Annual Financial Report

RNS Number : 6444R

Maven Income and Growth VCT 3 PLC

01 March 2019

 

Maven Income and Growth VCT 3 PLC

Final results for the year ended 30 November 2018

The Directors report the Company's financial results for the year ended 30 November 2018

Highlights

•      NAV total return at the year end of 143.66p per share (2017: 143.57p)

•      NAV at year end of 61.49p per share (2017: 72.35p), after payment of dividends totalling 10.95p per share during the period

•      Annual dividend of 10.95p per share (2017: 14.52p)

•      Offer for Subscription fully subscribed and raised £20 million

•      Net assets increased to £42.41 million

•      Completion of 17 VCT qualifying new and follow-on investments

•      Four notable realisations achieved

Strategic Report

Chairman's Statement

Your Board is pleased to report on another year of positive performance with NAV total return increased to 143.66p per share and an annual dividend of 10.95p per share. During the period under review, your Company completed an Offer for Subscription which raised a total of £20 million of new capital for investment. The underlying investee company portfolio has seen further expansion during the year, with the addition of nine new private company assets operating across a broad range of sectors, alongside eight follow-on investments in existing portfolio companies. Several profitable realisations were also completed, which supported the payment of the annual dividend. Over the past two financial years, Shareholders have received 25.47p per share in enhanced dividends, arising from a build-up of distributable reserves following a number of profitable exits and the requirement to maintain ongoing compliance with the VCT regulations. While this level of distribution is unlikely to be sustained, your Board remains committed to making regular tax-free payments wherever possible, with the potential for further distributions when realisations are achieved.

Your Company continues to be focused on steadily growing Shareholder value and building a broadly based and diversified portfolio of investments, which will support that objective. Central to this was the success of the Offer for Subscription, which closed in early April 2018 at full capacity, including utilisation of the over-allotment facility, raising £20 million. With net assets at the period end in excess of £42 million, and good levels of liquidity, your Company is now well placed to continue to deploy these funds in a wide range of carefully selected VCT qualifying growth companies that offer the prospect of capital gain.

The Directors are encouraged by the level of investment activity that has been achieved during the year, particularly given the process for securing Advanced Assurance clearance from HM Revenue and Customs (HMRC), which has continued to cause delays to the completion of certain investments. Following enactment of the Finance Act 2015, which altered the investment parameters of VCT qualifying transactions, Maven has successfully adapted its deal origination strategy whilst concurrently expanding its investment team and nationwide presence to enable access to the widest possible pool of qualifying opportunities. Based on the pipeline of live transactions currently under review, your Board anticipates sustaining a healthy rate of investment in the new financial year, supplemented by follow-on commitments to support existing portfolio companies that are making identifiable commercial progress. It is also possible that your Company may make a number of investments in qualifying AIM quoted companies, for which the Manager has an established team with good knowledge of the market.

Details of the principal Key Performance Indicators (KPIs) can be found in the Business Report and a summary of the Alternative Performance Measures (APMs) can be found in the Financial Highlights in the Annual Report. The Investment Manager's Review in the Annual Report contains a detailed analysis of portfolio developments. It is pleasing to report that, despite the political and economic uncertainty that has continued to surround the UK's intended exit from the European Union (EU), the portfolio of investee companies has generally performed in line with expectations. The continuing positive performance achieved by a number of established private companies has enabled the valuations of these assets to be increased. The younger and earlier stage investee companies have generally made satisfactory progress, although it may take time for this to translate into meaningful uplifts in valuation. The Board and the Manager will maintain a conservative approach to valuing these assets, holding them at cost, or cost less provision, until there is clear evidence of measurable progress, or a specific event from which a new valuation level can be supported. Encouragingly, the oil & gas portfolio has witnessed a further steady improvement in trading performance, continuing the trend of the previous year. Elsewhere in the portfolio, there are a small number of investments that are operating behind plan or have experienced a market adjustment that has influenced performance and, as a result, the valuations of these assets have been reduced.

This has also been an active period for realisations, reflecting the maturing profile of a number of portfolio assets. As previously reported, in December 2017 the holdings in SPS, the UK's largest provider of promotional merchandise, and John McGavigan, a manufacturer and supplier of plastic components for the global automotive industry, were exited at premiums to carrying value delivering total returns of 2.5 times and 4.2 times cost respectively over the lives of these investments. In February 2018, the exit was completed from Endura, a designer and manufacturer of high performance cycling apparel and accessories, for a total return of 1.6 times cost over the holding period. In October 2018, the holding in Cursor Controls, a niche manufacturer of trackballs, track pads and keyboards for industrial applications, was exited at a premium to carrying value, generating a total return of 2.7 times cost over the three-year investment period. The Board is aware that discussions are underway regarding further potential exits from other portfolio companies, although there can be no certainty that these will result in realisations.

Dividends

As a result of the profitable exits noted above, and in order to ensure ongoing compliance with the VCT regulations, the Directors considered it necessary to distribute an enhanced level of interim dividends.

Accordingly, a first interim dividend in respect of the year ended 30 November 2018 of 5.70p per Ordinary Share was paid on 13 April 2018 to Shareholders on the register at close of business on 16 March 2018. A second interim dividend, of 5.25p per Ordinary Share, was paid on 22 June 2018 to Shareholders on the register at close of business on 25 May 2018. As no final dividend is proposed, total distributions for the year are 10.95p per Ordinary Share, representing a tax-free yield of 19.21% based on a year-end closing mid-market price of 57.00p. Since the Company's launch, and after receipt of the payments noted above, Shareholders have received 82.17p per share in tax-free dividends. It should be noted that the effect of paying dividends is to reduce the NAV of the Company by the total cost of the distribution.

Decisions on future distributions will take into consideration the availability of surplus revenue, the adequacy of reserves and the VCT qualifying levels of the portfolio, all of which are kept under close and regular review by the Board and the Manager. Decisions on future distributions will take into consideration the availability of surplus revenue, the adequacy of reserves and the VCT qualifying levels of the portfolio, all of which are kept under close and regular review by the Board and the Manager. To this end, the Directors are proposing that Special Resolutions are passed at the Annual General Meeting (AGM), seeking Shareholders' approval to cancel the share premium account and the capital redemption reserve of the Company, pursuant to the Companies Act 2006 and subject to sanction by the High Court, to create a further pool of distributable reserves that can be used for future distributions. As the portfolio continues to evolve, and a greater proportion of holdings are invested in younger and earlier stage companies, there may be fluctuations in the quantum and timing of future dividend payments, which could ultimately be more closely linked to realisation activity. The Board and the Manager will ensure that this is carefully monitored, in line with your Company's investment objective. As the portfolio continues to evolve, and a greater proportion of holdings are invested in younger and earlier stage companies, there may be fluctuations in the quantum and timing of future dividend payments, which could ultimately be more closely linked to realisation activity.  The Board and the Manager will ensure that this is carefully monitored, in line with your Company's investment objective.

Dividend Investment Scheme (DIS)

Your Company has in place a DIS through which Shareholders may elect to have their dividend payments used to apply for new Ordinary Shares issued by the Company under the standing authority requested from Shareholders at annual general meetings. Shares issued under the DIS should qualify for VCT tax reliefs applicable for the tax year in which they are allotted.

Shareholders who wish to participate in respect of future dividends should ensure that a mandate form for DIS election, or CREST instruction as appropriate, is submitted to the Registrar (Link Market Services). Full details of the scheme are available from the Company's website, together with a mandate form. A DIS election can also be made using the Link share portal at www.signalshares.com.

Fund Raising

On 22 September 2017, the Directors of your Company, together with the board of Maven Income and Growth VCT 4 PLC, launched an Offer for Subscription for new Ordinary Shares for up to £30 million, in aggregate, with total over-allotment facilities of up to £10 million.

On 5 April 2018, your Board was pleased to announce that the Offer was fully subscribed having raised £20 million in total, including the full utilisation of the over-allotment facility. During the period, the Company issued 18,433,172 new Ordinary Shares for the 2017/2018 tax year, with a further 3,305,548 new Ordinary Shares issued for the 2018/2019 tax year. The programme for investing this capital has commenced and the Directors are encouraged by the positive rate of new investment that has been achieved to date, which is expected to continue in the new financial year.

Further details regarding the new Ordinary Shares issued under the Offer for Subscription can be found in Note 12 to the Financial Statements in the Annual Report.

Share Buy-backs

Shareholders should be aware that the Board's primary objective is for the Company to retain sufficient liquid assets for making investments in line with its stated policy, and for the continued payment of dividends. However, the Directors also acknowledge the need to maintain an orderly market in the Company's shares and have delegated authority to the Manager to buy back shares in the market for cancellation or to be held in treasury, subject always to such transactions being in the best interests of Shareholders.

It is intended that, subject to market conditions, available liquidity and the maintenance of the Company's VCT status, shares will be bought back at prices representing a discount of between 5% and 10% to the prevailing NAV per share.

Regulatory Developments

Following legislative changes introduced by the Finance Act 2015, with further amendments included in the Finance Act 2018, it is reassuring to report that the Finance (No. 3) Bill 2017-2019 does not propose any further amendments to the legislation governing VCTs. Your Company is well positioned to accommodate the provisions of the Finance Act 2018, in particular the requirement for a VCT to hold 80% of its investments in qualifying holdings for periods ending after 6 April 2019. For your Company, this will be applicable from 30 November 2019 and progress towards this target is being monitored closely.

The General Data Protection Regulation (GDPR) came into force on 25 May 2018, replacing the Data Protection Act 1998. During the year the Manager worked with the third parties that process Shareholders' personal data to ensure that their rights under the new regulation are respected.

In July 2018, the Financial Reporting Council published an update of the UK Corporate Governance Code, which focusses on the application and reporting of the updated Principles. The 2018 Code applies to all companies with a Premium Listing and is applicable for all accounting periods beginning on or after 1 January 2019. The Board will consider the implications of the Code and take appropriate action as required.

The Future

Your Board is encouraged by the progress achieved during the financial year and remains confident in your Company's future prospects, despite the prevailing macro-economic uncertainty associated with the UK's withdrawal from the EU. The key objectives for the year ahead are to maintain a steady investment rate, to ensure that the capital deployment targets are achieved, and that the portfolio continues to grow, by securing some of the best growth companies across the UK regions. It may, however, take time for the full benefits of this more active investment phase to translate into a meaningful increase in Shareholder returns, as the growth profile of younger and earlier stage companies is more difficult to predict. During this transitional phase, with over 60% of the holdings in the portfolio, by value, still invested in more established private companies, there remains a stable and mature asset base that is capable of continuing to support Shareholder returns in the years ahead.

Atul Devani

Chairman

1 March 2019

Business Report

This Business Report is intended to provide an overview of the strategy and business model of the Company, as well as the key measures used by the Directors in overseeing its management. The Company is a venture capital trust and invests in accordance with the investment objective set out in this Business Report.

Investment Objective

The Company aims to achieve long-term capital appreciation and generate income for Shareholders.

Business Model and Investment Policy

The Company intends to achieve its objective by:

•      investing the majority of its funds in a diversified portfolio of shares and securities in smaller, unquoted UK companies and AIM/NEX quoted companies which meet the criteria for VCT qualifying investments and have strong growth potential;

•      investing no more than £1.25 million in any company in one year and no more than 15% of the Company's assets by cost in one business at any time; and

•      borrowing up to 15% of net asset value, if required and only on a selective basis, in pursuit of its investment strategy.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Company are as follows:

Investment Risk

The majority of the Company's investments are in small and medium sized unquoted UK companies and AIM/NEX quoted companies which, by their nature, carry a higher level of risk and lower liquidity than investments in large quoted companies. The Board aims to limit the risk attached to the investment portfolio as a whole by ensuring that a robust structured selection, monitoring and realisation process is applied. The Board reviews the investment portfolio with the Manager on a regular basis.

The Company manages and minimises investment risk by:

•      diversifying across a large number of companies;

•      diversifying across a range of economic sectors;

•      actively and closely monitoring the progress of investee companies;

•      co-investing with other clients of Maven and other VCT managers;

•      ensuring valuations of underlying investments are made fairly and reasonably (see Notes to the Financial Statements 1(e) and 1(f) for further details);

•      taking steps to ensure that share price discount is managed appropriately; and

•      choosing and appointing an FCA authorised investment manager with the appropriate skills, experience and resources required to achieve the investment objective, with ongoing monitoring to ensure the Manager is performing in line with expectations.

Financial and Liquidity Risk

As most of the investments require a mid to long term commitment and are relatively illiquid, the Company retains a portion of the portfolio in cash and listed investments in order to finance any new unquoted investment opportunities. The Company has only limited direct exposure to currency risk and does not enter into any derivative transactions.

Economic Risk

The valuation of investment companies may be affected by underlying economic conditions such as fluctuating interest rates and the availability of bank finance. The economic and market environment is kept under constant review and the investment strategy of the Company is adapted so far as possible to mitigate emerging risks.

Credit Risk

The Company may hold financial instruments and cash deposits and is dependent on counterparties discharging their agreed responsibilities. The Directors consider the creditworthiness of the counterparties to such instruments and seek to ensure that there is no undue concentration of exposure to any one party.

Internal Control Risk

The Board regularly reviews the system of internal controls, both financial and non-financial, operated by the Company, the Manager and other key third party outsourcers such as the Custodian and Registrar. These include controls designed to ensure that the Company's assets are safeguarded, all records are complete and accurate and that the third parties have adequate controls in place to prevent data protection and cyber security failings.

VCT Qualifying Status Risk

The Company operates in a complex regulatory environment and faces a number of related risks, including:

•      becoming subject to capital gains tax on the sale of its investments as a result of a breach of Section 274 of the Income Tax Act 2007;

•      loss of VCT status and the consequential loss of tax reliefs available to Shareholders as a result of a breach of the VCT Regulations;

•      loss of VCT status and reputational damage as a result of serious breach of other regulations such as the FCA Listing Rules and the Companies Act 2006 (the Companies Act); and

•      increased investment restrictions resulting from the EU State Aid Rules incorporated by the Finance (No. 2) Act 2015 and the Finance Act 2018.

The Board works closely with the Manager to ensure compliance with all applicable and upcoming legislation, such that VCT qualifying status is maintained. Further information on the management of this risk is detailed under other headings in this Business Report.

Legislative and Regulatory Risk

In order to maintain its approval as a VCT, the Company is required to comply with current VCT legislation in the UK as well as the EU State Aid Rules. Changes to either legislation could have an adverse impact on Shareholder investment returns, whilst maintaining the Company's VCT status.  The Board and the Manager continue to make representations where appropriate, either directly or through relevant industry bodies such as the Association of Investment Companies (AIC) or the British Venture Capital Association (BVCA).

The Company has retained Philip Hare & Associates LLP as its principal VCT adviser and also uses the services of a number of other VCT advisers on a transactional basis.

Breaches of other regulations including, but not limited to, the Companies Act, the FCA Listing Rules, FCA Disclosure Guidance and Transparency Rules, the GDPR, or the Alternative Investment Fund Managers Directive (the AIFMD), could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers to the Company could also lead to reputational loss or damage.

The AIFMD, which regulates the management of alternative investment funds, including VCTs, introduced an authorisation and supervisory regime for all investment companies in the EU. The Company was approved by the FCA as a self-managed small registered UK AIFM under the AIFMD.

The Company is also required to comply with tax legislation under the Foreign Account Tax Compliance Act and the Common Reporting Standards. The Company has appointed Link Market Services to act on its behalf to report annually to HMRC and ensure compliance with this legislation.

Political Risk

Following the referendum held on 23 June 2016, the UK voted to leave the EU. The two year period for negotiating the Withdrawal Agreement expires on 29 March 2019. The full political, economic and legal consequences of leaving the EU are not yet known. It is possible that investments in the UK may be more difficult to value and to assess for suitability of risk, harder to buy or sell, and may be subject to greater or more frequent rises and falls in value. In the longer term, there is likely to be a period of uncertainty as the UK seeks to negotiate its ongoing relationship with the EU and other global trade partners.

In the future, UK laws and regulations, including those relating to investment companies and AIFMs, may diverge from those of the EU. This may lead to changes in the operation of the Company, the rights of investors, or the list of territories in which the shares of the Company can be promoted or sold.

The Board regularly reviews the political situation, together with any associated changes to the economic, regulatory and legislative environment, in order to ensure that any risks are mitigated as effectively as possible.

An explanation of certain economic and financial risks and how they are managed is contained in Note 16 to the Financial Statements in the Annual Report.

Statement of Compliance with Investment Policy

The Company is adhering to its stated investment policy and managing the risks arising from it. This can be seen in various tables and charts throughout the Annual Report, from information provided in the Chairman's Statement and in the Investment Manager's Review. A review of the Company's business, its position as at 30 November 2018 and its performance during the year then ended is included in the Chairman's Statement, which also includes an overview of the Company's business model and strategy.

The management of the investment portfolio has been delegated to Maven, which also provides company secretarial, administrative and financial management services to the Company. The Board is satisfied with the depth and breadth of the Manager's resources and its nationwide network of offices, which supply new deals and enable it to monitor the geographically widespread portfolio of companies effectively.

The Investment Portfolio Summary in the Annual Report discloses the investments in the portfolio and the degree of co-investment with other clients of the Manager. The tabular analysis of the unlisted and quoted portfolio shows that the portfolio is diversified across a variety of sectors and deal types. The level of qualifying investments is monitored by the Manager on a daily basis and reported to the Audit & Risk Committee quarterly, or as required.

Key Performance Indicators

During the year, the net return on ordinary activities before taxation was £74,000 (2017: £27,000), gains on investment were £521,000 (2017: £153,000) and earnings per share were 0.12p (2017: 0.07p). The Directors also use a number of Alternative Performance Measures (APMs) in order to assess the Company's success in achieving its objectives as these are considered to be more appropriate long-term measures. The APMs are viewed by the Board as additional Key Performance Indicators that enable Shareholders and prospective investors to gain an understanding of the Company's business, and are as follows:

•      NAV total return;

•      annual yield;

•      share price discount to NAV;

•      investment income; and

•      operational expenses.

The NAV total return is a measure of Shareholder value that includes both the current NAV per share and the sum of dividends paid to date. The annual yield is the total dividends paid for the financial year, expressed as a percentage of the share price at the year end date. The Directors seek to pay dividends to provide a yield and comply with the VCT rules, taking account of the level of distributable reserves, profitable realisations in each accounting period and the Company's future cash flow projections. The share price discount to NAV is the percentage by which the mid-market price of an investment is lower than the NAV per share. A historical record of these measures is shown in the Financial Highlights in the Annual Report. The change in the profile of the portfolio is reflected in the Summary of Investment Changes. Definitions of these APMs can be found in the Glossary in the Annual Report. The Board reviews the Company's investment income and operational expenses on a quarterly basis as the Directors consider that both of these elements are important components in the generation of Shareholder returns. Further information can be found in Notes 2 and 4 to the Financial Statements in the Annual Report.

There is no VCT index against which to compare the performance of the Company. However, for reporting to the Board and Shareholders, the Manager uses comparisons with the most appropriate index, being the FTSE AIM All-Share Index. The Directors also consider non-financial performance measures such as the flow of investment proposals and ranking of the VCT sector by independent analysts.

In addition, the Directors consider economic, regulatory and political trends and factors that may impact on the Company's future development and performance.

Valuation Process

Investments held by Maven Income and Growth VCT 3 PLC 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.

Share Buy-backs

At the forthcoming Annual General Meeting (AGM), the Board will seek the necessary Shareholder authority to continue to conduct share buy-backs under appropriate circumstances.

Employee, Environmental and Human Rights Policy

The Company has no direct employee or environmental responsibilities, nor is it responsible for the emission of greenhouse gases. The Board's principal responsibility to Shareholders is to ensure that the investment portfolio is managed and invested properly. As the Company has no employees, it has no requirement to report separately on employment matters. The management of the portfolio is undertaken by the Manager through members of its portfolio management team. The Manager engages with the Company's underlying investee companies in relation to their corporate governance practices and in developing their policies on social, community and environmental matters and further information may be found in the Statement of Corporate Governance. In light of the nature of the Company's business, there are no relevant human rights issues and, therefore, the Company does not have a human rights policy.

Auditor

The Company's Auditor is required to report if there are any material inconsistencies between the content of the Strategic Report and the Financial Statements. The Independent Auditor's Report can be found in the Annual Report.

Future Strategy

The Board and Manager intend to maintain the policies set out above for the year ending 30 November 2019, as it is believed that these are in the best interest of Shareholders.

Approval

The Business Report, and the Strategic Report as a whole, was approved by the Board of Directors and signed on its behalf by:

Atul Devani

Director

1 March 2019

Income Statement

For the Year Ended 30 November 2018

	Year ended 30 November 2018			Year ended 30 November 2017
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on investments	-	521	521	-	153	153
Income from investments	984	-	984	1,047	-	1,047
Other income	35	-	35	14	-	14
Investment management fees	(214)	(854)	(1,068)	(179)	(717)	(896)
Other expenses	(398)	-	(398)	(291)	-	(291)
Net return on ordinary activities	407	(333)	74	591	(564)	27
before taxation
Tax on ordinary activities	(71)	71	-	(103)	103	-
Return attributable to Equity Shareholders	336	(262)	74	488	(461)	27
Earnings per share (pence)	0.54	(0.42)	0.12	1.20	(1.13)	0.07

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 one reportable segment, the results of which are set out in the Income Statement and Balance Sheet. The Company derives its income from investments made in shares, securities and bank deposits.

There are no potentially dilutive capital instruments in issue and, therefore, no diluted earnings per share figures are relevant. The basic and diluted earnings per share are, therefore, identical.

The accompanying Notes are an integral part of the Financial Statements and can be found in full in the Annual Report.

Statement of Changes in Equity

Year Ended 30 November 2018

	Share     Capital£'000	Share premium account £'000	Capital reserve realised £'000	Capital reserve unrealised £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Revenue reserve £'000	Total £'000
At 30 November 2017	4,702	18,035	(5,989)	(62)	15,749	819	761	34,015
Net return	-	-	2,734	(2,996)	-	-	336	74
Dividends paid	-	-	(6,529)	-	-	-	(241)	(6,770)
Repurchase and cancellation of shares	(71)	-	-	-	(426)	71	-	(426)
Net proceeds of share issue	2,174	12,793	-	-	-	-	-	14,967
Net proceeds of DIS issue	92	457	-	-	-	-	-	549
At 30 November 2018	6,897	31,285	(9,784)	(3,058)	15,323	890	856	42,409

Year Ended 30 November 2017

	Share     Capital£'000	Share premium account £'000	Capital reserve realised £'000	Capital reserve unrealised £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Revenue reserve £'000	Total £'000
At 30 November 2016	4,093	13,820	(2,115)	3,499	16,251	752	720	37,020
Net return	-	-	3,100	(3,561)	-	-	488	27
Dividends paid	-	-	(6,974)	-	-	-	(447)	(7,421)
Repurchase and cancellation of shares	(67)	-	-	-	(502)	67	-	(502)
Net proceeds of share issue	650	4,042	-	-	-	-	-	4,692
Net proceeds of DIS issue	26	173	-	-	-	-	-	199
At 30 November 2017	4,702	18,035	(5,989)	(62)	15,749	819	761	34,015

The accompanying Notes are an integral part of the Financial Statements and can be found in full in the Annual Report.

Balance Sheet

As at 30 November 2018

	30 November 2018 £'000	30 November 2017 £'000
Fixed assets Investments at fair value through profit or loss Current assets Debtors Cash	21,108 358 20,979	24,335 469 9,246
Creditors Amounts falling due within one year	21,337 (36)	9,715 (35)
Net current assets	21,301	9,680
Net assets	42,409	34,015
Capital and reserves
Called up share capital	6,897	4,702
Share premium account	31,285	18,035
Capital reserve - realised	(9,784)	(5,989)
Capital reserve - unrealised	(3,058)	(62)
Special distributable reserve	15,323	15,749
Capital redemption reserve	890	819
Revenue reserve	856	761
Net assets attributable to Ordinary Shareholders	42,409	34,015
Net asset value per Ordinary Share (pence)	61.49	72.35

The Financial Statements of Maven Income and Growth VCT 3 PLC, registered in England and Wales with number 04283350, were approved by the Board of Directors and were signed on its behalf by:

Atul Devani

Director

1 March 2019

The accompanying Notes are an integral part of the Financial Statements and can be found in full in the Annual Report.

Cash Flow Statement

For the Year Ended 30 November 2018

	Year ended 30 November 2018 £'000	Year ended 30 November 2017 £'000
Net cash flows from operating activities*	(335)	(211)
Cash flows from investing activities Purchase of investments Sale of investments	(3,904) 7,652	(3,212) 11,432
Net cash flows from investing activities	3,748	8,220
Cash flows from financing activities
Equity dividends paid	(6,770)	(7,421)
Issue of Ordinary Shares	15,516	4,891
Repurchase of Ordinary Shares	(426)	(502)
Net cash flows from financing activities	8,320	(3,032)
Net increase in cash	11,733	4,977
Cash at beginning of year	9,246	4,269
Cash at end of year	20,979	9,246

* Refer to Note 15 in the Annual Report for reclassification in the current and prior year.

The accompanying Notes are an integral part of the Financial Statements and can be found in full in the Annual Report.

Notes to the Financial Statements

For the Year Ended 30 November 2018

1.    Accounting Policies

The Company is a public limited company, incorporated in England and Wales and its registered office is shown in the Annual Report.

(a)   Basis of preparation

The Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of investments and in accordance with FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland, and in accordance with the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts (the SORP) issued by the AIC in November 2014.

(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 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 early stage investments completed in the reporting period, 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 investee company.

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 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.    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.

5.    All unlisted investments are valued individually by the portfolio management team of Maven Capital Partners UK LLP. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

6.    In accordance with normal market practice, investments listed on AIM 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 - the unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date;

•      Level 2 - inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly; and

•      Level 3 - inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

(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.

(h)   Critical accounting judgements and key sources of estimation uncertainty

Disclosure is required of judgements and estimates made by the Board and the Manager in applying the accounting policies that have a significant effect on the Financial Statements. The area involving the highest degree of judgement and estimates is the valuation of unlisted investments recognised in Note 8 in the Annual Report and explained in Note 1(e) above.

In the opinion of the Board and the Manager, there are no critical accounting judgements.

Reserves

Share premium account

The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs.

Capital reserves

Gains or losses on investments realised in the year that have been recognised in the Income Statement are transferred to the capital reserve realised account on disposal. Furthermore, any prior unrealised gains or losses on such investments are transferred from the capital reserve unrealised account to the capital reserve realised account on disposal.

Increases and decreases in the fair value of investments are recognised in the Income Statement and are then transferred to the capital reserve unrealised account. The capital reserve realised account also represents capital dividends, capital investment management fees and the tax effect of capital items.

Special distributable reserve

The total cost to the Company of the repurchase and cancellation of shares is represented in the special distributable reserve account.

Capital redemption reserve

The nominal value of shares repurchased and cancelled is represented in the capital redemption reserve.

Revenue reserve

The revenue reserve represents accumulated profits retained by the Company that have not been distributed to Shareholders as a dividend.

Return per Ordinary Share	Year ended 30 November 2018	Year ended 30 November 2017
The returns per share have been based on the following figures: Weighted average number of Ordinary Shares Revenue return Capital return	62,607,301 £336,000 (£262,000)	40,706,349 £488,000 (£461,000)
Total return	£74,000	£27,000

Net asset value per Ordinary Share

The net asset value per Ordinary Share as at 30 November 2018 has been calculated using the number of Ordinary Shares in issue at that date of 68,973,462 (2017: 47,016,945).

Directors' Responsibility Statement

Each Director believes that, to the best of their knowledge:

•      the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as at 30 November 2018 and for the year to that date;

•      the Directors' Report includes a fair review of the development and performance of the Company, together with a description of the principal risks and uncertainties that it faces; and

•      the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.

Other information

The Annual General Meeting will be held on Wednesday 10 April 2019, commencing at 11.00am, at Maven Capital Partners UK LLP, Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF.

The Annual Report and Financial Statements for the year ended 30 November 2018 will be issued to Shareholders and 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 2017 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under S498(2) or S498(3) of the Companies Act 2006.

Copies of this announcement, and of the Annual Report and Financial Statements for the year ended 30 November 2018, will be available, in due course, to the public at the office of Maven Capital Partners UK LLP, 205 West George Street, Glasgow G2 2LW; at the registered office of the Company, 1-2 Royal Exchange Buildings, London EC3V 3LF 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.

The Annual Report will shortly be submitted to the National Storage Mechanism and will be available for inspection at: www.morningstar.co.uk/uk/NSM.

By Order of the Board

Maven Capital Partners UK LLP

Secretary

1 March 2019

 

END

 

 

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