.5p
	paid on 26 May 2011 (2009: 2.0p)			765	589
	Interim capital dividend for the year end 30 November 2011 of 0.75p
	paid on 25 August 2011 (2010: 0.5p)			229	147
				994	736

6	Dividends (continued)
		Year ended 30 November 2011		Year ended 30 November 2010
			£'000	£'000
	Revenue dividends
	Revenue available for distribution by way of dividends for the year		685	102
	Final revenue dividend proposed for the year ended 30 November 2011
	of 1.0p (2010:Nil) payable on 30 May 2012		301	-
	Capital Dividends
	Final capital dividend proposed for the year ended 30 November 2011
	of 1.75p (2010:2.5p) payable on 30 May 2012		526	727

7	Return per ordinary share		Year ended 30 November 2011	Year ended 30 November 2010
	The returns per share have been based on the following figures:
	Weighted average number of Ordinary Shares		30,083,549	28,707,938
	Revenue return		£685,000	£102,000
	Capital return		£1,469,000	£1,091,000
	Total return		£2,154,000	£1,193,000

					Year ended 30 November 2011
						AIM/PLUS	Unlisted	Total
						(quoted prices)	(unobservable inputs)
8	Investments					£'000	£'000	£'000
	Valuation at 30 November 2010					995	17,288	18,283
	Unrealised (loss)/gain					(2,242)	820	(1,422)
	Cost at 30 November 2010					3,237	16,468	19,705
	Movements during the year:
	Purchases					180	3,976	4,156
	Sales proceeds					(476)	(2,848)	(3,324)
	Realised (loss)/gains					(789)	440	(349)
	Cost at 30 November 2011					2,152	18,036	20,188
	Unrealised (loss)/gain					(1,473)	2,246	773
	Valuation at 30 November 2011					679	20,282	20,961
	Realised losses on historical basis						(349)	(340)
	Net increase in value of investments						2,195	1,779
	Gains on investments						1,846	1,439
	Note 1(f) defines the three tier hierarchy of investments, and the significance of the information used to determine their fair value, that is required by Financial Reporting Standard 29 "Financial Instruments: Disclosures".

9	Participating Interests
	The principal activity of the Company is to select and hold a portfolio of investments in unlisted securities.  Although the Company will, in some cases, be represented on the board of the investee company, it will not take a controlling interest or become involved in the management.  The size and structure of the companies with unlisted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement.
	At 30 November 2011, the Company held shares amounting to 20% or more of the nominal value of the equity capital of the following undertakings:

							Aggregate	Profit/(loss)
		%	%	Total	Carrying	Latest	capital and	after tax
		of class	of equity	cost	value	accounts	reserves	for period
Investment		held	held	£'000	£'000	period end	£'000	£'000
Beckford Capital Limited
360,000 B ordinary shares		27.1	27.1	360	360	N/A	N/A	N/A
Blackford Capital Limited
145,794 B ordinary shares		46.3	46.3	630	630	N/A	N/A	N/A
Corinthian Foods Limited
75,716 B ordinary shares		41.0	41.0	630	630	N/A	N/A	N/A
Staffa Capital Limited
68,674 B ordinary shares		49.0	49.0	640	640	N/A	N/A	N/A
TC Communications Holdings Limited
48,606 B ordinary shares		27.8	24.7	719	645	31/12/2010	147	(276)
247,070 C ordinary shares		35.1
292 preference shares		29.2
423,684 institutional loan notes		29.2
105,887 Institutional loan notes		37.0
115,814 institutional loan notes		37.0

The results of the above companies have not been incorporated in the Income Statement except to the extent of any income received and receivable.

No audited accounts are available in respect of Beckford Capital Limited, Staffa Capital Limited, Corinthian Foods Limited and Blackford Capital Limited.
The company also holds shares or units amounting to 3% or more of the nominal value of the allotted shares or units of any class of certain investee companies.
Details of the equity percentages held are shown in the Investment Portfolio Summary.

				30 November	30 November
				2011	2010
10	Debtors			£'000	£'000
	Prepayments and accrued income			615	424
	Monies held pending investment			-	16
	Balance at Brokers			-	1,406
				615	1,846

		30 November 2011		30 November 2010
11	Creditors	£'000		£'000
	Current taxation	11		6
	Accruals	42		197
	Other creditors	38		-
		91		203

		30 November 2011			30 November 2010
		Ordinary Shares			Ordinary Shares
12	Share capital		Number	£'000	Number	£'000
	At 30 November the authorised share capital comprised:
	allotted, issued and fully paid
	Ordinary Shares of 10p each:
	Balance brought forward		29,074,396	2,907	27,460,383	2,746
	Ordinary shares issued during year		1,512,311	151	2,373,582	237
	Ordinary shares repurchased during the year		(321,000)	(32)	(759,569)	(76)
			30,265,707	3,026	29,074,396	2,907

During the year 321,000 Ordinary Shares (2010: 759,569) of 10p each were repurchased by the Company at a total cost of £192,116 (2010: £400,000) and cancelled.

During the year the Company issued 1,512,311 shares (2010: 2,373,582) pursuant to the linked offer at a subscription price of 79.8p per share (2010: 75.3p).

		Share	Capital	Capital		Capital
		premium	reserve	reserve	Distributable	redemption	Revenue
		account	realised	unrealised	reserve	reserve	reserve
13	Reserves	£'000	£'000	£'000	£'000	£000	£'000
	At 30 November 2010	-	(1,135)	(1,422)	22,033	33	231
	Losses on sales of investments	-	(349)	-	-	-	-
	Net increase in value of investments	-	-	2,195	-	-	-
	Investment management fees	-	(474)	-	-	-	-
	Dividends paid	-	(994)	-	-	-	(306)
	Tax effect of capital items	-	97	-	-	-	-
	Repurchase and cancellation of shares	-	-	-	(192)	32	-
	Share Issue - 2 February 2011	225	-	-	-	-	-
	Share Issue - 6 April 2011	618	-	-	-	-	-
	Share Issue - 5 May 2011	154	-	-	-	-	-
	Net return on ordinary activities after taxation	-	-	-	-	-	685
	At 30 November 2011	997	(2,855)	773	21,841	65	610

14	Net asset value per Ordinary Share		30 November 2011		30 November 2010
	The net asset value per ordinary shares and		Net asset	Net asset	Net asset	Net asset
	the net asset value attributable to the		value per	value	value per	value
	Ordinary shareholders at the year end		share	attributable	share	attributable
	calculated in accordance with the Articles of Association were as follows:		p	£'000	p	£'000
	Ordinary Shares		80.8	24,457	77.9	22,647

The number of shares used in the above calculation is set out in note 12.

			Year ended			Year ended
			30 November 2011			30 November 2010
15	Reconciliation of total return before finance costs			£'000		£'000
	and taxation to net cash (outflow)/inflow from operating activities
	Total return before taxation				2,165	1,195
	Gains on Investments				(1,846)	(1,439)
	(Increase)/decrease in accrued income				(186)	115
	(Increase)/decrease in prepayments				(5)	2
	Increase in other debtors				-	193
	(Decrease)/Increase in accruals				(156)	158
	Net cash (outflow)/inflow from operating activities				(28)	224

16	Analysis of changes in net funds
			At		At
			30 November	Cash	30 November
			2010	flows	2011
			£'000	£'000	£'000
	Cash and overnight deposits		2,721	251	2,972
			At		At
			30 November	Cash	30 November
			2009	flows	2010
			£'000	£'000	£'000
	Cash and overnight deposits		1,287	1,434	2,721

			At 30 November 2011		At 30 November 2010
17	Capital commitments, contingencies and financial guarantees			£'000		£'000
	Financial guarantees			708		718

These financial guarantees represent potential further investment in unlisted securities.

18	Derivatives and other financial instruments
	The Company's financial instruments comprise equity and fixed interest investments, cash balances, debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company holds financial assets in accordance with its investment policy of investing mainly in a portfolio of VCT-qualifying unquoted and AIM quoted securities. The Company may not enter into derivative transactions in the form of forward foreign currency contracts, futures and options without the written permission of the Directors.  No derivative transactions were entered into during the period.  The purpose of these financial instruments is efficient portfolio management.
	The main risks the Company faces from its financial instruments are (i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rates, (ii) interest rate risk, (iii) liquidity risk and (iv) credit rate risk.  In line with the Company's investment objective, the portfolio comprises only sterling currency securities and therefore has no exposure to foreign currency risk.
	The Manager's policies for managing these risks are summarised below and have been applied throughout the period.  The numerical disclosures below exclude short-term debtors and creditors.
	Market price risk
	The Company's investment portfolio is exposed to market fluctuations, which are monitored by the Manager in pursuance of the investment objective as set out on page 21. Adherence to investment guidelines and to investment and borrowing policies set out in the management agreement mitigates the risk of excessive exposure to any particular type of security or issuer.  These powers and guidelines include the requirement to invest in up to 50 companies across a range of industrial and service sectors at varying stages of development, to closely monitor the progress of these companies and to appoint a non executive director to the board of each company.  Further information on the investment portfolio is set out in the Investment Manager's Review on pages 10 to 13.
	Price risk sensitivity
	The following details the Company's sensitivity to a 10% increase and decrease in the market prices of AIM/PLUS quoted securities, with 10% being the Manager's assessment of a reasonably possible change in market prices.
	At 30 November 2011, if market prices of listed AIM/PLUS quoted securities had been 10% higher or lower with all other variables held constant, the increase or decrease in net assets attributable to Shareholders for the year would have been £68,000 (2010:£100,000), due to the change in valuation of financial assets at fair value through profit or loss.
	At 30 November 2011, 82.8% (2010: 93.8%) comprised investments in unquoted companies held at fair value.  The valuation methods used by the Company include cost and realisable value.  Therefore, it is not considered meaningful to provide a sensitivity analysis on the net asset position and total return for the year due to the fact any such movements would be immaterial to users of Financial Statements.
	Interest rate risk
	Some of the Company's financial assets are interest bearing, some of which are at fixed rates and some at variable.  As a result, the Company is subject to exposure to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates.
	The interest rate risk profile of financial assets at the balance sheet date was as follows:

At 30 November 2011	Fixed	Floating	Non interest
	interest	rate	bearing
Sterling	£'000	£'000	£'000
Listed fixed income	-	-	-
Unlisted and AIM/PLUS	12,332	-	8,629
Cash	-	2,972	-
	12,332	2,972	8,629
At 30 November 2010	Fixed	Floating	Non interest
	interest	rate	bearing
Sterling	£'000	£'000	£'000
Listed fixed income	-	-	-
Unlisted and AIM/PLUS	11,049	-	7,234
Cash	-	2,721	-
	11,049	2,721	7,234

The unlisted fixed interest assets have a weighted average life of 2.78 years (2010: 2.80 years) and weighted average interest rate of 10.57% (2010: 10.30%) per annum.  Floating rate assets are cash balances held in interest bearing accounts.  The interest rate received on the interest bearing cash balances was 0.5% (2009: nil). The non-interest bearing assets represent the equity element of the portfolio.  All assets and liabilities of the Company are included in the balance sheet at fair value.

Maturity profile
The interest rate profile of the Company's financial assets at the balance sheet date was as follows:

		Within	Within	Within	Within	Within	More than
		1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years	Total
At 30 November 2011		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Fixed interest
Listed		-	-	-	-	-	-	-
Unlisted		2,550	1,368	3,130	3,138	1,361	785	12,332
		2,550	1,368	3,130	3,138	1,361	785	12,332
		Within	Within	Within	Within	Within	More than
		1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years	Total
At 30 November 2010		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Fixed interest
Listed		-	-	-	-	-	-	-
Unlisted		1,684	2,162	616	3,968	2,566	53	11,049
		1,684	2,162	616	3,968	2,566	53	11,049

In the "More than 5 years" column the figure of £32,000 (2010: £53,000) is in respect of preference shares which have no redemption date.  It is the Directors' opinion that the carrying amounts of these financial assets represent the maximum credit risk exposure at the balance sheet date.

All liabilities are due within one year and, as such, no maturity profile has been provided.

Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.  The Company's financial instruments include unlisted and AIM/PLUS traded investments which are not traded in an organised public market and which generally may be illiquid.  As a result, the Company may not be able to liquidate quickly some of its investments at an amount close to their fair value in order to meet its liquidity requirements.  Note 1 (f) details the three-tier hierarchy of inputs used as at 30 November 2011 in valuing the Company's investments carried at fair value.

The Company's investment policy ensures that the Company has sufficient investment in cash and readily realisable securities to meet its ongoing obligations.  At 30 November 2011 these investments including cash were £2,972,000 (2010: £2,721,000).

The Company has the power to take out borrowings, which gives it access to additional funding when required.

Credit risk

This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.

The Company's financial assets exposed to credit risk amounted to the following :

				30 November 2011					30 November 2010
						£'000			£'000
Investments in fixed interest instruments						-			-
Investments in unlisted debt securities						12,332			11,049
Cash and cash equivalents						2,972			2,721
						15,304			13,770

All assets which are traded on a recognised exchange are held by JP Morgan, the company's custodian.  Cash balances are held by JPM, Royal Bank of Scotland and Clydesdale Bank.  Should the credit quality or the financial position of any of these institutions deteriorate significantly the Manager will move these assets to another financial institution.

There were no significant concentrations of credit risk to counterparties at 30 November 2011 or 30 November 2010.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report, Directors' Remuneration 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the net return of the Company for that period. In preparing these financial statements the Directors are required to:

·      select suitable accounting policies and then apply them consistently

·      make judgments and estimates that are reasonable and prudent

·      state whether applicable UK Accounting Standards have been followed, subject to any

material departures disclosed and explained in the financial statements

·      prepare the financial statements on the going concern basis unless it is inappropriate to

presume that the company will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the Annual Financial Report

We confirm that, to the best of our knowledge, the financial statements, prepared in accordance with the applicable set of accounting standards and set out on pages 34 to 51, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and the Directors' Report, set out on pages 20 to 28, includes a fair review of the developments and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that they face.

Other information

This announcement has been prepared on the same basis as the Annual Report and Financial Statements for the year ended 30 November 2011. The Annual Report and Financial Statements for the year ended 30 November 2011 will be filed with the Registrar of Companies and issued to Shareholders in due course.

The financial information contained within this announcement does not constitute the Company's statutory Financial Statements as defined in the Companies Act 2006. The statutory Financial Statements for the year ended 30 November 2010 have been delivered to the Registrar of Companies and contained an audit report which was unqualified.

Copies of this announcement and of the Annual Report and Financial Statements for the year ended 30 November 2011 will be available to the public at the office of Maven Capital Partners, 149 St Vincent Street, Glasgow; at the registered office of the Company, 9-13 St Andrew Street, London, and on the Company's website at www.mavencp.com/migvct3.

Neither the content of the Company's website nor the contents of any website accessible from hyperlinks on the company's website (or any other website) is incorporated into, or forms part of, this announcement.

By order of the Board

Maven Capital Partners UK LLP

Secretary

13 March 2012

ENDS

 

END

 

 

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