Annual Financial Report

RNS Number : 0496V

Maven Income & Growth VCT 4 PLC

09 April 2021

 

Maven Income and Growth VCT 4 PLC

Final results for the year ended 31 December 2020

Highlights for the year

• NAV total return at the year end of 148.93p per share (2019: 146.51p)

• NAV at the year end of 70.33p per share (2019: 70.91p), after total dividend payments of 3.00p per share during the year

• Final dividend of 2.00p per share proposed

• Offer for Subscription fully subscribed, raising £7.5 million

• Deployment of £12.39 million during the year, including new investments in 25 private and AIM quoted companies

• Three profitable private company realisations completed during the year and a total of £2.29 million realised through AIM disposals

Chairman's Statement

The financial year to 31 December 2020 has been a very challenging period, during which the COVID-19 pandemic and the protective measures that were subsequently introduced, have had a significant impact on the economy, whilst also affecting the personal and working lives of most people. This global health crisis has had a wide reaching impact across our society and the thoughts of the Directors are with all of those who have been affected.

Against this economic backdrop, it is encouraging to report on the positive progress that has been achieved by your Company, with NAV total return at the year end increasing to 148.93p per share. This growth reflects the strength and resilience of the underlying portfolio, and the ability of investee companies to adapt to the evolving market conditions. The AIM quoted portfolio made a strong contribution to the overall performance with most investee companies reporting positive trading updates, which resulted in share price appreciation. Consistent with your Company's growth strategy, further progress was also made in the expansion and diversification of the portfolio, with the addition of 25 new private and AIM quoted holdings, alongside the provision of follow-on funding to support the continuing growth of certain companies. During the year, three profitable private company realisations completed, including the exit from Symphonic Software, which achieved a 2.92 times total return and is the first material realisation from the early stage portfolio. The Directors recognise the importance of distributions to Shareholders and are proposing a final dividend of 2.00p per share.

Over the past three years, your Company has substantially increased in size and scale, following the completion of two mergers and two successful fundraisings, with net assets increasing from £31.87 million in 2017 to £78.77 million at the end of the financial year. The core objective continues to be the expansion and diversification of the portfolio through the addition of carefully selected private company and AIM quoted holdings to support the long term growth in Shareholder value. Despite the challenges presented by COVID-19 and the requirement to temporarily focus attention on value preservation and supporting the needs of existing portfolio companies, the Directors are pleased to report that good progress has been made in line with this objective, with the deployment of £12.39 million across a range of private and AIM quoted companies with strong growth characteristics.

In March 2020, ahead of the first nationwide lockdown, the Manager successfully migrated its regional offices and administration hub to a remote working model, to comply with Government and local guidelines. Throughout the period and to date, your Company has maintained full operational capability, and the Directors are reassured that the Manager, and all third-party service providers, are capable of continuing to service your Company either remotely or from COVID-secure office environments for as long as is necessary.

The Manager was swift to respond to the potential economic impact of the pandemic and on 20 March 2020 completed a comprehensive appraisal of the portfolio to identify the likely impact on each company. Following this review, the Board approved a small number of specific provisions against the holdings in private companies with exposure to consumer facing sectors, which were most immediately impacted. The AIM quoted and listed holdings were also valued at their prevailing market prices. This review resulted in a 9% reduction in NAV per share from 70.91p at 31 December 2019 to 64.51p as at 20 March 2020, which was announced on 26 March 2020. The Directors are pleased to note that there has been a subsequent recovery in NAV per share to 70.33p at the year end, which is stated after the payment during the year of the 2019 final and 2020 interim dividends, totalling 3.00p per share. This improvement demonstrates the strength and quality of the underlying portfolio, which has diversified exposure to a range of defensive sectors such as software, funeral services, healthcare, data analytics and training, where the impact of the pandemic has been less severe. A number of these companies have continued to generate meaningful growth during the year, which has resulted in uplifts to valuations in line with the progress achieved. The recovery in NAV was also supported by a positive performance from the AIM quoted holdings, which have been gradually increased over recent years and now accounts for 13% of net assets, where several holdings, notably those with exposure to the healthcare and life sciences sectors, have experienced share price appreciation following positive trading updates.

Throughout the pandemic, the Directors have maintained close communication with the Manager, receiving regular updates on the performance of investee companies. The Board has been encouraged by the measures taken by investee management teams, with Maven taking an active role and providing assistance on a case-by-case basis. Whilst there are a small number of portfolio companies that are operating behind plan, the majority are trading in line with their revised COVID-19 budgets and, in all cases, cash is being carefully managed. It is also encouraging to report that several private and AIM quoted companies have continued to grow, reflecting the level of innovation and entrepreneurialism across the portfolio. This includes companies that offer a disruptive technology designed to take a product or service online, such as training, restaurant food ordering or prescription dispensing. Several businesses operating in the specialist biotechnology market have been able to make an active contribution towards the urgent need for COVID-19 testing or therapeutics, and those that manufacture devices and products for medical markets have experienced a surge in demand.

Following the successful completion of the top-up fundraising, which was launched in November 2019 and closed early fully subscribed on 6 February 2020 after raising £7.5 million of new capital. Full details on portfolio developments and a summary of the investments completed during the year can be found in the Investment Manager's Review in the Annual Report. The Manager maintained a cautious approach to certain sectors during the year, which resulted in a small number of potential transactions being aborted due to client attrition resulting from the pandemic. It is encouraging to report that 11 new private companies and 14 AIM quoted holdings were added to the portfolio including several in the healthcare and life sciences sectors, which are likely to remain attractive investment areas for the foreseeable future. In addition, your Company gained exposure to various new market sectors, including cyber security, data analytics and web archiving, which offer defensive characteristics and are likely to continue to grow when the immediate impact of the pandemic subsides. The provision of performance based follow-on funding remains a key component of the investment strategy, as it is generally recognised that many earlier stage companies are likely to require several rounds of capital before they are fully scaled and shareholder value can be optimised.

The uncertainty surrounding the UK's future global trading relationships, as a result of Brexit, continued throughout the year. The UK formally left the EU on 31 January 2020 and entered an 11 month transition period that ended on 31 December 2020. The EU (Future Relationship) Act 2020, which was agreed with the EU on 24 December 2020, came into effect on 1 January 2021. The potential impact of the UK's withdrawal from the EU has been closely monitored across the portfolio of investee companies and, as at the date of this Annual Report, there is nothing material to report. The majority of investee companies have limited direct exposure to the EU, and those that do have been implementing contingency plans to mitigate any potential impact. Furthermore, it is not anticipated that there will be any changes to the legislation governing VCTs as a result of the UK's departure from the EU.

Prior to the emergence of the pandemic, two profitable exits were completed, with the realisations of the holdings in Attraction World and Global Risk Partners. In October 2020, there was a further positive development when your Company successfully exited its holding in Symphonic Software through a sale to a US listed trade acquirer. The exit generated a total return of 2.92 times cost in a holding period of just under two years. Whilst the Directors are optimistic that further profitable exits can be achieved from the early stage portfolio, it may take time for these companies to develop and achieve scale and for full value to be optimised. The timing of exits is difficult to predict, and this is particularly relevant for the early stage portfolio where certain companies may attract early interest from a strategic acquirer, whereas others may need to raise further capital in order to develop to their full potential before a formal exit process can be initiated.

Proposed Final Dividend

As Shareholders will be aware from recent Interim and Annual Reports, decisions on distributions take into consideration the availability of surplus revenue, the realisation of capital gains, the adequacy of distributable reserves and the VCT qualifying level, all of which are kept under close and regular review by the Board and the Manager.

In respect of the year ended 31 December 2020, your Board is proposing a final dividend of 2.00p per Ordinary Share to be paid on 21 May 2021 to Shareholders on the register at 23 April 2021. This will bring total distributions for the year to 3.00p per Ordinary Share, representing a yield of 4.76% based on the year end closing mid-market share price of 63.00p. Since the Company's launch, and after receipt of the proposed final dividend, Shareholders will have received 80.60p per share in tax free distributions. 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.

Given the higher concentration of growth companies within the portfolio, which may take longer to reach maturity, there may be fluctuations in the quantum and timing of dividends and future distributions may be more closely linked to realisation activity, whilst also reflecting the Company's requirement to maintain its minimum VCT qualifying level. If larger distributions are required, as a consequence of exits, this could result in a corresponding reduction in NAV per share. However, the Board considers this to be a tax efficient means of returning value to Shareholders, whilst ensuring ongoing compliance with the requirements of the VCT legislation.

Dividend Investment Scheme (DIS)

Your Company operates a DIS, through which Shareholders may elect to have their dividend payments utilised to subscribe for new Ordinary Shares issued by the Company under the standing authority requested from Shareholders at Annual General Meetings. Due to the volatility in financial markets at the outset of the COVID-19 pandemic, the DIS was temporarily suspended on 26 March 2020, before being fully reinstated on 20 August 2020.

Shareholders who wish to participate in the DIS in respect of future dividends, including the payment of the proposed final dividend to be paid on 21 May 2021, should ensure that a DIS mandate or CREST instruction, as appropriate, is received by the Registrar (Link Group) in advance of 7 May 2021, this being the next dividend election date. The mandate form, terms & conditions and full details of the scheme (including further details about tax considerations) are available from the Company's website at www.mavencp.com/migvct4. Election to participate in the DIS can also be made through the Registrar's share portal at www.signalshares.com. Shares issued under the DIS should qualify for VCT tax relief applicable for the tax year in which they are allotted, subject to an individual Shareholder's particular circumstances. If a Shareholder is in any doubt about the merits of participating in the DIS, or their own tax status, they should seek advice from a suitably qualified adviser.

Fund Raising and Allotments

On 13 November 2019, the Directors of your Company, together with the board of Maven Income and Growth VCT 3 PLC, launched joint Offers for Subscription for new Ordinary Shares of up to £15 million in aggregate (£7.5 million for each company). Your Company's Offer closed on 6 February 2020, fully subscribed.

The allotment of 9,719,959 new Ordinary Shares, in respect of the 2019/20 tax year, was made on 11 February 2020, and 858,029 new Ordinary Shares were allotted in respect of the 2020/21 tax year on 9 July 2020. 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.

This additional liquidity will enable your Company to continue to execute its investment strategy through selective new investments in both private and AIM quoted companies, alongside the provision of follow-on funding to support the continued growth of the existing portfolio. Furthermore, the funds raised will allow your Company to maintain its share buy- back policy, whilst also spreading costs over a wider asset base in line with the objective of maintaining a competitive total expense ratio for the benefit of all Shareholders.

Share Buy-backs

Shareholders will be aware that a primary objective for the Board is to ensure that the Company retains sufficient liquidity 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, therefore, 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. Despite the market volatility in relation to COVID-19, the Board maintained the view that it was appropriate to continue to operate the buy-back policy as this is an important mechanism for ensuring an orderly market in your Company's shares.

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

Regulatory Developments

During the year, there have been no further amendments to the rules governing VCTs. The Chancellor did not issue an Autumn 2020 Budget as the Treasury's focus at the time was on providing stimulus packages to support the economy through the pandemic. The Spring Budget was delivered on 3 March 2021, with no specific changes being proposed to the regulations governing VCTs.

The requirement of the Finance Act 2018, which increased the threshold level of qualifying investments that a VCT must hold from 70% to 80%, was comfortably achieved by your Company ahead of 1 January 2020, being the required date of compliance. The qualifying level continues to be closely monitored by the Manager and reviewed by the Board on a regular basis.

Following the outbreak of COVID-19, a number of regulatory changes were implemented to assist companies through the crisis. The Corporate Insolvency and Governance Act 2020 temporarily suspended parts of insolvency law in order to support directors, whose companies continued to trade through the emergency, from the threat of personal liability for wrongful trading and to protect companies from creditor action. This suspension has been extended until April 2021. In addition, Company Law and other legislation was amended to provide companies with temporary easements on company filings and the holding of Annual General Meetings.

On 27 March 2020, the International Private Equity and Venture Capital Valuation (IPEV) Guidelines Board issued Coronavirus Special Valuation Guidance to assist managers who are applying the IPEV Valuation Guidelines to their portfolios from 31 March 2020. The Guidelines were last updated in 2018 and are the prevailing framework for fair value information in the private equity and venture capital industry. The Directors and the Manager continue to apply the IPEV Guidelines as a central methodology for all private company valuations.

Environmental, Social and Governance (ESG)

The Board recognises the importance of ESG principles and believes that each portfolio company should behave responsibly towards the environment and society. The Directors are pleased to report that the Manager considers environmental, social and governance matters as part of the investment appraisal process and ensures that any relevant ESG issues are identified at an early stage. The Manager is currently undertaking a programme of work to develop a framework which will ensure that ESG issues are carefully managed throughout the period of investment and there is close engagement with each portfolio company in relation to corporate governance practices and support provided to the management team to develop or improve policies on the environment, community engagement, HR and employee relations, corporate governance and responsible product marketing.

The Directors are aware of the work that the Manager is undertaking to address the recommendations of the Task Force on Climate-related Financial Disclosures, which seek to address the material financial impacts of the global transition to a lower carbon economy. The Directors are satisfied that the Manager is taking the appropriate steps to address these requirements, and will continue to monitor progress.

Annual General Meeting (AGM)

The 2021 AGM will be held in the Glasgow office of Maven Capital Partners UK LLP on Wednesday, 12 May 2021 commencing at 12 noon. The Notice of Annual General Meeting can be found in the Annual Report.

The Directors understand that the AGM is a good opportunity for Shareholders to meet the Board and the Manager but consider the well-being of its Shareholders and other AGM attendees to be their immediate priority. In light of the current Government advice against all non-essential travel and public gatherings, Shareholders will be unable to attend the AGM in person and should instead vote using the Proxy Form, which can be submitted to the Company. Proxy Forms should be completed and returned in accordance with the instructions thereon and the latest time for the receipt of Proxy Forms is 12.00 noon on 10 May 2021. Proxy votes can also be submitted by CREST or online using the Registrar's Share Portal Service at www.signalshares.com.

The Directors also encourage Shareholders to submit any questions to the Board and the Manager by email or by letter in advance of the AGM. Shareholders wishing to submit a question should write to: The Company Secretary, Maven Income and Growth VCT 4 PLC, c/o Maven Capital Partners UK LLP, First Floor, Kintyre House, 205 West George Street, Glasgow G2 2LW or email: [e-mail]. A summary of responses will be published after the AGM on the Company's website at: www.mavencp.com/migvct4.

The Future

Despite the challenges and disruption caused by the coronavirus pandemic, the Directors are encouraged by the progress achieved by your Company during the reporting period. Over recent years, the strategy has focused on expanding and diversifying the portfolio, through the addition of carefully selected private company and AIM holdings and it is pleasing to note that this approach is starting to deliver results. The Directors note the encouraging performance across the early stage investments, where a number of companies are gaining credible market traction and have demonstrated their ability to continue to deliver growth in an uncertain economic environment. The strategy for the year ahead will remain focused on further portfolio expansion, with the central objective of generating long term and sustained growth in Shareholder value.

Peter Linthwaite

Chairman

9 April 2021

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 below.

Investment Objective

Under an investment policy approved by the Directors, 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/AQSE quoted companies that 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 Board and the Risk Committee have an ongoing process for identifying, evaluating and monitoring the principal and emerging risks and uncertainties facing the Company. The risk register and dashboard form key parts of the Company's risk management framework used to carry out a robust assessment of the risks, including a significant focus on the controls in place to mitigate them. The principal and emerging 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/AQSE 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 and structured selection, monitoring and realisation process is applied by Maven. 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, other VCT managers and co-investment partners;

• ensuring valuations of underlying investments are made fairly and reasonably (see Notes to the Financial Statements 1(e), 1(f) and 16 for further details);

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

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

Internal Control Risk

The Board reviews regularly the system of internal controls, both financial and non-financial, operated by the Company, Maven 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, that 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 consequent 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 a serious breach of other regulations such as the FCA Listing Rules and the Companies Act 2006; and

• increased investment restrictions resulting from 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

The Directors strive to maintain a good understanding of the changing regulatory agenda and consider emerging issues so that appropriate changes can be implemented and developed in good time. 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), the British Venture Capital Association (BVCA) and the Venture Capital Trust Association (VCTA).

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, the FCA Disclosure Guidance and Transparency Rules, the General Data Protection Regulation (GDPR), and the Alternative Investment Fund Managers Directive (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 is a small registered, internally managed alternative investment fund under the AIFMD, and its status as such is unchanged as a result of the UK's departure from the EU. The Company is also required to comply with tax legislation under the Foreign Account Tax Compliance Act and the Common Reporting Standard. The Company has appointed Link Group to act on its behalf to report annually to HM Revenue & Customs (HMRC) and ensure compliance with this legislation.

Political Risk

Although the EU (Future Relationship) Act 2020 came into effect on 1 January 2021, the full political, economic and legal consequences of the UK leaving the EU are not yet known. It is possible that investments in the UK may be more difficult to value and 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 reviews the political situation regularly, 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.

Climate Change and Social Responsibility Risk

The Board recognises that climate change is an important emerging risk that all companies should take into consideration within their strategic planning. As referred to elsewhere in this Strategic Report and in the Statement of Corporate Governance, the Company has little direct impact on environmental issues. However, the Company has introduced measures to reduce the cost and environmental impact of the production and circulation of Shareholder documentation such as the annual and interim reports. This has resulted in a significant reduction in the number of copies being printed and posted, with fewer than 15% of Shareholders now receiving paper reports.

The Board is aware that the Manager is increasing efforts in relation to the identification of environmental risks and opportunities, and is developing its ESG policy accordingly. Environmental risk is a fundamental aspect of due diligence and industry specialists are assigned where there may be specific concerns in relation to a potential business or sector. The results are then factored into the decision making process for new investments. VCTs in general are regarded as supporting small and medium sized enterprises, which helps to create local employment opportunities across a range of UK geographical regions.

Other Key Risks

Governance Risk

The Directors are aware that an ineffective Board could have a negative impact on the Company and its Shareholders. The Board recognises the importance of effective leadership and board composition and this is ensured by completing an annual evaluation process, with action being taken if required.

Management Risk

The Directors are aware of the risk that investment opportunities could fail to complete, or the management of the VCT could breach the Management and Administration Deed or regulatory parameters, due to lack of knowledge and/or experience of the investment professionals acting on behalf of the Company. To manage this risk, the Board has appointed Maven as investment manager, as it employs skilled professionals with the required VCT knowledge and experience. In addition, the Board takes comfort that the Manager's controls have been updated to ensure compliance with the Senior Managers and Certification Regime (SMCR).

The Directors are also mindful of the impact that the loss of the Manager's key employees could have on both investment opportunities that may be lost or existing investments that may fail. The Board is reassured by the Manager's approach to incentivising staff and ensuring that adequate notice periods are included in all contracts of employment.

Financial and Liquidity Risk

As most of the investments require a medium to long-term commitment and are relatively illiquid, the Company retains a portion of the portfolio in cash and listed investment trusts in order to finance any new or follow-on 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, which can be impacted during times of geopolitical uncertainty and fluctuating markets. The economic and market environment is kept under constant review and the investment strategy of the Company adapted, so far as is 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.

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

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 this Annual Report, and from information provided in the Chairman's Statement and in the Investment Manager's Review. A review of the Company's business, its financial position as at 31 December 2020 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 in the Annual Report shows that the portfolio is diversified across a variety of industry sectors and transaction types. The level of VCT qualifying investments is monitored continually by the Manager and reported to the Risk Committee quarterly, or as otherwise required.

Key Performance Indicators (KPIs)

During the year, the net return on ordinary activities before taxation was £2,721,000 (2019: £1,175,000); gains on investments were £4,463,000 (2019: £1,497,000) and earnings per share were 2.45p (2019: 1.53p). The Directors also use a number of APMs in order to assess the Company's success in achieving its objectives and also enable Shareholders and prospective investors to gain an understanding of its business. These APMs are shown in the Financial Highlights in the Annual Report.

In addition, the Board considers the following to be KPIs:

• NAV total return;

• annual yield;

• share price discount to NAV;

• investment income; and

• operational expenses.

The NAV total return is considered to be a more appropriate long-term measure of Shareholder value as it includes the current NAV per share and the sum of dividends paid to date. The annual yield is the total of dividends paid per share for the financial year, expressed as a percentage of the share price at the year end. 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 a share is lower than its NAV per share.

Definitions of these APMs can be found in the Glossary in the Annual Report. A historical record of some of these measures is shown in the Financial Highlights in the Annual Report and the change in the profile of the portfolio is reflected in the Summary of Investment Changes 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 financial 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 will consider economic, regulatory and political trends and factors that may impact on the Company's future development and performance.

Valuation Process

Investments held by the Company 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 AGM, the Board will seek the necessary Shareholder authority to continue to conduct a share buy-back programme under appropriate circumstances.

The Board's Duty and Stakeholder Engagement

The Directors recognise the importance of an effective Board and its ability to discuss, review and make decisions to promote the long-term success of the Company and protect the interests of its key stakeholders. As required by Provision 5 of the AIC Code (and in line with the UK Code), the Board has discussed the Directors' duty under Section 172 of the Companies Act and how the interests of key stakeholders have been considered in the Board discussions and decision making during the year.

This has been summarised in the table below:

Form of engagement	Influence on Board decision making
Shareholders AGM - Under normal circumstances, Shareholders are encouraged to attend the AGM and are provided with the opportunity to ask questions and engage with the Directors and the Manager. Shareholders are also encouraged to exercise their right to vote on the resolutions proposed at the AGM. However, please refer to the guidance in the Chairman's Statement in the Annual Report. Shareholder documents - the Company reports formally to Shareholders by publishing Annual and Interim Reports, normally in April and September each year. In the instance of a corporate action taking place, the Board will communicate with Shareholders through the issue of a Circular and, if required, a Prospectus. In addition, significant matters or reporting obligations are disseminated to Shareholders by way of announcements to the London Stock Exchange. The Secretary acts as a key point of contact for the Directors and communications received from Shareholders are circulated to the whole Board.	Dividend declarations - the Board recognises the importance of tax-free dividends to Shareholders and takes this into consideration when making decisions to pay interim and propose final dividends for each year. Further details regarding dividends for the year under review can be found in the Chairman's Statement in the Annual Report. Share buy-back policy - the Directors recognise the importance to Shareholders of the Company maintaining an active buy-back programme and considered this when establishing the current policy. Further details can be found in the Chairman's Statement in the Annual Report, and in the Directors' Report in the Annual Report. Offers for Subscription - in making a decision to launch any Offer for Subscription, the Directors have to consider that it would be in the interest of Shareholders to continue to expand the portfolio and make investments across a diverse range of sectors. By growing the Company, costs are spread over a wider asset base, which helps to promote a competitive total expense ratio and is in the interests of Shareholders. In addition, the increased liquidity helps support the buy-back policy referred to above. Further details regarding the latest Offer for Subscription can be found in the Chairman's Statement in the Annual Report. Liquidity management - in order to generate income and add value for Shareholders, the Board has an active liquidity management policy, which has the objective of generating income from the cash held prior to investment. Further details regarding the liquidity management policy can be found in the Investment Manager's Report in the Annual Report.
Environment and society The Directors and the Manager take account of the social environment and ethical factors impacted by the Company and the investments that it makes.	The Directors and the Manager are aware of their duty to act in the interests of the Company and acknowledge that there are risks associated with investment in companies that fail to conduct business in a socially responsible manner. Further details can be found in the Statement of Corporate Governance in the Annual Report.
Portfolio companies Quarterly Board Meetings - the Manager reports to the Board on the portfolio companies and the Directors challenge the Manager where they feel it is appropriate. The Manager then communicates directly with each portfolio company, normally through the Maven representative who sits on the board of the portfolio company.	The Directors are aware that the exercise of voting rights is key to promoting good corporate governance and, through the Manager, ensures that the portfolio companies are encouraged to adopt best practice corporate governance. The Board has delegated the responsibility for monitoring the portfolio companies to the Manager and has given it discretion to vote in respect of the Company's holdings in the investment portfolio, in a way that reflects the concerns and key governance matters discussed by the Board. From time to time, the management teams give presentations to the Board. The Manager's ESG assessment of investee companies focuses heavily on their impact on their environment, challenging fundamental aspects such as energy and emissions usage, and targets an approach to waste and recycling as well as broader social themes such as the companies' approach to diversity and inclusion in the workplace, and their work with charities. The Board is also mindful that, as the portfolio expands and the proportion of early stage investments increases, follow-on funding will represent an important part of the Company's investment strategy and this forms a key part of the Directors' discussions on valuations, risk management and fundraising.
Manager Quarterly Board Meetings - the Manager attends every Board Meeting and presents a detailed portfolio analysis and reports on key issues such as VCT compliance, investment pipeline and utilisation of any new monies raised.	The Manager is responsible for implementing the investment objective and the strategy agreed by the Board. In making a decision to launch any Offer for Subscription, the Board needs to consider that the Company requires sufficient liquidity in order to continue to expand and broaden the investment portfolio in line with the strategy, including the provision of follow-on funding.
Registrar Annual review meetings and control reports.	The Directors review the performance of all third party service providers on an annual basis, including ensuring compliance with GDPR.
Custodian Regular statements and control reports received, with all holdings and balances reconciled.	The Directors review the performance of all third party providers on an annual basis, including oversight of securing the Company's assets.

Employee, Environmental and Human Rights Policy

As a VCT, the Company has no direct employee or environmental responsibilities, nor is it responsible directly 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 Board comprises five male Directors and delegates responsibility for diversity to the Nomination Committee, as explained in the Statement of Corporate Governance in the Annual Report. 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. Further information can be found in the Statement of Corporate Governance. Additional work is being carried out by the Manager to establish a framework for the effective capture of ESG information, consistently across all investee companies. Maven will be overseeing the collation of this information for the benefit of the Board but will also be supporting individual investee companies to identify their ESG risks and opportunities and, where potential improvements are identified, will work jointly with the business to make positive changes.

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.

Independent Auditor

The Company's Independent 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 the Manager intend to maintain the policies set out above for the year ending 31 December 2021, as it is believed that these are in the best interests 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:

Peter Linthwaite

Director

9 April 2021

Income Statement

For the year ended 31 December 2020

	Year ended 31 December 2020			Year ended 31 December 2019
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on investments	-	4,463	4,463	-	1,497	1,497
Income from investments	1,287	-	1,287	1,509	-	1,509
Other income	23	-	23	81	-	81
Investment management fees	(504)	(2,017)	(2,521)	(315)	(1,260)	(1,575)
Other expenses	(531)	-	(531)	(337)	-	(337)
Net return on ordinary activities before taxation	275	2,446	2,721	938	237	1,175
Tax on ordinary activities	(55)	55	-	(162)	162	-
Return attributable to Equity Shareholders	220	2,501	2,721	776	399	1,175
Earnings per share (pence)	0.20	2.25	2.45	1.01	0.52	1.53

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

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

Year ended 31 December 2020

	Non-distributable reserves				Distributable reserves
	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve unrealised £'000	Capital reserve realised £'000	Special distributable reserve £'000	Revenue reserve £'000	Total £'000
At 31 December 2019	10,311	16,526	51	494	-	44,177	1,564	73,123
Net return	-	-	-	3,238	1,225	(1,962)	220	2,721
Share premium cancellation costs	-	(38)	-	-	-	-	-	(38)
Dividends paid	-	-	-	-	-	(2,526)	(841)	(3,367)
Repurchase and cancellation of shares	(185)	-	185	-	-	(1,156)	-	(1,156)
Merger costs	-	(14)	-	-	-	-	-	(14)
Net proceeds of share issue	1,058	6,348	-	-	-	-	-	7,406
Net proceeds of DIS issue	16	83	-	-	-	-	-	99
At 31 December 2020	11,200	22,905	236	3,732	1,225	38,533	943	78,774

Year ended 31 December 2019*

	Non-distributable reserves				Distributable reserves
	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve unrealised £'000	Capital reserve realised £'000	Special distributable reserve £'000	Revenue reserve £'000	Total £'000
At 31 December 2018	7,657	48,568	472	(1,186)	(9,020)	7,675	788	54,954
Net return	-	-	-	1,680	(183)	(1,098)	776	1,175
Cancellation of share premium account	-	(48,562)	-	-	-	48,562	-	-
Cancellation of capital redemption reserve	-	-	(544)	-	-	544	-	-
Share premium cancellation costs	-	(9)	-	-	-	-	-	(9)
Dividends paid	-	-	-	-	-	(1,517)	-	(1,517)
Repurchase and cancellation of shares	(123)	-	123	-	-	(786)	-	(786)
Issue of shares on merger	2,758	16,427	-	-	-	-	-	19,185
Net proceeds of DIS issue	19	102	-	-	-	-	-	121
Transfer between distributable reserves*	-	-	-	-	9,203	(9,203)	-	-
At 31 December 2019	10,311	16,526	51	494	-	44,177	1,564	73,123

*Refer to Note 1 to the Financial Statements.

The capital reserve unrealised is generally non-distributable, other than the part of the reserve relating to gains / (losses) attributable to readily realisable quoted investments that are distributable.

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

Balance Sheet

As at 31 December 2020

	31 December 2020 £'000	31 December 2019* £'000
Fixed assets
Investments at fair value through profit or loss	64,151	54,188
Current assets
Debtors	591	708
Cash	14,852	18,402
	15,443	19,110
Creditors
Amounts falling due within one year	(820)	(175)
Net current assets	14,623	18,935
Net assets	78,774	73,123
Capital and reserves
Called up share capital	11,200	10,311
Share premium account	22,905	16,526
Capital redemption reserve	236	51
Capital reserve - unrealised	3,732	494
Capital reserve - realised	1,225	-
Special distributable reserve	38,533	44,177
Revenue reserve	943	1,564
Net assets attributable to Ordinary Shareholders	78,774	73,123
Net asset value per Ordinary Share (pence)	70.33	70.91

*Refer to Note 1 to the Financial Statements.

The Financial Statements of Maven Income and Growth VCT 4 PLC, registered number SC272568, were approved by the Board of Directors and were signed on its behalf by:

Peter Linthwaite

Director

9 April 2021

The 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 31 December 2020

	Year ended 31 December 2020 £'000	Year ended 31 December 2019 £'000
Net cash flows from operating activities Cash flows from investing activities Purchase of investments Sale of investments	(1,090) (12,386) 6,996	(120) (23,503) 4,478
Net cash flows from investing activities	(5,390)	(19,025)
Cash flows from financing activities
Equity dividends paid	(3,367)	(1,517)
Net proceeds of DIS issue	99	-
Issue of Ordinary Shares	7,406	121
Issue of Ordinary Shares - merger	-	19,185
Merger costs	(14)	-
Share premium cancellation costs	(38)	(9)
Repurchase of Ordinary Shares	(1,156)	(786)
Net cash flows from financing activities	2,930	16,994
Net decrease in cash	(3,550)	(2,151)
Cash at beginning of year	18,402	20,553
Cash at end of year	14,852	18,402

The 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 31 December 2020

1.  Accounting policies

The Company is a public limited company, incorporated in Scotland, and its registered office is shown in the Corporate Summary.

(a)  Basis of preparation

The Financial Statements have been prepared on a going concern basis, including an assessment of the impact of COVID-19 on the finances of the Company, as covered in the Directors' Report in the Annual Report. 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 October 2019.

Changes in presentation of 2019 of Statement of Changes in Equity and Balance Sheet - in previous years, capital expenses and dividends were recorded through the capital reserve realised. The nature of this treatment created a large deficit position that continued to build. In order to improve the transparency of distributable reserves, capital expenses and dividends are now recorded through the special distributable reserve. A one-off prior year reclassification has been reflected in the Statement of Changes in Equity to clear the originating deficit position. This disclosure change has no impact on the profit and loss account or NAV.

(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 that are incidental to the acquisition and disposal of an investment are charged to capital;

• 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 and performance fee has been allocated 20% to revenue and 80% to special distributable reserve to reflect the Company's investment policy and prospective income and capital growth; and

• share issue and merger costs are charged to the share premium account.

(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 that 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 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 or loss. At subsequent reporting dates, investments are valued at fair value, which represent the Directors' view of the amount for which an asset could be exchanged between knowledgeable 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 with reference to the price of recent investment, calibrating for any material change in the trading circumstances of the investee company. Other early stage investments are valued using a milestone approach, in particular where it is considered there are no deemed current or short-term future maintainable earnings or positive cashflows.

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 maintainable earnings to determine the enterprise value of the company.

  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.

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 Manager's portfolio management team. 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 (i.e. developed using market data) for the asset or liability, either directly or indirectly.

• Level 3 - inputs are unobservable (i.e. 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 early stage unlisted investments recognised in Note 8 to the Financial Statements 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. This reserve is non-distributable.

Capital redemption reserve

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

Capital reserve - unrealised

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. This reserve is non-distributable.

Capital reserve - realised

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. This reserve is distributable.

Special distributable reserve

The total cost to the Company of the repurchase and cancellation of shares is represented in the special distributable reserve account. The special distributable reserve also represents capital dividends, capital investment management fees and the tax effect of capital items. This reserve is distributable.

Revenue reserve

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

Return per Ordinary Share

	Year ended 31 December 2020	Year ended 31 December 2019
The returns per share have been based on the following figures: Weighted average number of Ordinary Shares Revenue return Capital return	111,344,983 £220,000 £2,501,000	76,885,003 £776,000 £399,000
Total return	£2,721,000	£1,175,000

Net asset value per Ordinary Share

The net asset value per Ordinary Share as at 31 December 2020 has been calculated using the number of Ordinary Shares in issue at that date of 112,005,928 (2019: 103,113,920).

Directors Responsibility Statement

The Directors confirm 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 31 December 2020 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 and emerging 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 AGM will be held on Wednesday, 12 May 2021, commencing at 12.00 noon, at the offices of Maven Capital Partners UK LLP, Kintyre House, 205 West George Street, Glasgow G2 2LW.

Copies of this announcement and the Annual Report and Financial Statements for the year ended 31 December 2020, will be available to the public at: the registered office of the Company, Kintyre House, 205 West George Street, Glasgow G2 2LW; the offices of Maven Capital Partners UK LLP, Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF; and on the Company's website at www.mavencp.com/migvct4.

The Annual Report and Financial Statements for the year ended 31 December 2020 will be issued to Shareholders and filed with the Registrar of Companies 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 31 December 2019 have been delivered to the Registrar of Companies and contained an audit report that was unqualified and did not constitute statements under S498(2) or S498(3) of the Companies Act 2006.

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 be submitted to the National Storage Mechanism and will be available for inspection at: https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.

By Order of the Board

Maven Capital Partners UK LLP

Secretary

9 April 2021

 

END

 

 

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