Annual Financial Report

RNS Number : 3902O

Maven Income & Growth VCT PLC

29 May 2020

 

Maven Income and Growth VCT PLC

Final results for the year ended 29 February 2020

The Directors are pleased to report the Company's financial results for the year ended 29 February 2020.

Highlights

• NAV total return at the year end of 143.26p per share (2019: 142.67p)

• NAV at the year end of 46.35p per share (2019: 47.76p), after payment of the interim dividend of 2.00p per share

• Final dividend of 2.00p per share proposed

• Offer for Subscription fully subscribed, raising £20 million

• Deployment of £5.3 million in total, including 18 new private company and AIM quoted investments

• Five profitable private company realisations completed during the year

• Post the period end, updated NAV announced of 43.49p per share as at 20 March 2020

Chairman's Statement

Since the end of your Company's financial year, the global economy and financial markets have been impacted significantly by the coronavirus (COVID-19) pandemic. These are unprecedented times that have disrupted personal and working life for most people. On behalf of the Board, I wish to reassure Shareholders that, since the emergence of the pandemic in the UK, the Manager has been actively working with portfolio companies to protect Shareholder value whilst, at the same time, complying with Government guidelines. However, it is important to note that nearly 50% of your portfolio by value is invested in young and dynamic growth companies, which typically operate with a flexible cost base and many of which are focused on the software and technology space, which may be less affected by the current economic conditions. Where possible, portfolio companies have also availed themselves of Government led support, including the Coronavirus Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme (CBILS). Further information is provided in the Investment Manager's Review and in Note 17 to the Financial Statements in the Annual Report. The Board and the Manager remain in regular contact regarding this evolving situation and will continue to provide updates to Shareholders as appropriate.

Turning to the performance in the financial year, your Company reported a further annual increase in NAV total return, supported by the realisation of five private company holdings. The Directors recognise the importance of tax-free distributions to Shareholders and remain committed to making dividend payments whenever possible. In recognition of this positive performance, the Directors are pleased to propose a final dividend of 2.00p per share. This takes full year distributions to 4.00p per share which, based on the share price at the year end, represents a yield of 9.17%.

During the financial year, your Company also made encouraging progress in line with its long term growth strategy. A key component of this was the completion of the £20 million fundraising, which closed early, fully subscribed in March 2019. This additional capital has enabled your Company to continue to invest in carefully researched growth orientated businesses operating across a wide range of sectors, whilst also continuing to support investee companies that are gaining commercial traction and require additional capital to deliver their business plan. It is encouraging to report that, during the year, £5.3 million was invested in a range of private and AIM quoted companies that have the potential to achieve further growth in Shareholder value as they reach maturity.

As the portfolio continues to evolve, the proportion of holdings in early stage companies will increase in line with the requirements of the VCT regulations.  The ability to provide follow-on funding will become an important element of the investment strategy, as many of these new portfolio companies will require several rounds of funding before they reach maturity and their value is optimised. The Manager has, therefore, taken the cautious approach of making smaller initial investments, where possible, often as part of a syndicate with other VCT houses or co-investment partners, as a means of managing portfolio risk.  Whilst early stage companies can offer the opportunity to generate significant capital gains, this has to be balanced against their stage of development and inherently different risk profile. Investing through a phased or tranched approach provides the opportunity to monitor commercial progress closely and continually assess the merits of investment before committing further financial support.

 

The political and economic uncertainty surrounding the UK's departure from the EU continued to dominate the domestic macro-economic outlook throughout the financial year. Whilst the full extent of future global trading relationships is still to be determined, the portfolio has not been materially affected as at the date of this Annual Report. The majority of the investee companies have limited direct exposure to the EU, and those that do have been implementing contingency plans to mitigate any potential impact. Assessing the medium to long term impact of COVID-19 on the portfolio is ongoing. The Manager is working closely with each investee company to support them as they take appropriate protective action. The Board is being regularly appraised of the situation and will continue to keep Shareholders updated as required.

The Investment Manager's Review in the Annual Report contains details of key portfolio developments during the financial year, including a summary of the new investments and realisations completed. It is pleasing to report that a number of the more established private companies within the portfolio continued to trade well, which enabled the valuations of certain assets to be increased. Those companies that are at an earlier stage of development generally performed in line with expectations, with most achieving growth in revenue over the previous year, which has, in a small number of cases, warranted uplifts to valuations. Aside from the specific provisions that were taken by your Company in response to the outbreak of COVID-19, reflected in the revised NAV at 20 March 2020 announced on 26 March 2020, there were also a small number of investments that had been operating behind plan or experienced a market adjustment that had influenced performance and, as a result, the valuations of these assets were reduced. During the year, two early stage portfolio companies failed to scale their businesses in line with plan and the values of the holdings were fully written down, with one of those companies being placed into administration.

This was also a highly active period for realisations, with the completion of five exits from private companies which each generated a total return in excess of current carrying value. In June 2019, the holdings in Just Trays, the UK's leading designer and manufacturer of shower trays and accessories, and wind turbine maintenance specialist GEV, were realised for total returns of 2.0 times and 2.7 times cost respectively over their holding periods. In September 2019, the exit from ELE Advanced Technologies, a manufacturer of precision engineering components, was completed, generating a total return of 4.4 times cost over the life of the investment. In December 2019, your Company completed its first exit from the portfolio of earlier stage assets, with the realisation of fibre network provider ITS Technology for a total return of just above 1.0 times cost over the investment period. In February 2020, the holding in Attraction World, a provider of worldwide theme park and attraction tickets, was realised at a value in line with revised carrying value and generated a total return of 1.9 times cost over the life of the investment. Whilst the Board is aware that discussions are underway regarding potential exits from other portfolio companies, it is likely that, in light of the COVID-19 outbreak, a number of these sale processes will be put on hold until there is a greater degree of economic certainty.

Dividends and Distributable Reserves

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. During the previous financial year, your Company paid an enhanced level of interim dividends, which occurred outwith the normal dividend payment cycle and was the result of a build-up of distributable reserves and the requirement to maintain ongoing compliance with the VCT regulations.

Whilst your Company does not have a specific dividend target, the Board and the Manager recognise the importance of tax-free distributions to Shareholders and, following recent realisation activity, are pleased to propose a final dividend of 2.00p per Ordinary Share in respect of the year ended 29 February 2020. The final dividend will be paid on 31 July 2020 to Shareholders on the register at 3 July 2020 and will bring total distributions for the year to 4.00p per Ordinary Share, representing a yield of 9.17% on the year end closing mid-market share price of 43.60p. Since the Company's launch, and after receipt of the proposed final dividend, Shareholders will have received 98.91p 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.

At a General Meeting of the Company held on 2 November 2018, Shareholders approved the resolutions to cancel the Company's Share Premium Account and the Capital Redemption Reserve, pursuant to the Companies Act 2006, to create a further pool of distributable reserves that could be used for future dividends or any other applicable purpose. On 4 December 2019, the Directors confirmed that the cancellation had been approved by the Court and registered with the Registrar of Companies on 19 November 2019, at which point the cancellation became effective.

Whilst the level of distributable reserves has increased, the Directors would like to remind Shareholders that, as the portfolio evolves and a greater proportion of holdings are invested in young companies with growth capital requirements, there will continue to be fluctuations in the quantum and timing of dividend payments. Distributions will be more closely linked to realisation activity and, if larger distributions are required as a consequence of exits, this could result in a commensurate 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.

Suspension of the Dividend Investment Scheme (DIS)

On 26 March 2020, the Board announced that, in light of the volatility in financial markets caused by the COVID-19 pandemic, it had deemed it appropriate to suspend the DIS with immediate effect. As a result, the proposed final dividend of 2.00p per share for the financial year to 29 February 2020, and all subsequent dividends until further notice, will be paid to Shareholders either by cheque or bank transfer using existing mandate instructions. Written confirmation of the suspension in the operation of the DIS will be issued to those Shareholders who had elected to participate.

If a Shareholder has a specific query with respect to the DIS suspension, they should contact The Company Secretary, Maven Income and Growth VCT PLC, c/o Maven Capital Partners UK LLP, First Floor, Kintyre House, 205 West George Street, Glasgow G2 2LW or email: [e-mail].

Fund Raising

On 7 March 2019, the Directors were pleased to announce that your Company's Offer for Subscription, which launched on 26 September 2018 as part of a joint Offer with Maven Income and Growth VCT 5 PLC, was fully subscribed, including full utilisation of the over-allotment facility, raising £20 million. The allotment of 38,112,053 new Ordinary Shares in respect of the 2018/19 tax year took place on 6 March 2019, with the allotment of 3,049,148 new Ordinary Shares in respect of the 2019/20 tax year completing on 24 April 2019.

The funds raised have enabled your Company to continue to expand its portfolio by making new investments in growth focused private and AIM quoted companies that operate across a range of market sectors and are capable of generating capital gains, as well as ensuring that existing portfolio companies can continue to be supported through follow-on funding where there is an ongoing business case and commercial traction that merits support. The additional capital will allow your Company to continue its share buy-back policy, whilst 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.

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

Share Buy-backs

Shareholders will be aware that a primary objective for the Board is to ensure that the Company retains sufficient liquidity to make 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. The Board maintains the view that, despite the market volatility in relation to COVID-19, it currently remains appropriate to operate the buy-back policy as this is an important mechanism for ensuring an orderly market in the 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

Whilst the 2019 Budget did not introduce further amendments to the rules governing VCTs, a key focus for the financial year has been satisfying the requirement of the Finance Act 2018, which increased the threshold level of qualifying investments that a VCT must hold from 70% to 80%. The Directors are pleased to confirm that this was achieved ahead of 1 March 2020, being the date of compliance for your Company. The qualifying position will continue to be closely monitored by the Manager and reviewed by the Board on a regular basis.

In February 2019, the Association of Investment Companies (AIC) issued an updated version of the AIC Corporate Governance Code (the AIC Code), reflecting the revised UK Corporate Governance Code (the UK Code), which was published in July 2018. Having considered the implications and reporting obligations under the revised Codes, and consistent with maintaining high standards of corporate governance, the Board has adopted the AIC Code. Shareholders will note the inclusion of a number of additional disclosures in this Annual Report, reflecting application of the AIC Code, and the notable changes to the revised AIC Code are highlighted in the Statement of Corporate Governance in the Annual Report.

During the year, the Manager has been working towards the implementation of the Senior Managers and Certification Regime (SMCR) which, for solo regulated firms such as Maven, came into effect on 9 December 2019. The SMCR replaces the FCA's approved persons regime and seeks to increase transparency and accountability of processes and structures within FCA regulated entities, including Maven. The Board is pleased to note that all relevant requirements of the SMCR were achieved by Maven ahead of the implementation date.

Annual General Meeting (AGM)

The 2020 AGM will be held in the Glasgow office of Maven Capital Partners UK LLP on 22 July 2020 commencing at 12.00 noon. The Notice of Annual General Meeting can be found in the Annual Report.

The Directors are aware that the AGM is a good opportunity for Shareholders to meet the Board and the Manager but also consider the well-being of its Shareholders and other AGM attendees to be their priority. Therefore, in light of the current Government advice against all non-essential travel and maintaining social distancing, Shareholders will not be allowed 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 20 July 2020. Proxy votes can be also be submitted by CREST or online using the Registrar's Share Portal Service at www.signalshares.com.

The Board would also encourage Shareholders to submit any questions for the Board and Manager by email or by letter in advance of the AGM. A summary of responses will be published after the AGM on the Company's website at: www.mavencp.com/migvct.

Shareholders wishing to submit a question should write to: The Company Secretary, Maven Income and Growth VCT PLC, c/o Maven Capital Partners UK LLP, First Floor, Kintyre House, 205 West George Street, Glasgow G2 2LW or email to: [e-mail].

The Future

Whilst the COVID-19 pandemic has presented a number of significant unforeseen economic and social challenges for the UK and global economy, your Board remains committed to continuing to build a large and broadly based portfolio of carefully selected private and AIM quoted companies that are capable of generating value as they mature. Following the success of the 2019 fundraising, your Company has the liquidity to support this strategy, whilst also maintaining the

capability to continue to support existing portfolio companies that are making measurable progress. However, in light of the current market uncertainty, the Manager is likely to be more circumspect in terms of new investment activity until the economic effects of the pandemic become clearer.

John Pocock

Chairman

29 May 2020

 

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. The Board holds at least one meeting per annum at which strategic matters are discussed.

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

Under an investment policy approved by the Directors, 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 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.

The Company had no borrowings as at 29 February 2020 and, as at the date of this Report, the Board has no intention of utilising the borrowing facility.

Principal and Emerging 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/NEX quoted companies which, by their nature, carry a higher level of risk and lower liquidity relative to 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 the Manager. 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 the Manager;

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

• taking steps to ensure that the 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.

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 VCT legislation in the UK as well as the EU State Aid Rules. Changes in 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 AIC and the British Private Equity and Venture Capital Association (BVCA).

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

Breaches of other regulations including, but not limited to, the Companies Act 2006, the FCA Listing Rules, the FCA Disclosure Guidance and Transparency Rules, the GDPR, or 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 damage or loss.

The AIFMD, which regulates the management of alternative investment funds, including VCTs, introduced a new authorisation and supervisory regime for all investment companies in the EU. The Company is a small registered and internally managed alternative investment fund under the AIFMD. 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 Market Services to act on its behalf to report annually to HMRC and to ensure compliance with this legislation.

Political Risk

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 assess for suitability of risk, harder to buy or sell and, therefore, there will be a greater level of subjectivity in their valuations. 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 future, the UK's 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 territories in which the shares of the Company may be promoted and sold.

The Board reviews the political situation on a regular basis, together with any associated changes to the economic, regulatory and legislative environment, in order to ensure that any risks arising 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 35% of Shareholders now receiving paper reports.

The Board is also aware that the Manager continues to take into account environmental, social and governance matters when considering investment proposals. VCTs in general are regarded as supporting small and medium sized enterprises, investment in which helps to create local employment 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 taken if required.

Management Risk

The Directors are aware of the risk that investment opportunities could fail, 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 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 mid to long term commitment and are relatively illiquid, the Company retains a portion of the portfolio in cash or cash equivalents in order to finance any new unlisted investment opportunities. The Company has no 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 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 also contained in Note 16 to the Financial Statements.

Other Emerging Risks

The Directors are cognisant of the potential impact of the COVID-19 outbreak and its implications for the activities of the Manager and on the performance of investee companies. This is covered in more detail in the Chairman's Statement, the Investment Manager's Review and Note 17 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 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 position as at 29 February 2020 and its performance during the year then ended is included in the Chairman's Statement, which also includes an overview of its strategy and business model.

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 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 in the Annual Report shows that the portfolio is diversified across a variety of industry sectors and transaction types. The level of VCT qualifying investment is monitored by the Manager on a daily basis and reported to the Risk Committee quarterly, or as otherwise required.

Key Performance Indicators

During the year, the net return on ordinary activities before taxation was £548,000 (2019: £1,099,000); gains on investments were £579,000 (2019: £1,292,000); and earnings per share were 0.59p (2019: 2.06p).

The Directors also consider a number of APMs to assess the Company's success in achieving its objective and enable Shareholders and prospective investors to gain an understanding of the Company's 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 both the current NAV per share and total dividends paid to date. The annual yield is the total dividends paid per share 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 its net asset value per share.

Definitions of the APMs can be found in the Glossary in the Annual Report. A historical record of these measures is shown in the Financial Highlights 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 these are both 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 the Company's ranking within the VCT sector by independent analysts. In addition, the Directors consider economic, regulatory and political trends and features 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 Board discussions and decision making during the year. This has been summarised in the table below:

Stakeholder		Form of engagement		Influence on Board/Committee decision making
Shareholders		Annual General Meeting - Shareholders are normally 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 (please refer to Chairman's Statement in the Annual Report). Shareholder documents - the Company reports formally to Shareholders by publishing Annual and Interim Reports, normally in May and October 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. Other significant matters, including those in relation to reporting obligations, are disseminated to Shareholders by way of announcements to the London Stock Exchange. The Company Secretary acts as a key point of contact for the Board 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 and the Directors' Report in the Annual Report. Offer for Subscription - in making a decision to launch any such Offer, the Directors have to consider that it would be in the interest of Shareholders to continue to expand the portfolio and make further investments across a diverse range of sectors. By growing the Company, costs are spread over a wider asset base to promote a competitive total expense ratio, which 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 - as a result of the success of the recent Offer for Subscription, the Company has a strong liquidity position. In order to generate income and add value for Shareholders during the period while the Manager is deploying the funds raised, 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.
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 in 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 of investee companies give presentations to the Board.
				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 and risk management.
	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. Ad hoc meetings are convened to address specific circumstances, such as the COVID-19 pandemic.	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 management of the Company's assets 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 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.

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 Manager intend to maintain the policies set out above for the year ending 28 February 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:

John Pocock

Director

29 May 2020

 

Income Statement

For the year ended 29 February 2020

	Year ended 29 February 2020			Year ended 28 February 2019
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on investments	-	579	579	-	1,292	1,292
Income from investments	966	-	966	664	-	664
Other income	115	-	115	10	-	10
Investment management fees	(150)	(601)	(751)	(102)	(406)	(508)
Other expenses	(361)	-	(361)	(359)	-	(359)
Net return on ordinary activities before taxation	570	(22)	548	213	886	1,099
Tax on ordinary activities	(106)	106	-	(35)	35	-
Return attributable to Equity Shareholders	464	84	548	178	921	1,099
Earnings per share (pence)	0.50	0.09	0.59	0.33	1.73	2.06

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 are included in full in the Annual Report.

Statement of Changes in Equity

For the year ended 29 February 2020

Year ended 29 February 2020	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 28 February 2019	5,286	10,253	(16,907)	(135)	25,746	361	646	25,250
Net return	-	-	276	(192)	-	-	464	548
Cancellation of share premium account	-	(25,787)	-	-	25,787	-	-	-
Cancellation of capital redemption reserve	-	-	-	-	475	(475)	-	-
Share premium cancellation costs	-	(12)	-	-	-	-	-	(12)
Dividends paid	-	-	(1,858)	-	-	-	-	(1,858)
Repurchase and cancellation of shares	(139)	-	-	-	(627)	139	-	(627)
Net proceeds of share issue	4,116	15,536	-	-	-	-	-	19,652
Net proceeds of DIS issue	36	111	-	-	-	-	-	147
At 29 February 2020	9,299	101	(18,489)	(327)	51,381	25	1,110	43,100

Year ended 28 February 2019	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 28 February 2018	5,356	10,253	(10,770)	(599)	26,067	291	574	31,172
Net return	-	-	457	464	-	-	178	1,099
Dividends paid	-	-	(6,594)	-	-	-	(106)	(6,700)
Repurchase and cancellation of shares	(70)	-	-	-	(321)	70	-	(321)
At 28 February 2019	5,286	10,253	(16,907)	(135)	25,746	361	646	25,250

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

Balance Sheet

As at 29 February 2020

	29 February 2020 £'000	28 February 2019 £'000
Fixed assets Investments at fair value through profit or loss Current assets Debtors Cash	26,182 416 16,540	22,578 357 2,349
Creditors Amounts falling due within one year	16,956 (38)	2,706 (34)
Net current assets	16,918	2,672
Net assets	43,100	25,250
Capital and reserves
Called up share capital	9,299	5,286
Share premium account	101	10,253
Capital reserve - realised	(18,489)	(16,907)
Capital reserve - unrealised	(327)	(135)
Special distributable reserve	51,381	25,746
Capital redemption reserve	25	361
Revenue reserve	1,110	646
Net assets attributable to Ordinary Shareholders	43,100	25,250
Net asset value per Ordinary Share (pence)	46.35	47.76

The Financial Statements of Maven Income and Growth VCT PLC, registered number 3908220, were approved and authorised for issue by the Board of Directors on 29 May 2020 on its behalf by:

John Pocock

Director

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

Cash Flow Statement

For the year ended 29 February 2020

	Year ended 29 February 2020 £'000	Year ended 28 February 2019 £'000
Net cash flows from operating activities Cash flows from investing activities Purchase of investments Sale of investments	39 (8,450) 5,300	(77) (2,642) 2,453
Net cash flows from investing activities	(3,150)	(189)
Cash flows from financing activities
Equity dividends paid	(1,858)	(6,700)
Issue of Ordinary Shares	19,799	-
Share premium cancellation costs	(12)	-
Repurchase of Ordinary Shares	(627)	(321)
Net cash flows from financing activities	17,302	(7,021)
Net increase/(decrease) in cash	14,191	(7,287)
Cash at beginning of year	2,349	9,636
Cash at end of year	16,540	2,349

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

Notes to the Financial Statements

For the year ended 29 February 2020

Accounting policies

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

(a)  Basis of preparation

The Financial Statements have been prepared under 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 that 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 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 (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. 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 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 that 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, both described above.

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 (ie developed using market data) for the asset or liability, either directly or indirectly.

• 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 early stage unlisted investments recognised in Note 8 in the Annual Report and explained in Note (e) above.

In the opinion of the Board and the Manager, there are no critical accounting judgements and there are no reasonable possible alternative assumptions and estimates that will have a significant effect on the valuation of the rest of the unlisted portfolio.

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 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. 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. This reserve is distributable.

Capital redemption reserve

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

Earnings per share

	Year ended 29 February 2020	Year ended 28 February 2019
The returns per share have been based on the following figures: Weighted average number of Ordinary Shares Revenue return Capital return	92,232,124 £464,000 £84,000	53,147,172 £178,000 £921,000
Total return	£548,000	£1,099,000

Net asset value per Ordinary Share

Net asset value per Ordinary Share as at 29 February 2020 has been calculated using the number of Ordinary Shares in issue at that date of 92,988,133 (2019: 52,863,884).

These Notes are an integral part of the Financial Statements and are included in full in the Annual Report.

Directors' Responsibility Statement

The Directors believe 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 29 February 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 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 22 July 2020, 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 of the Annual Report and Financial Statements for the year ended 29 February 2020, will be available to the public at the offices of Maven Capital Partners UK LLP, Kintyre House, 205 West George Street, Glasgow G2 2LW; at the registered office of the Company, Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF and on the Company's website at www.mavencp.com/migvct.

The Annual Report and Financial Statements for the year ended 29 February 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 28 February 2019 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.

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

29 May 2020

 

END

 

 

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