TIDMMIG3
RNS Number : 6699F
Maven Income and Growth VCT 3 PLC
10 March 2020
Maven Income and Growth VCT 3 PLC
Final results for the year ended 30 November 2019
The Directors report the Company's financial results for the
year ended 30 November 2019
Highlights
-- NAV total return at the year end of 144.09p per share (2018: 143.66p)
-- NAV at the year end of 59.92p per share (2018: 61.49p), after
payment of the interim dividend of 2.00p per share
-- Final dividend of 2.00p per share proposed
-- Offer for Subscription closed fully subscribed
-- Deployment of GBP6.1 million in total, which includes
investments in 16 new private and AIM quoted companies
-- Two profitable realisations completed during the year, with a
further two full exits completing after the period end
Strategic Report
Chairman's Statement
Your Board is pleased to report on another year of progress,
which has seen NAV total return increase to 144.09p per share. The
Directors are encouraged by the strong investment rate that has
been achieved during the year, with the acquisition of 16 new
portfolio company holdings and the deployment of GBP6.1 million of
investor capital. This is consistent with the strategy of building
a large, broadly based portfolio of emerging and fast growing
companies to support future growth in Shareholder value. There has
also been notable exit activity, with the profitable realisation of
two of the more established portfolio holdings. The Directors are
cognisant of Shareholders' expectations with respect to dividend
payments and, in recognition of the performance achieved in the
financial year, are pleased to propose a final dividend of 2.00p
per share, making the total dividend for the year 4.00p per
share.
Following the success of the 2017/18 fund raising, and with
healthy levels of liquidity, a key focus for the reporting period
was to maintain momentum in the rate of investment, to ensure
effective utilisation of the new capital in line with the
regulatory timeframe for deployment. The Board is pleased to report
that your Company completed its highest ever number of investments
in a single year and comfortably achieved its required target. This
successful outturn is testament to Maven's regionally focused
investment approach, which has evolved over recent years to focus
on early stage investment for its VCT clients. The Board remains
committed to further expanding the portfolio to ensure that
Shareholders have increasing exposure to a diverse range of
attractive, fast growing private company and AIM quoted holdings
that are capable of generating capital gains. The ability to invest
across both markets is therefore an important differentiator,
giving access to a wider range of companies and scope to realise
profits earlier.
In order to continue to help increase the size and scale of your
Company a top-up Offer for Subscription was launched on 13 November
2019 with the objective of raising up to GBP7.5 million of new
capital. On 28 January 2020, the Board announced that the Company
had received subscriptions up to its fundraising limit of GBP7.5
million and that the Offer was closed for further applications. On
5 February 2020, 11,065,572 new Ordinary Shares were allotted in
respect of applications for the 2019/20 tax year. A further
allotment in respect of applications for the 2020/21 tax year, will
take place as soon as practicable after 6 April 2020.
This additional liquidity will enable your Company to continue
to expand its portfolio through the acquisition of new investments
across a wide range of sectors, whilst also supporting existing
companies that are growing and require additional capital to
deliver their plans. As the portfolio evolves and the proportion of
early stage companies continues to increase, the ability to provide
follow-on funding will become an increasingly important element of
the investment strategy, as many of these companies will require
several rounds of funding before they reach maturity and value is
optimised. The Manager has, therefore, taken the cautious approach
of making smaller initial investments, often as part of a syndicate
with another VCT house or co-investment partner, as a means of
managing portfolio risk. The Board recognises that the opportunity
to generate significant capital gains from early-stage companies
has to be balanced against their inherently different risk profile.
Investing through a phased approach provides the opportunity to
monitor commercial progress closely and continually assess the
merits of investment before committing further financial
support.
The Investment Manager's Review in the Annual Report contains a
detailed analysis of portfolio developments and a summary of the
investments completed during the year. Whilst political and
economic uncertainty continued to dominate the UK's macro-economic
outlook throughout the financial year, it is reassuring to report
that the portfolio has not been discernibly impacted to date. The
majority of the underlying investee companies have limited direct
exposure to the EU, and those that do have been implementing
contingency plans to mitigate any potential impact.
The continuing positive performance achieved by a number of the
more established private companies has enabled the valuations of
certain assets to be increased. Those companies that are at an
earlier stage of development have 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. Inevitably, however, there are other
investments that are operating behind plan or have experienced a
market adjustment that has influenced performance and, as a result,
the valuations of these assets have been reduced. In addition, one
early stage portfolio company was unable to scale in line with the
business plan and the value of that holding was fully written down
before the business was placed into administration.
Two notable exits completed during the period. In June 2019, the
holdings in Just Trays, the UK's leading designer and manufacturer
of shower trays and accessories, and wind turbine blade maintenance
specialist GEV were realised for total returns of 2.0 times and 2.7
times cost over their respective holding periods. The Board is
aware that discussions are underway regarding further potential
exits from other portfolio companies, although there can be no
certainty that these will result in profitable realisations.
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 2017 and 2018, your Company made a
number of enhanced dividend payments, which occurred outwith the
normal dividend payment cycle and were 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 30 November 2019. The
dividend will be paid on 17 April 2020 to Shareholders on the
register at 20 March 2020. This will bring total distributions for
the year to 4.00p per Ordinary Share, representing a yield of 7.34%
based on the year end closing mid-market share price of 54.50p.
Since the Company's launch, and after receipt of the proposed final
dividend, Shareholders will have received 86.17p 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 the Company's 2019 AGM, Shareholders approved a Special
Resolution to cancel the 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 Company announced that the High Court of Justice had
confirmed the cancellation of the share premium account and the
capital redemption reserve. The Court Order was registered by 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 are likely to be
fluctuations in the quantum and timing of dividend payments.
Distributions will be more closely linked to realisation activity
and will also reflect the Company's requirement to maintain its VCT
qualifying level. If larger distributions are required this could
result in a reduction in NAV per share, however the Board considers
this to be a tax efficient means of returning value to Shareholders
whilst ensuring ongoing compliance with the requirements of the VCT
legislation.
Dividend Investment Scheme (DIS)
Your Company operates a DIS, through which Shareholders may
elect to have their dividend payments used to subscribe for new
Ordinary Shares issued by the Company under the standing authority
requested from Shareholders at AGMs. Shares issued under the DIS
should qualify for VCT tax relief applicable for the tax year in
which they are allotted, subject to an individual Shareholder's
particular circumstances. If a Shareholder is in any doubt about
the merits of participating in the DIS, or their own tax status,
they should seek advice from a suitably qualified adviser.
Shareholders who wish to participate in the DIS in respect of
future dividends, including the payment of the proposed final
dividend, should ensure that a DIS mandate or CREST instruction, as
appropriate, is received by the Registrar (Link Market Services) in
advance of 3 April 2020, this being the next dividend election
date. The mandate form, terms & conditions and full details of
the scheme (including further details about tax considerations) are
available from the Company's website at www.mavencp.com/migvct3. An
election to participate in the DIS can also be made through the
Registrar's share portal at www.signalshares.com.
Fund Raising
On 13 November 2019, the Directors of your Company, together
with the board of Maven Income and Growth VCT 4 PLC, launched joint
Offers for Subscription of new Ordinary Shares for up to GBP15
million in aggregate (GBP7.5 million for each company). Your
company's Offer closed on 28 January 2020, fully subscribed.
The allotment of 11,065,572 new Ordinary Shares, in respect of
the 2019/20 tax year, was made on 5 February 2020. The allotment
for the 2020/21 tax year will take place as soon as practicable
after 6 April 2020.
This additional liquidity will enable your Company to continue
to expand the portfolio by investing in ambitious, growth focused
private and AIM quoted companies that operate across a range of
markets sectors, and are capable of generating capital gains. It
will also ensure 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.
Furthermore, the funds raised will allow your Company to maintain
its share buy-back policy, whilst also spreading costs over a wider
asset base in line with the objective of maintaining a competitive
total expense ratio for the benefit of all Shareholders.
Further details regarding the new Ordinary Shares issued under
the Offer for Subscription 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
for making investments in line with its stated policy, and for the
continued payment of dividends. However, the Directors also
acknowledge the need to maintain an orderly market in the Company's
shares and have, therefore, delegated authority to the Manager to
buy back shares in the market for cancellation or to be held in
treasury, subject always to such transactions being in the best
interests of Shareholders.
It is intended that, subject to market conditions, available
liquidity and the maintenance of the Company's VCT status, shares
will be bought back at prices representing a discount of between 5%
and 10% to the prevailing NAV per share.
Regulatory Developments
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 requirements 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 December 2019, 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 Code of Corporate Governance
(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 elected to adopt the AIC Code ahead of
your Company's required application date, which is 30 November 2020
(being the end of the first accounting period beginning after 1
January 2019). Shareholders will note the inclusion of a number of
additional disclosures in this Annual Report, reflecting
application of the AIC Code. 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
person regime and aims to increase transparency and accountability
of processes and structures within FCA regulated entities,
including Maven. Whilst the introduction of this regime will have
no direct impact on the way in which your Company is managed or
administered, the Board is pleased to note that all necessary
requirements of the SMCR were achieved by Maven ahead of the
application date.
AGM
The 2020 AGM will be held in the London office of Maven Capital
Partners UK LLP on 8 April 2020 commencing at 12.00 noon. The
Notice of Annual General Meeting can be found in the Annual
Report.
The Future
During the reporting period your Company has made considerable
progress in laying the foundations for future growth. Over the past
two years the portfolio has experienced a significant level of
expansion and diversification with the addition of 25 new private
and AIM quoted investments, which complement and balance the
portfolio of older, more mature investments. The Board anticipates
that the recent strong level of investment activity will continue
during the first half of the new financial year, and that a
combination of building a larger asset base and raising further
capital will leave your Company well positioned to generate
positive Shareholder returns in the future.
Atul Devani
Chairman
10 March 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 below.
Investment Objective
The Company aims to achieve long-term capital appreciation and
generate income for Shareholders.
Business Model and Investment Policy
The Company intends to achieve its objective by:
-- investing the majority of its funds in a diversified
portfolio of shares and securities in smaller, unquoted UK
companies and AIM/NEX quoted companies which meet the criteria for
VCT qualifying investments and have strong growth potential;
-- investing no more than GBP1.25 million in any company in one
year and no more than 15% of the Company's assets by cost in one
business at any time; and
-- borrowing up to 15% of net asset value, if required and only
on a selective basis, in pursuit of its investment strategy.
Principal and Emerging Risks and Uncertainties
The Board and the Audit & 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 considered to be as follows:
Investment Risk
The majority of the Company's investments are in small and
medium sized unquoted UK companies and AIM/NEX quoted companies
which, by their nature, carry a higher level of risk and lower
liquidity than investments in large quoted companies. The Board
aims to limit the risk attached to the investment portfolio as a
whole by ensuring that a robust and structured selection,
monitoring and realisation process is applied. The Board reviews
the investment portfolio with the Manager on a regular basis.
The Company manages and minimises investment risk by:
-- diversifying across a large number of companies;
-- diversifying across a range of economic sectors;
-- actively and closely monitoring the progress of investee companies;
-- co-investing with other clients of Maven and other VCT managers;
-- ensuring valuations of underlying investments are made fairly
and reasonably (see Notes to the Financial Statements 1(e), 1(f)
and 16 for further details);
-- taking steps to ensure that share price discount is managed appropriately; and
-- choosing and appointing an FCA authorised investment manager
with the 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 regularly reviews the system of internal controls,
both financial and non-financial, operated by the Company, the
Manager and other key third party outsourcers such as the Custodian
and Registrar. These include controls designed to ensure that the
Company's assets are safeguarded, all records are complete and
accurate and that the third parties have adequate controls in place
to prevent data protection and cyber security failings.
VCT Qualifying Status Risk
The Company operates in a complex regulatory environment and
faces a number of related risks, including:
-- becoming subject to capital gains tax on the sale of its
investments as a result of a breach of Section 274 of the Income
Tax Act 2007;
-- loss of VCT status and the consequential loss of tax reliefs
available to Shareholders as a result of a breach of the VCT
Regulations;
-- loss of VCT status and reputational damage as a result of
serious breach of other regulations such as the FCA Listing Rules
and the Companies Act 2006 (the Companies Act); and
-- increased investment restrictions resulting from the EU State
Aid Rules incorporated by the Finance (No. 2) Act 2015 and the
Finance Act 2018.
The Board works closely with the Manager to ensure compliance
with all applicable and upcoming legislation, such that VCT
qualifying status is maintained. Further information on the
management of this risk is detailed under other headings in this
Business Report.
Legislative and Regulatory Risk
The Directors strive to maintain a good understanding of the
changing regulatory agenda and consider emerging issues so that
appropriate changes can be implemented and developed in good time.
In order to maintain its approval as a VCT, the Company is required
to comply with current VCT legislation in the UK as well as the EU
State Aid Rules. Changes to either legislation could have an
adverse impact on Shareholder investment returns, whilst
maintaining the Company's VCT status. The Board and the Manager
continue to make representations where appropriate, either directly
or through relevant industry bodies such as the AIC and the British
Venture Capital Association (BVCA).
The Company has retained Philip Hare & Associates LLP as its
principal VCT adviser and also uses the services of a number of
other VCT advisers on a transactional basis.
Breaches of other regulations including, but not limited to, the
Companies Act, the FCA Listing Rules, the FCA Disclosure Guidance
and Transparency Rules, the GDPR, or the Alternative Investment
Fund Managers Directive (the AIFMD), could lead to a number of
detrimental outcomes and reputational damage. Breaches of controls
by service providers to the Company could also lead to reputational
loss or damage.
The AIFMD, which regulates the management of alternative
investment funds, including VCTs, introduced an authorisation and
supervisory regime for all investment companies in the EU. The
Company is a small registered, 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 Standards. The Company has appointed Link Market Services
to act on its behalf to report annually to HMRC and ensure
compliance with this legislation.
Political Risk
The full political, economic and legal consequences of the UK
leaving the EU are not yet known. It is possible that investments
in the UK may be more difficult to value and assess for suitability
of risk, harder to buy or sell, and may be subject to greater or
more frequent rises and falls in value. In the longer term, there
is likely to be a period of uncertainty as the UK seeks to
negotiate its ongoing relationship with the EU and other global
trade partners.
In the future, UK laws and regulations, including those relating
to investment companies and AIFMs, may diverge from those of the
EU. This may lead to changes in the operation of the Company, the
rights of investors, or the list of territories in which the shares
of the Company can be promoted or sold.
The Board regularly reviews the political situation, together
with any associated changes to the economic, regulatory and
legislative environment, in order to ensure that any risks are
mitigated as effectively as possible.
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 paper
copies being printed and posted, with fewer than 10% of
Shareholders now receiving printed 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, which helps to
create local employment across a range of UK geographical
regions.
Other 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 and listed investment trusts in order to finance
any new or follow-on investment opportunities. The Company has only
limited direct exposure to currency risk and does not enter into
any derivative transactions.
Economic Risk
The valuation of investment companies may be affected by
underlying economic conditions such as fluctuating interest rates
and the availability of bank finance, which can be impacted during
times of geopolitical uncertainty and fluctuating markets. The
economic and market environment is kept under constant review and
the investment strategy of the Company is adapted so far as
possible to mitigate emerging risks.
Credit Risk
The Company may hold financial instruments and cash deposits and
is dependent on counterparties discharging their agreed
responsibilities. The Directors consider the creditworthiness of
the counterparties to such instruments and seek to ensure that
there is no undue concentration of exposure to any one party.
An explanation of certain economic and financial risks and how
they are managed is contained in Note 16 to the Financial
Statements.
Statement of Compliance with Investment Policy
The Company is adhering to its stated investment policy and
managing the risks arising from it. This can be seen in various
tables and charts throughout the Annual Report, from information
provided in the Chairman's Statement and in the Investment
Manager's Review. A review of the Company's business, its position
as at 30 November 2019 and its performance during the year then
ended is included in the Chairman's Statement, which also includes
an overview of the Company's business model and strategy.
The management of the investment portfolio has been delegated to
Maven, which also provides company secretarial, administrative and
financial management services to the Company. The Board is
satisfied with the depth and breadth of the Manager's resources and
its nationwide network of offices, which supply new deals and
enable it to monitor the geographically widespread portfolio of
companies effectively.
The Investment Portfolio Summary in the Annual Report discloses
the investments in the portfolio and the degree of co-investment
with other clients of the Manager. The tabular analysis of the
unlisted and quoted portfolio in the Annual Report shows that the
portfolio is diversified across a variety of sectors and
transaction types. The level of qualifying investments is monitored
continually by the Manager and reported to the Audit & Risk
Committee quarterly, or as otherwise required.
Key Performance Indicators (KPIs)
During the year, the net return on ordinary activities before
taxation was GBP256,000 (2018: GBP74,000), gains on investment were
GBP641,000 (2018: GBP521,000) and earnings per share were 0.37p
(2018: 0.12p). The Directors also use a number of Alternative
Performance Measures (APMs) in order to assess the Company's
success in achieving its objectives, and these also enable
Shareholders and prospective investors to gain an understanding of
its business. The 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 the sum of dividends paid to date. The
annual yield is the total dividends paid for the financial year,
expressed as a percentage of the share price at the year end date.
The Directors seek to pay dividends to provide a yield and comply
with the VCT rules, taking account of the level of distributable
reserves, profitable realisations in each accounting period and the
Company's future cash flow projections. The share price discount to
NAV is the percentage by which the mid-market price of an
investment is lower than the NAV per share. A historical record of
these measures is shown in the Financial Highlights in the Annual
Report. The change in the profile of the portfolio is reflected in
the Summary of Investment Changes in the Annual Report. Definitions
of these APMs can be found in the Glossary in the Annual Report.
The Board also reviews the Company's investment income and
operational expenses on a quarterly basis, as the Directors
consider that both of these elements are important components in
the
generation of Shareholder returns. Further information can be
found in Notes 2 and 4 to the Financial Statements in the Annual
Report.
There is no VCT index against which to compare the performance
of the Company. However, for reporting to the Board and
Shareholders, the Manager uses comparisons with the most
appropriate index, being the FTSE AIM All-Share Index. The
Directors also consider non-financial performance measures such as
the flow of investment proposals and ranking of the VCT sector by
independent analysts.
In addition, the Directors consider economic, regulatory and
political trends and factors that may impact on the Company's
future development and performance.
Valuation Process
Investments held by Maven Income and Growth VCT 3 PLC in
unquoted companies are valued in accordance with the International
Private Equity and Venture Capital Valuation Guidelines.
Investments quoted or traded on a recognised stock exchange,
including AIM, are valued at their bid prices.
Share Buy-backs
At the forthcoming AGM, the Board will seek the necessary
Shareholder authority to continue to conduct share buy-backs under
appropriate circumstances.
The Board's Duty and Stakeholder Engagement
The Directors recognise the importance of an effective Board and
its ability to discuss, review and make decisions to promote the
long-term success of the Company and protect the interests of its
key stakeholders. As required by provision 5 of the AIC Code (and
in line with the UK Code), the Board has discussed the Directors'
duty under Section 172 of the Companies Act and how the interests
of key stakeholders have been considered in the Board discussions
and decision making during the year. This has been summarised in
the table below:
Stakeholder Form of Engagement Influence on Board/Committee decision
making
Shareholders Annual General Meeting Dividend Declarations - the Board recognises
- Shareholders are encouraged the importance of tax-free dividends
to attend the AGM and to Shareholders and takes this into consideration
are provided with the when making decisions to pay interim
opportunity to ask questions and propose final dividends for each
and engage with the Directors year. Further details regarding dividends
and the Manager. Shareholders for the year under review can be found
are also encouraged to in the Chairman's Statement in the Annual
exercise their right to Report.
vote on the resolutions Share Buy-Back Policy - the Directors
proposed at the AGM. recognise the importance to Shareholders
Shareholder Documents of the Company maintaining an active
- the Company reports buy-back policy and considered this when
formally to Shareholders establishing the current policy. Further
by publishing Annual and details can be found in the Chairman's
Interim Reports, normally Statement and Directors' Report in the
in March and July each Annual Report.
year. In the instance Offer for Subscription - in making a
of a corporate action decision to launch an Offer for Subscription,
taking place, the Board the Directors considered that it would
will communicate with be in the interest of Shareholders to
Shareholders through the continue to grow the portfolio and make
issue of a Circular and, investments across a diverse range of
if required, a Prospectus. sectors. By growing the Company, costs
In addition, significant are spread over a wider asset base, which
matters or reporting obligations helps to promote a competitive total
are disseminated to Shareholders expense ratio, which is in the interest
by way of Stock Exchange of Shareholders. In addition, the increased
Announcements. liquidity helps support the buy-back
The Company Secretary policy referred to above. Further details
acts as a key point of regarding the Offer for Subscription
contact for the Board can be found in the Chairman's Statement
and communications received in the Annual Report.
from Shareholders are Liquidity Management - as a result of
circulated to the whole the success of the recent Offer for Subscription,
Board. the Company has a strong liquidity position
and the Board is conscious that it will
take time for the Manager to deploy the
funds raised. In order to generate income
and add value for Shareholders, the Board
has an active liquidity management policy,
which has the objective of generating
income from the cash held prior to investment.
Further details regarding the liquidity
management policy can be found in the
Investment Manager's Report in the Annual
Report.
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Portfolio Quarterly Board Meetings The Directors are aware that the exercise
Companies - the Manager reports of voting rights is key to promoting
to the Board on the portfolio good corporate governance and, through
companies and the Directors the Manager, ensures that the portfolio
challenge the Manager companies are encouraged to adopt best
where they feel it is practice corporate governance. The Board
appropriate. The Manager has delegated the responsibility for
then communicates directly monitoring the portfolio companies to
with each portfolio company, the Manager and has given it discretion
normally through the Maven to vote in respect of the Company's holdings
representative who sits in the investment portfolio, in a way
on the board of the portfolio that reflects the concerns and key governance
company. 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 also risk
management.
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Manager Quarterly Board Meetings The Manager is responsible for implementing
- the Manager attends the investment objective and the strategy
every Board Meeting and agreed by the Board. In making a decision
presents a detailed portfolio to launch any Offer for Subscription,
analysis and reports on the Board needs to consider that the
key issues such as VCT Company requires to have sufficient liquidity
compliance, investment in order to continue to expand and broaden
pipeline and utilisation the investment portfolio in line with
of any new monies raised. the strategy, including the provision
of follow-on funding.
----------------------------------- -----------------------------------------------------
Registrar Annual review meetings The Directors review the performance
and control reports. of all third party service providers
on an annual basis, including ensuring
compliance with GDPR.
----------------------------------- -----------------------------------------------------
Custodian Regular statements and The Directors review the performance
control reports received, of all third party providers on an annual
with all holdings and basis, including oversight of securing
balances reconciled. the Company's assets.
----------------------------------- -----------------------------------------------------
Employee, Environmental and Human Rights Policy
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 portfolio is undertaken by the Manager through
members of its portfolio management team. The Manager engages with
the Company's underlying investee companies in relation to their
corporate governance practices and in developing their policies on
social, community and environmental matters and further information
may be found in the Statement of Corporate Governance. In light of
the nature of the Company's business, there are no relevant human
rights issues and, therefore, the Company does not have a human
rights policy.
Auditor
The Company's Auditor is required to report if there are any
material inconsistencies between the content of the Strategic
Report and the Financial Statements. The Independent Auditor's
Report can be found in the Annual Report.
Future Strategy
The Board and Manager intend to maintain the policies set out
above for the year ending 30 November 2020, 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:
Atul Devani
Director
10 March 2020
Income Statement
For the Year Ended 30 November 2019
Year ended 30 November Year ended 30 November
2019 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- -------- --------
Gains on investments - 641 641 - 521 521
Income from investments 922 - 922 984 - 984
Other income 60 - 60 35 - 35
Investment management fees (213) (854) (1,067) (214) (854) (1,068)
Other expenses (300) - (300) (398) - (398)
---------------------------------- -------- -------- -------- -------- -------- --------
Net return on ordinary activities 469 (213) 256 407 (333) 74
before taxation
Tax on ordinary activities (78) 78 - (71) 71 -
---------------------------------- -------- -------- -------- -------- -------- --------
Return attributable to Equity
Shareholders 391 (135) 256 336 (262) 74
---------------------------------- -------- -------- -------- -------- -------- --------
Earnings per share (pence) 0.57 (0.20) 0.37 0.54 (0.42) 0.12
---------------------------------- -------- -------- -------- -------- -------- --------
All gains and losses are recognised in the Income Statement.
All items in the above statement are derived from continuing
operations. The Company has only one class of business and one
reportable segment, the results of which are set out in the Income
Statement and Balance Sheet. The company derives its income from
investments made in shares, securities and bank deposits.
There are no potentially dilutive capital instruments in issue
and, therefore, no diluted earnings per share figures are relevant.
The basic and diluted earnings per share are, therefore,
identical.
The Notes are an integral part of the Financial Statements and
can be found in full in the Annual Report.
Statement of Changes in Equity
Year Ended 30 November 2019
Share Capital Capital Special Capital
Share premium reserve reserve distributable redemption Revenue
capital account realised unrealised reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
At 30 November 2018 6,897 31,285 (9,784) (3,058) 15,323 890 856 42,409
Net return - - (1,707) 1,572 - - 391 256
Cancellation of share
premium account - (31,379) - - 31,379 - - -
Cancellation of
capital
redemption reserve - - - - 977 (977) - -
Share premium
cancellation
costs - (2) - - - - - (2)
Dividends paid - - (1,367) - - - - (1,367)
Repurchase and
cancellation
of shares (122) - - - (677) 122 - (677)
Net proceeds of DIS
issue 23 96 - - - - - 119
---------------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
At 30 November 2019 6,798 - (12,858) (1,486) 47,002 35 1,247 40,738
---------------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
Year Ended 30 November 2018
Share Capital Capital Special Capital
Share premium reserve reserve distributable redemption Revenue
capital account realised unrealised reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
At 30 November 2017 4,702 18,035 (5,989) (62) 15,749 819 761 34,015
Net return - - 2,734 (2,996) - - 336 74
Dividends paid - - (6,529) - - - (241) (6,770)
Repurchase and
cancellation
of shares (71) - - - (426) 71 - (426)
Net proceeds of share
issue 2,174 12,793 - - - - - 14,967
Net proceeds of DIS
issue 92 457 - - - - - 549
---------------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
At 30 November 2018 6,897 31,285 (9,784) (3,058) 15,323 890 856 42,409
---------------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
The Notes are an integral part of the Financial Statements and
can be found in full in the Annual Report.
Balance Sheet
As at 30 November 2019
30 November 2019 30 November 2018
GBP'000 GBP'000
--------------------------------------- ---------------- ----------------
Fixed assets
Investments at fair value through
profit or loss 26,623 21,108
Current assets
Debtors 333 358
Cash 13,822 20,979
--------------------------------------- ---------------- ----------------
14,155 21,337
Creditors
Amounts falling due within one year (40) (36)
--------------------------------------- ---------------- ----------------
Net current assets 14,115 21,301
--------------------------------------- ---------------- ----------------
Net assets 40,738 42,409
--------------------------------------- ---------------- ----------------
Capital and reserves
Called up share capital 6,798 6,897
Share premium account - 31,285
Capital reserve - realised (12,858) (9,784)
Capital reserve - unrealised (1,486) (3,058)
Special distributable reserve 47,002 15,323
Capital redemption reserve 35 890
Revenue reserve 1,247 856
--------------------------------------- ---------------- ----------------
Net assets attributable to Ordinary
Shareholders 40,738 42,409
--------------------------------------- ---------------- ----------------
Net asset value per ordinary share
(pence) 59.92 61.49
--------------------------------------- ---------------- ----------------
The financial statements of Maven Income and Growth VCT 3 PLC,
registered number 04283350, were approved by the Board of Directors
and were signed on its behalf by:
Atul Devani
Director
10 March 2020
The Notes are an integral part of the Financial Statements and
can be found in full in the Annual Report.
Cash Flow Statement
For the Year Ended 30 November 2019
Year ended Year ended
30 November 2019 30 November 2018
GBP'000 GBP'000
-------------------------------------- ----------------- -----------------
Net cash flows from operating
activities (292) (335)
Cash flows from investing activities (7,367) (3,904)
Purchase of investments 2,429 7,652
Sale of investments
-------------------------------------- ----------------- -----------------
Net cash flows from investing
activities (4,938) 3,748
-------------------------------------- ----------------- -----------------
Cash flows from financing activities
Equity dividends paid (1,367) (6,770)
Issue of Ordinary Shares 119 15,516
Share premium cancellation
costs (2) -
Repurchase of Ordinary Shares (677) (426)
-------------------------------------- ----------------- -----------------
Net cash flows from financing
activities (1,927) 8,320
-------------------------------------- ----------------- -----------------
Net (decrease)/increase in
cash (7,157) 11,733
-------------------------------------- ----------------- -----------------
Cash at beginning of year 20,979 9,246
Cash at end of year 13,822 20,979
The Notes are an integral part of the Financial Statements and
can be found in full in the Annual Report.
Notes to the Financial Statements
For the Year Ended 30 November 2019
1 Accounting Policies
The Company is a public limited company, incorporated in England
and Wales and its registered office is shown on the Corporate
Summary in the Annual Report.
(a) Basis of preparation
The Financial Statements have been prepared under the historical
cost convention, as modified by the revaluation of investments and
in accordance with FRS 102, The Financial Reporting Standard
applicable in the UK and Republic of Ireland, and in accordance
with the Statement of Recommended Practice for Investment Trust
Companies and Venture Capital Trusts (the SORP) issued by the AIC
in November 2014.
(b) Income
Dividends receivable on equity shares and unit trusts are
treated as revenue for the period on an ex-dividend basis. Where no
ex-dividend date is available dividends receivable on or before the
year end are treated as revenue for the period. Provision is made
for any dividends not expected to be received. The fixed returns on
debt securities and
non-equity shares are recognised on a time apportionment basis
so as to reflect the effective interest rate on the debt securities
and shares. Provision is made for any income not expected to be
received. Interest receivable from cash and short term deposits and
interest payable are accrued to the end of the year.
(c) Expenses
All expenses are accounted for on an accruals basis and charged
to the income statement. Expenses are charged through the revenue
account except as follows:
- expenses which are incidental to the acquisition and disposal
of an investment are charged to capital; and
- expenses are charged to realised capital reserves where a
connection with the maintenance or enhancement of the value of the
investments can be demonstrated. In this respect the investment
management fee and performance fee have been allocated 20% to
revenue and 80% to realised capital reserves to reflect the
Company's investment policy and prospective income and capital
growth.
(d) Taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance
sheet date, where transactions or events that result in an
obligation to pay more tax in the future or right to pay less tax
in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits
from which the future reversal of the underlying timing differences
can be deducted. Timing differences are differences arising between
the Company's taxable profits and its results as stated in the
Financial Statements which are capable of reversal in one or more
subsequent periods.
Deferred tax is measured on a non-discounted basis at the tax
rates that are expected to apply in the periods in which timing
differences are expected to reverse, based on tax rates and laws
enacted or substantively enacted at the balance sheet date.
The tax effect of different items of income/gain and
expenditure/loss is allocated between capital reserves and revenue
account on the same basis as the particular item to which it
relates using the Company's effective rate of tax for the
period.
UK corporation tax is provided at amounts expected to be
paid/recovered using the tax rates and laws that have been enacted
or substantively enacted at the balance sheet date.
(e) Investments
In valuing unlisted investments, the Directors follow the
criteria set out below. These procedures comply with the revised
International Private Equity and Venture Capital Valuation
Guidelines (IPEVCV) for the valuation of private equity and venture
capital investments. Investments are recognised at their trade date
and are designated by the Directors as fair value through profit
and loss. At subsequent reporting dates, investments are valued at
fair value, which represents the Directors' view of the amount for
which an asset could be exchanged between knowledgeable and willing
parties in an arm's length transaction. This does not assume that
the underlying business is saleable at the reporting date or that
its current shareholders have an intention to sell their holding in
the near future.
A financial asset or liability is generally derecognised when
the contract that gives rise to it is settled, sold, cancelled or
expires.
1. For early stage investments completed in the reporting
period, fair value is determined using the Price of Recent
Investment Method, except that adjustments are made when there has
been a material change in the trading circumstances of the investee
company. 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 which carry
a right to convert into ordinary share capital are valued at the
higher of the Price of Recent Investment Method basis and the
price/earnings basis.
4. In the absence of evidence of a deterioration, or strong
defensible evidence of an increase in value, the fair value is
determined to be that reported at the previous balance sheet
date.
5. All unlisted investments are valued individually by the
portfolio management team of Maven Capital Partners UK LLP. The
resultant valuations are subject to detailed scrutiny and approval
by the Directors of the Company.
6. In accordance with normal market practice, investments listed
on the AIM or a recognised stock exchange are valued at their bid
market price.
(f) Fair value measurement
Fair value is defined as the price that the Company would
receive upon selling an investment in a timely
transaction to an independent buyer in the principal or the most
advantageous market of the investment. A three-tier hierarchy has
been established to maximise the use of observable market data and
minimise the use of unobservable inputs and to establish
classification of fair value measurements for disclosure purposes.
Inputs refer broadly to the assumptions that market participants
would use in pricing the asset or liability, including assumptions
about risk, for example, the risk inherent in a particular
valuation technique used to measure fair value including such a
pricing model and/or the risk inherent in the inputs to the
valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market
participants would use in pricing the asset or liability developed
based on market data obtained from sources independent of the
reporting entity.
Unobservable inputs are inputs that reflect the reporting
entity's own assumptions about the assumptions market participants
would use in pricing the asset or liability developed based on best
information available in the circumstances.
The three-tier hierarchy of inputs is summarised in the three
broad levels listed below:
-- Level 1 - the unadjusted quoted price in an active market for
identical assets or liabilities that the entity can access at the
measurement date;
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable (i.e. developed using market data) for
the asset or liability, either directly or indirectly; and
-- Level 3 - inputs are unobservable (i.e. for which market data
is unavailable) for the asset or liability.
(g) Gains and losses on investments
When the Company sells or revalues its investments during the
year, any gains or losses arising are credited/charged to the
Income Statement.
(h) Critical accounting judgements and key sources of estimation uncertainty
Disclosure is required of judgements and estimates made by the
Board and the Manager in applying the accounting policies that have
a significant effect on the Financial Statements. The area
involving the highest degree of judgement and estimates is the
valuation of early-stage unlisted investments recognised in Note 8
and explained in Note 1(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.
Return per Ordinary Share
Year ended 30 November Year ended 30 November
2019 2018
The returns per share have been 68,673,884 62,607,303
based on the following figures:
Weighted average number of Ordinary GBP391,000 GBP336,000
Shares
Revenue return (GBP135,000) (GBP262,000)
Capital return
---------------------- ----------------------
Total return GBP256,000 GBP74,000
---------------------- ----------------------
Net Asset Value per Ordinary Share
The net asset value per Ordinary Share as at 30 November 2019
has been calculated using the number of Ordinary Shares in issue at
that date of 67,983,600 (2018: 68,973,462).
Directors' Responsibility Statement
Each Director believes that, to the best of their knowledge:
-- the Financial Statements have been prepared in accordance
with the applicable accounting standards and give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company as at 30 November 2019 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 8 April
2020, commencing at 12.00 noon, at Maven Capital Partners UK LLP,
Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF.
The Annual Report and Financial Statements for the year ended 30
November 2019 will be issued to Shareholders and filed with the
Registrar of Companies and issued to Shareholders in due
course.
The financial information contained within this announcement
does not constitute the Company's statutory Financial Statements as
defined in the Companies Act 2006. The statutory Financial
Statements for the year ended 30 November 2018 have been delivered
to the Registrar of Companies and contained an audit report which
was unqualified and did not constitute statements under S498(2) or
S498(3) of the Companies Act 2006.
Copies of this announcement, and of the Annual Report and
Financial Statements for the year ended 30 November 2019, will be
available, in due course, to the public at the office of Maven
Capital Partners UK LLP, 205 West George Street, Glasgow G2 2LW; at
the registered office of the Company, 1-2 Royal Exchange Buildings,
London EC3V 3LF and on the Company's website at
www.mavencp.com/migvct3.
Neither the content of the Company's website nor the contents of
any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into, or forms part of, this
announcement.
The Annual Report will shortly be submitted to the National
Storage Mechanism and will be available for inspection at:
www.morningstar.co.uk/uk/NSM.
By Order of the Board
Maven Capital Partners UK LLP
Secretary
10 March 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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