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MavIncGroVCT4 (MAV4)

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Friday 07 April, 2017

MavIncGroVCT4

Annual Financial Report

RNS Number : 9756B
Maven Income & Growth VCT 4 PLC
07 April 2017
 

Maven Income and Growth VCT 4 PLC

 

Final results for the year ended 31 December 2016

 

Highlights for the year

 

•      NAV total return of 143.40p per share (2015: 140.16p) at the year end, up 2.31% over the year

 

•      NAV at year end of 99.00p per share (2015: 101.01p) after payment of dividends totalling 5.25p during the year

 

•      Six new VCT qualifying private equity investments added to the portfolio

 

•      Strong pipeline of qualifying private equity investments

 

•      Realisation of Nenplas, achieving a total return of 5.0 times cost

 

•      Disposal of Dantec Hose, generating a total return of 2.1 times cost

 

•      Proposed final dividend of 3.05p per share (2015: 3.05p)

 

 

Chairman's Statement

On behalf of your Board I am pleased to announce the results for the year to 31 December 2016. During the reporting period your Company has delivered further growth, with NAV total return increasing to 143.40p. This positive outcome reflects the profitable realisation of a number of the more mature holdings, as well as the strength of the underlying portfolio which has generated healthy levels of income and supported uplifts in the valuations of a number of assets. In light of this encouraging performance the Board is proposing a final dividend of 3.05p per share, taking full year distributions to 5.25p and representing an annual tax-free yield of 6.03% based on the share price at the year end.

 

The period under review has been one of considerable change for the UK VCT industry following the enactment of the revised VCT legislation in November 2015. The new rules have introduced a number of restrictions on the types of qualifying transactions and companies in which VCTs can invest, requiring the Manager to focus on the provision of development capital or investing in businesses with growth finance requirements, rather than management buy-outs or acquisition based transactions which have traditionally offered a more predictable return profile. The investment team at Maven is highly experienced at sourcing and executing transactions that meet the revised qualification criteria, and the Board is pleased to report that six new VCT qualifying investments were completed during the year. The Directors are also aware that there is a large and diverse pipeline of prospective new investments, at various stages of due diligence, and anticipate seeing a number of these transactions complete during the first half of the current financial year.

 

Notwithstanding the challenges presented by the implementation of the revised VCT legislation and the economic uncertainty resulting from the outcome of the European Union (EU) referendum in June 2016, the Board believes that considerable progress has been achieved by your Company during the reporting period. The core portfolio has traded well, as can be seen from the detailed analysis of portfolio developments included in the Investment Manager's Review in the Annual Report. The continuing growth experienced by a number of private company holdings has enabled the valuations of these assets to be increased, reflecting positive trading results. The Board remains conscious of the impact that the low oil price is having on companies with exposure to this sector. Whilst remedial actions have been taken by investee companies with direct exposure to the oil & gas sector, the external environment has continued to be challenging and is likely to remain so until the second half of 2017. As such, a number of these investments have had their valuations conservatively reduced to reflect prevailing market conditions.

 

During the period a number of profitable realisations have been achieved, most notably the exit from Nenplas which completed in December 2016, achieving a total return of 5.0 times cost over the life of the investment. Given the maturity of the portfolio, the Board is aware that discussions are in progress regarding potential exits from a number of other private companies, although there can be no certainty that these will lead to profitable realisations.

 

Whilst the full impact of the UK's decision to leave the EU will become clearer once formal negotiations commence, the Board and the Manager have conducted a review of the portfolio and, at present, believe that any overall impact is not likely to be significant. The businesses in which your Company has invested can maintain or adapt their growth strategies as appropriate, with a number of exporters already seeing a short- term benefit from the devaluation of Sterling against several major currencies that has occurred since the June 2016 referendum.

 

The Board is pleased to note that, in June 2016, Maven received industry recognition for its performance when it was named Private Equity House of the Year, for the second year running, at the 2016 High Potential Business Awards (previously the M&A Awards). This category celebrates outstanding growth businesses and their financial backers, recognising private equity managers that have displayed the keenest judgement and opportunism in completing acquisitions or exit transactions. Maven was also named Private Equity Manager of the Year at the ACQ Global Awards, which celebrate achievement and innovation across the fund management industry.

 

Dividends

The Board recommends that a final dividend of 3.05p per Ordinary Share, comprising 0.20p of revenue and 2.85p of capital, be paid on 26 May 2017 to Shareholders on the register at 28 April 2017. This would bring total dividends for the year to 5.25p per share representing a yield of 6.03% based on the year-end closing mid-market share price of 87.00p. The effect of paying the proposed final dividend would be to reduce the NAV of the Company by the total cost of the distribution.

 

Since the Company's launch, and after receipt of the proposed final dividend, Shareholders will have received 47.45p per share in tax-free dividends. The Board considers it important Shareholders are aware that the move to invest in development capital and growth finance opportunities, as required by the revised VCT legislation, is likely to result in less predictable capital gains and income flows, with the result that the quantum and timing of future dividend payments could be subject to fluctuation.

 

Fund Raising

As the Company had significant cash liquidity for new investment, the Board elected not to raise further funds during the year. However, given the anticipated investment rate, this will be kept under regular review.

 

Share Buy-backs

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

 

It is intended that, subject to market conditions, available liquidity and the maintenance of the Company's VCT status, shares will be bought back at prices representing a discount of up to 15% of the prevailing NAV per share.

 

Regulatory Developments

As previously reported, the Finance Act (No. 2) 2015 was enacted in November 2015 and introduced a number of changes to the legislation governing VCTs. The new rules are designed to bring the UK VCT scheme into line with EU State Aid Rules for smaller company investment and have introduced a number of restrictions on the types of qualifying transactions and companies in which VCTs can invest. Unlike previous changes in legislation, the new rules apply to all funds raised by a VCT, including those raised prior to November 2015, although existing investments completed prior to the change in legislation are unaffected.

 

The new rules specifically prohibit participation in management buy-outs or acquisitions, and limit the ability to support older companies unless specific criteria are met. The emphasis is, therefore, on providing development capital to younger and earlier stage companies, or supporting more established businesses which can demonstrate growth strategies that satisfy specific provisions under the revised qualification criteria. In a further amendment, the March 2016 Budget Statement included changes to the rules governing non-qualifying investments by VCTs. With effect from 6 April 2016, VCTs have only been able to make qualifying investments and certain limited investments for liquidity purposes, with other types of new non-qualifying investments now prohibited.

 

The revised legislation has imposed additional diligence and administrative requirements on the investment process to ensure that all aspects of the potential investment and transaction structure remain compliant with the new rules. The Manager continues to pursue a cautious approach and works closely with a specialist VCT adviser engaged by the Company to assist in interpreting the revised legislation and advising on the VCT tax clearance process with HM Revenue & Customs (HMRC), with advance assurance secured prior to any new investment proceeding. The Board welcomed the announcement in the Chancellor's 2016 Autumn Statement that, in response to the increased volume of applications submitted and the resultant delays experienced in obtaining clearance for proposed investments, a consultation is to be carried out to consider the options for streamlining the HMRC advance assurance service.

 

The 2016 Autumn Statement highlighted that the Government will no longer be initiating a review of the provision allowing replacement capital in certain new VCT transactions, but suggested that this may be reviewed at some point in the future. Whilst the Directors and the Manager were disappointed by this announcement, as the ability to include replacement capital was viewed as an important flexibility under the new rules, it does not impact the Company's investment strategy which has already been adapted to meet the requirements of the new rules.

 

The Future

Your Board is encouraged by the progress achieved during the reporting period, notwithstanding the challenges presented by the enactment of the revised VCT legislation. Whilst the new VCT rules have introduced restrictions on the types of transactions and companies in which your Company can invest, the Directors believe that the Manager has adapted well to these changes.  This capability is demonstrated by the six new VCT qualifying investments completed across a range of diverse industries during the reporting period, and the strong pipeline of prospective new investments currently in progress across Maven's office network.

 

The strategy for your Company continues to be to build a large and varied portfolio of income generating private company holdings, capable of supporting attractive levels of tax free dividends to Shareholders, whilst maintaining the underlying NAV. The Directors anticipate steady growth in the number of investments held by your Company, comprising of existing later stage investments which were completed prior to the changes in the VCT legislation, alongside new holdings in a range of carefully selected, high growth opportunities. Whilst the increased concentration of younger companies may impact the timing of future distributions to Shareholders, your Board is confident that this broad-based approach to portfolio construction will continue to underpin investor returns in the years ahead.

 

 

Ian Cormack

Chairman

7 April 2017

 

 

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 which invests in accordance with the investment objective set out in this report.

 

Investment Objective

The Company aims to achieve long-term capital appreciation and generate maintainable levels of 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/ISDX quoted companies which meet the criteria for VCT qualifying investments and have strong growth potential;

•      investing no more than £1 million in any company in one year and no more than 15% of the Company's assets by cost in one business at any time; and

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

 

Principal Risks and Uncertainties

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

 

Investment Risk

Many of the Company's investments are in small and medium sized UK unquoted and AIM/ISDX quoted companies which, by their nature, entail a higher level of risk and lower liquidity than investments in large quoted companies. The Board aims to limit the risk attaching to the investment portfolio as a whole by ensuring a structured selection, monitoring and realisation process. 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;

•      seeking to appoint a non-executive director to the board of each private investee company, provided from the Manager's investment management team or from its pool of experienced independent directors;

•      co-investing with other clients of the Manager in larger deals, which tend to carry less risk;

•      not investing in hostile public to private transactions; and

•      retaining the services of a manager that can provide the resources required to achieve the investment objective and meet the criteria stated above.

 

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 investments in order to finance any new unquoted and listed investments. 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.

 

Credit Risk

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

 

Internal Control Risk

The Board reviews regularly the system of internal controls, both financial and non-financial, operated by the Company and the Manager. These include controls designed to ensure that the Company's assets are safeguarded and that all records are complete and accurate.

 

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, enacted through the Finance Act (No. 2) 2015.

 

Legislative and Regulatory Risk

In order to maintain its approval as a VCT, the Company is required to comply with current VCT legislation in the UK as well as the EU State Aid Rules. Changes in the future to either 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 British Venture Capital Association (BVCA).

 

The Company has retained Philip Hare & Associates LLP as its VCT Adviser.

 

Breaches of other regulations including, but not limited to, the Companies Act 2006, the FCA Listing Rules, the FCA Disclosure and Transparency Rules 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 introduced a new authorisation and supervisory regime for all investment companies in the EU. The Company was approved by the FCA as a self-managed UK AIFM under the AIFMD.

 

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

 

Political Risk

In a referendum held on 23 June 2016, the UK voted to leave the EU (a process informally known as Brexit). The formal process of implementing this decision is contained within Article 50 of the Lisbon Treaty. The political, economic and legal consequences of the referendum vote are not yet known. It is possible that investments in the UK may be more subjective to value, more difficult to assess for suitability of risk, harder to buy or sell, or 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 exit from the EU. The UK's laws and regulations concerning funds may, in future, 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.

 

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

 

Statement of Compliance with Investment Policy

The Company is adhering to its stated investment policy and managing the risks arising from it. This can be seen in various tables and charts throughout the Annual Report, 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 31 December 2016 and its performance during the year then ended is included in the Chairman's Statement, which also includes an overview of its 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 network of offices, which supply new deals and enable it to monitor the geographically widespread portfolio of companies effectively.

 

The Investment Portfolio Summary on pages 30 and 31 of 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 on pages 16 and 17 of the Annual Report shows that the portfolio is diversified across a variety of industry sectors and deal types. The level of qualifying investments is monitored by the Manager on a daily basis and reported to the Risk Committee quarterly.

 

Key Performance Indicators

At each Board Meeting, the Directors consider a number of financial performance measures to assess the Company's success in achieving its investment objective and these also enable Shareholders and prospective investors to gain an understanding of its business. The key performance indicators are as follows:

 

•      NAV total return;

•      dividend growth;

•      share price discount to NAV;

•      investment income; and

•      operational expenses.

 

The NAV total return is a measure of Shareholder value that includes the current NAV per share and the sum of dividends paid to date. The dividend growth measure shows how much of that Shareholder value has been returned to original investors in the form of dividends. A historical record of these measures is shown in the Financial Highlights on pages 5 and 6 of the Annual Report. The change in the profile of the portfolio is reflected in the Summary of Investment Changes on page 12 of 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.

 

There is no meaningful 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 appropriate indices and the Company's peer group. 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 features that may impact on the Company's future development and performance.

 

Valuation Process

Investments held by Maven Income and Growth VCT 4 PLC in unquoted companies are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. Investments quoted or traded on a recognised stock exchange, including AIM, are valued at their bid prices.

 

Share Buy-backs

At the forthcoming AGM, the Board will seek the necessary Shareholder authority to continue to conduct a share buy-back programme under appropriate circumstances.

 

Employee, Environmental and Human Rights Policy

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

 

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 on pages 49 to 53 of the Annual Report.

 

Future Strategy

The Board and the Manager intend to maintain the policies set out above for the year ending 31 December 2017 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:

 

 

Ian Cormack

Director

7 April 2017

 

Income Statement

For the Year Ended 31 December 2016

 

 

 

 

Year ended 31 December  2016

Year ended 31 December  2015

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Gains on investments


-

1,424

1,424

-

2,866

2,866

Income from investments


1,057

-

1,709

-

1,709

Other income


4

-

4

1

-

1

Investment management fees


(215)

(862)

(1,077)

(275)

(1,097)

(1,372)

Other expenses


(400)

-

(400)

(200)

-

(200)

Net Return on ordinary activities before taxation

446

562

1,008

1,235

1,769

3,004

Tax on ordinary activities


(85)

85

-

(219)

219

-

Return attributable to Equity Shareholders

361

647

1,088

1,016

1,988

3,004

 

Earnings per share (pence)

 

1.09

 

1.95

 

3.04

 

3.03

 

5.94

 

8.97

 

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 returns per share figures are relevant. The basic and diluted earnings per share are therefore identical.

 

The total column of this Statement is the Profit and Loss Account of the Company.

 

 

Statement of Changes in Equity

For the Year Ended 31 December 2016

 

 

 

 

 

 

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 31 December 2015

3,354

19,449

(697)

1,401

9,096

290

983

33,876

Net return

-

-

174

473

-

-

361

1,008

Dividends paid

-

-

(1,048)

-

-

-

(700)

(1,748)

Repurchase and cancellation of shares

(64)

-

-

-

(568)

64

-

(568)

At 31 December 2016

3,290

19,449

(1,571)

1,874

8,528

354

644

32,568

 

For the Year Ended 31 December 2015

 

 

 

 

 

 

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 31 December 2014

3,205

17,677

(1,018)

883

9,621

229

541

31,138

Net return

-

-

1,470

518

-

-

1,016

3,004

Dividends paid

-

-

(1,149)

-

-

-

(574)

(1,723)

Repurchase and cancellation of shares

(61)

-

-

-

(525)

61

-

(525)

Share issue

210

1,772

-

-

-

-

-

1,982

At 31 December 2015

3,354

19,449

(697)

1,401

9,096

290

983

33,876

 

The accompanying Notes are an integral part of the Financial Statements.

 

 

Balance Sheet

As at 31 December 2016

 

 

 

31 December 2016

£'000

31 December 2015

£'000

Fixed assets



 

 

Investments at fair value through profit or loss


28,108

33,121

 

Current assets




Debtors


347

418

Cash


4,394

762

 

Creditors


4,741

1,180



Amounts falling due within one year


(281)

(425)

Net current assets

4,460

755

Net assets

32,568

33,876

 

 

 

Capital and reserves




Called up share capital


3,290

3,354

Share premium account


19,449

19,449

Capital reserve - realised


(1,571)

(697)

Capital reserve - unrealised


1,874

1,401

Special  distributable reserve


8,528

9,096

Capital redemption reserve


354

290

Revenue reserve


644

983

Net assets attributable to Ordinary Shareholders

32,568

33,876

 

Net asset value per Ordinary Share (pence)

 

 

 

 

99.00

 

101.01

 

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:

 

 

Ian Cormack

Director

7 April 2017

 

The accompanying Notes are an integral part of the Financial Statements.

 

 

Cash Flow Statement

For the Year Ended 31 December 2016

 

 

 

Year ended 31 December 2016

£'000

Year ended 31 December 2015

£'000

Net cash flows from operating activities


(1,618)

(1,376)

 

Cash flows from investing activities



Investment income received


1,106

1,747

Deposit interest received


4

1

Purchase of investments


(6,441)

(24,377)

Sale of investments


12,897

23,468

Net cash flows from investing activities


7,566

839

 

 

Cash flows from financing activities


 

 

 

(1,748)

 

 

 

(1,723)

Equity dividends paid

Issue of Ordinary Shares


-

2,002

Merger costs


-

(20)

Repurchase of Ordinary Shares


(568)

(525)

Net cash flows from financing activities


(2,316)

(266)





Net increase/(decrease) in cash


3,632

(803)

 

 

Cash at beginning of year


 

 

762

 

 

1,565

Cash at end of year

4,394

762

 

The accompanying Notes are an integral part of the Financial Statements.

 

 

NOTES TO THE FINANCIAL STATEMENTS

For the Year Ended 31 December 2016

 

1.    Accounting Policies

(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 which 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 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; 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 which are capable of reversal in one or more subsequent periods.

 

Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

 

The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and revenue account on the same basis as the particular item to which it relates using the Company's effective rate of tax for the period.

 

UK corporation tax is provided at amounts expected to be paid/recovered using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date.

 

(e)   Investments

In valuing unlisted investments, the Directors follow the criteria set out below. These procedures comply with the revised International Private Equity and Venture Capital Valuation Guidelines 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 investments completed prior to the reporting date and those at an early stage in their development, fair value is determined using the Price of Recent Investment Method, except that adjustments are made when there has been a material change in the trading circumstances of the company or a substantial movement in the relevant sector of the stock market.

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

3.    Mature companies are valued by applying a multiple to their prospective earnings to determine the enterprise value of the company.

3.1     To obtain a valuation of the total ordinary share capital held by management and the institutional investors, the value of third party debt, institutional loan stock, debentures and preference share capital is deducted from the enterprise value. The effect of any performance related mechanisms is taken into account when determining the value of the ordinary share capital.

3.2     Preference shares, debentures and loan stock are valued using the Price of Recent Investment Method. When a redemption premium has accrued, this will only be valued if there is a reasonable prospect of it being paid. Preference shares which carry a right to convert into ordinary share capital are valued at the higher of the Price of Recent Investment Method basis and the price/ earnings basis, 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 portfolio management team of Maven Capital Partners UK LLP. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

6.    In accordance with normal market practice, investments listed on the Alternative Investment Market or a recognised stock exchange are valued at their bid market price.

 

(f)    Fair value measurement

Fair value is defined as the price that the Company would receive upon selling an investment in a timely transaction to an independent buyer in the principal or the most advantageous market of the investment. A three-tier hierarchy has been established to maximise the use of observable market data and minimise the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable.

 

Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity.

 

Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on best information available in the circumstances.

 

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

 

•      Level 1 - 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)   Significant judgements and estimates

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

 

Reserves

 

Share premium account

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

 

Capital reserves

Gains or losses on investments realised in the year that have been recognised in the Income Statement are transferred to the capital reserve realised account on disposal. Furthermore, any prior unrealised gains or losses on such investments are transferred from the capital reserve unrealised account to the capital reserve realised account on disposal. Increases and decreases in the fair value of investments are recognised in the Income Statement and are then transferred to the capital reserve unrealised account. The capital reserve realised account also represents capital dividends, capital investment management fees and the tax effect of capital items.

 

Special distributable reserve

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

 

Capital redemption reserve

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

 

Revenue reserve

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

 

Return per Ordinary Share

Year ended 31 December 2016

Year ended 31 December 2015

 

The returns per share have been based on the following figures:


 

 

 

 

 

33,489,492


 

 

33,260,669

33,260,669

 

Weighted average number of Ordinary Shares

 

Revenue return

 

£361,000

 

£1,016,000

Capital return

£647,000

£1,988,000

Total return


£1,008,000

£3,004,000

 

 

Net asset value per Ordinary Share

The net asset value per Ordinary Share as at 31 December 2016 has been calculated using the number of Ordinary Shares in issue at that date of 32,897,502 (2015: 33,535,502).

 

 

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 2016 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, 17 May 2017, commencing at 10.30am, at the offices of Maven Capital Partners UK LLP, Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF.

 

Copies of this announcement and the Annual Report and Financial Statements for the year ended 31 December 2016, 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/migvct4.

 

The Annual Report and Financial Statements for the year ended 31 December 2016 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 2015 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: www.morningstar.co.uk/uk/NSM

 

 

By Order of the Board

Maven Capital Partners UK LLP

Secretary

7 April 2017

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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