Annual Report • Nov 30, 2017
Annual Report
Open in ViewerOpens in native device viewer
Annual Report For the Year Ended 30 November 2017
Maven Income and Growth VCT 3 PLC (the Company) (formerly known as Aberdeen Growth Opportunities VCT PLC) is a venture capital trust (VCT) and its shares are listed on the Premium segment of the Official List and traded on the main market of the London Stock Exchange. The Company was incorporated on 7 September 2001 as a public limited company, limited by shares. Its registered office is at Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF. Following the conversion of the C Ordinary Shares on 28 February 2009, the Company has one class of share.
The Company is a small registered, internally managed alternative investment fund under the Alternative Investment Fund Managers Directive (AIFMD).
The Company aims to achieve long-term capital appreciation and generate income for Shareholders.
The Articles of Association (Articles) require the Directors to put a proposal for the continuation of the Company, in its then form, to Shareholders at the Company's Annual General Meeting to be held in 2020 or, if later, at the Annual General Meeting following the fifth anniversary of the latest allotment of new shares.
Shares in the Company can be purchased and sold in the market through a stockbroker. For qualifying investors buying shares on the open market:
The Broker to the Company is Shore Capital Stockbrokers Limited (020 7647 8132).
The Company currently conducts its affairs so that the shares issued by it can be recommended by financial advisers to ordinary retail investors in accordance with the rules of the Financial Conduct Authority (FCA) in relation to nonmainstream investment products and intends to do so for the foreseeable future. The Company's shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in a venture capital trust and the returns to investors are predominantly based on investments in private companies or publicly quoted securities.
Shareholders in a number of UK registered companies have received unsolicited calls from organisations, usually based overseas or using false UK addresses or phone lines routed abroad, offering to buy shares at prices much higher than their current market values or to sell non-tradeable, overpriced, high risk or even non-existent securities. Whilst the callers may sound credible and professional, Shareholders should be aware that their intentions are often fraudulent and high pressure sales techniques may be applied, often involving a request for an indemnity or a payment to be provided in advance.
If you receive such a call, you should exercise caution and, based on advice from the Financial Conduct Authority (FCA), the following precautions are suggested:
ACTION FRAUD
Telephone: 0300 123 2040
Website: www.actionfraud.police.uk
FCA
Telephone: 0800 111 6768 (freephone)
E-mail: [email protected]
Website: www.fca.org.uk
Annual General Meeting 11 April 2018
| Rate | 2.71p |
|---|---|
| XD date | 22 June 2017 |
| Record date | 23 June 2017 |
| Payment date | 14 July 2017 |
| Rate | 5.14p |
|---|---|
| XD date | 17 August 2017 |
| Record date | 18 August 2017 |
| Payment date | 15 September 2017 |
| Rate | 6.67p |
|---|---|
| XD date | 2 November 2017 |
| Record date | 3 November 2017 |
| Payment date | 30 November 2017 |
| Interim dividend | |
|---|---|
| Rate | 5.70p |
| XD date | 15 March 2018 |
| Record date | 16 March 2018 |
| Payment date | 13 April 2018 |
| Financial Highlights | 5 | |
|---|---|---|
| Your Board | 7 | |
| Chairman's Statement | 9 | |
| Summary of Investment Changes | 12 | |
| Business Report | 13 | |
| Analysis of Unlisted and Quoted Portfolio | 16 | |
| Investment Manager's Review | 18 | |
| Largest Investments by Valuation | 24 | |
| Investment Portfolio Summary | 30 |
| Directors' Report | 34 |
|---|---|
| Directors' Remuneration Report | 38 |
| Statement of Corporate Governance | 42 |
| Statement of Directors' Responsibilities | 46 |
| Report by the Audit & Risk Committee | 47 |
| Independent Auditor's Report to the Members of Maven Income and Growth VCT 3 PLC |
50 |
| Income Statement | 57 |
|---|---|
| Statement of Changes in Equity | 58 |
| Balance Sheet | 59 |
| Cash Flow Statement | 60 |
| Notes to the Financial Statements | 61 |
| Notice of Annual General Meeting | 73 |
|---|---|
| Explanatory Notes to the Notice of Annual General Meeting |
78 |
| Glossary | 79 |
| Your Notes | 80 |
| Financial Highlights | 5 |
|---|---|
| Your Board | 7 |
| Chairman's Statement | 9 |
| Summary of Investment Changes | 12 |
| Business Report | 13 |
| Analysis of Unlisted and Quoted Portfolio | 16 |
| Investment Manager's Review | 18 |
| Largest Investments by Valuation | 24 |
| Investment Portfolio Summary | 30 |
| 30 November 2017 | 30 November 2016 | 30 November 2015 | |
|---|---|---|---|
| Ordinary Shares | |||
| Net Asset Value (NAV) | £34,015,000 | £37,020,000 | £37,636,000 |
| NAV per Ordinary Share | 72.35p | 90.45p | 91.09p |
| Dividends paid per Ordinary Share for year | 14.52p | 5.75p | 5.75p |
| Dividends paid per Ordinary Share to date | 71.22p | 52.95p | 47.20p |
| NAV total return per share1 * |
143.57p | 143.40p | 138.29p |
| Share price2 | 66.50p | 84.00p | 75.75p |
| Discount to NAV* | 8.09% | 7.13% | 16.84% |
| Annual yield3 * |
21.83% | 6.85% | 7.59% |
| Ordinary Shares in issue | 47,016,945 | 40,930,853 | 41,317,853 |
1Sum of current NAV per share and dividends paid to date (excluding initial tax relief).
2Closing mid-market price (Source: London Stock Exchange).
3Based on dividends paid for year and share price at year end.
*Definitions of these Alternative Performance Measures (APMs) can be found in the Glossary on page 79.
The above chart shows the NAV total return per share as at the end of November in each year. Dividends that have been declared but not yet paid are included in the NAV at the balance sheet date. The policy for valuing investments is disclosed in Note 1 to the Financial Statements.
| Year ended 30 November | Payment date | Interim/final | Rate (p) |
|---|---|---|---|
| 2003-2012 | 34.45 | ||
| 2013 | 30 August 2013 | Interim | 2.00 |
| 30 May 2014 | Final | 3.25 | |
| 2014 | 29 August 2014 | Interim | 2.00 |
| 5 June 2015 | Final | 3.50 | |
| 2015 | 28 August 2015 | Interim | 2.00 |
| 29 April 2016 | Final | 3.75 | |
| 2016 | 2 September 2016 | Interim | 2.00 |
| 28 April 2017 | Final | 3.75 | |
| 2017 | 14 July 2017 | First interim | 2.71 |
| 15 September 2017 | Second interim | 5.14 | |
| 30 November 2017 | Third interim | 6.67 | |
| Total dividends paid | 71.22 | ||
| 2018 | 13 April 2018 | Interim | 5.70 |
| Total dividends paid or declared | 76.92 |
The Directors are all non-executive and the majority are considered to be independent of the Manager. The Directors are responsible for setting and monitoring the strategy, supervising the management of Maven Income and Growth VCT 3 PLC and looking after the interests of its Shareholders. The names and biographies of the Directors are set out below and indicate their range of investment, commercial and professional experience. Further details are also provided in the Directors' Report on page 34 and in the Statement of Corporate Governance on pages 42 to 45 of this Annual Report.
Atul Devani Chairman and Independent Non-executive Director Relevant experience and other directorships: Atul has held a number of senior positions in software technology companies operating in various sectors including finance, mobile, telecoms, food & drink, health and pharmaceuticals. He was founder and chief executive officer of AIM listed United Clearing Plc, which was sold to BSG in 2006. He is currently a director of, and an investor in, a number of private limited companies and is also mentor of entrepreneurs at the Company of Information Technologists in the City of London. Atul has a First Class Honours Degree in Electronic Engineering from the University College of North Wales.
Length of service: A Director since April 2014 and Chairman since 13 April 2016.
Re-elected to the Board: 27 April 2017.
Committee Member: Audit & Risk, Management Engagement, Nomination (Chairman) and Remuneration.
Employment by Manager: None.
Shared directorships with other Directors: None.
Shareholding in the Company: 184,607 Ordinary Shares.
David Allan Independent Non-executive Director
Relevant Experience and other Directorships: David is a legally qualified corporate finance practitioner with significant experience in equity investment, M&A, VCTs and AIM. He is currently an executive director of Aridhia Informatics Limited and a nonexecutive director of Sumerian Europe Limited, which are private equity backed technology companies. He is also an equity partner of Kergan Stewart LLP, a niche corporate finance law firm based in Glasgow. Prior to this, David was a partner with Biggart Baillie LLP and Brodies LLP.
Length of Service: A Director since 1 March 2017 and Chairman of the Remuneration Committee since 26 October 2017.
Elected to the Board: 27 April 2017.
Committee Member: Audit & Risk, Management Engagement, Nomination and Remuneration (Chairman).
Employment by the Manager: None.
Share Directorships with other Directors: None.
Shareholding in the Company: Nil.
Bill Nixon Non-executive Director
Relevant experience and other directorships: Bill is managing partner of Maven Capital Partners UK LLP (Maven) and has 35 years' experience in banking and private equity. He is a Fellow of the Chartered Institute of Bankers in Scotland and obtained an MBA from Strathclyde University in 1996. In the 1990s, Bill was head of the private equity business at Clydesdale Bank plc, a subsidiary of National Australia Bank, before joining Aberdeen Asset Management plc (Aberdeen) in 1999. In 2004 he was appointed as principal fund manager to all Aberdeen managed VCTs. In 2009, Bill and his senior colleagues led a management buy-out from Aberdeen to form Maven. He is also a director of Maven Income and Growth VCTs 2, 4 and 6.
Length of service: An alternate Director since 1 November 2005; appointed a Director on 10 July 2008.
Re-elected to the Board: 27 April 2017.
Committee Member: Nomination and Remuneration.
Employment by the Manager: Since 2009; with Aberdeen 1999 to 2009.
Shared directorships with other Directors: None.
Shareholding in the Company: 590,369 Ordinary Shares.
Keith Pickering Independent Non-executive Director
Relevant experience and other directorships: Keith is a Fellow of the Institute of Chartered Accountants of England and Wales. He is a partner at Catalyst Corporate Finance, which he founded in 1998 along with two others and where he leads the construction sector team. Over the past twenty years he has played a major role in the growth of Catalyst to its current market leading position which culminated in September 2017 in the sale of the business to Alantra Group, the Spanish listed midmarket investment bank. Prior to establishing Catalyst, Keith spent thirteen years at the successor firms of PwC and Deloitte, including a three year period in the Far East, operating out of Hong Kong.
Length of service: A Director since 15 April 2015 and Chairman of the Audit & Risk Committee since 13 April 2016.
Re-elected to the Board: 13 April 2016.
Committee Member: Audit & Risk (Chairman), Management Engagement (Chairman), Nomination and Remuneration.
Employment by the Manager: None.
Shared directorships with other Directors: None.
Shareholding in the Company: 81,465 Ordinary Shares.
NAV total return at the year end of 143.57p per share (2016: 143.40p)
NAV at year end of 72.35p per share (2016: 90.45p), after payment of dividends totalling 18.27p per share during the year
Annual dividend of 14.52p per share (2016: 5.75p)
Offer for Subscription launched with £12.73 million of new capital raised to date
15,084,657 new shares allotted between 21 November 2017 and 6 February 2018
This has been a dynamic and transformative year for your Company, with significantly enhanced dividend payments, and a new Share Offer underway to replenish the NAV. It was also a very successful period in the ongoing construction of the long term portfolio, with the addition of nine new assets, across a wide range of high growth industries and sectors. In addition, there were a number of successful realisations during and shortly after the year end, although the holding in one of the larger portfolio company holdings suffered a write down in value, which constrained the overall performance for the year.
Dividends in respect of the year totalled 14.52p per share representing a 21.83% yield based on the share price at the year end. Although this level of distribution is not expected to be sustained, your Board remains committed to making distributions when realisations are achieved and to making regular tax-free income payments to Shareholders.
During the financial year, your Company has delivered a steady performance against a backdrop of continuing economic uncertainty, largely related to the ongoing negotiations regarding the UK's intended withdrawal from the European Union (EU), and an ever-changing regulatory environment. Over the past few years the framework under which VCTs operate has become increasingly complex, with further legislation announced in the 2017 Autumn Budget Statement however, your Board believes that the Manager has the depth of experience and breadth of skill to ensure that your Company is responding appropriately.
The Share Offer was launched on 22 September 2017 and has, to date, raised £12.73 million of new capital, with 6,496,645 shares allotted prior to the year end in respect of £4.74 million of subscriptions with a further £6.59 million of subscriptions received subsequently, giving rise to the allotment of 8,588,012 shares on 6 February 2018. This provides your Company with significant liquidity to facilitate the continued expansion of the portfolio. The programme for deploying these funds has commenced and the Directors are encouraged by the strength of the pipeline of prospective opportunities currently under review across Maven's expanded network of eleven regional offices.
Following the introduction of the Finance (No. 2) Act 2015, the Directors believe it is important that Shareholders are aware of the longer term implications arising from the new regulatory framework, including the forthcoming amendments in the Finance (No.2) Bill 2017-2019. The changes to the VCT rules that were enacted in November 2015 specifically prohibit participation in management buy-outs or acquisition based transactions and also restrict the ability of VCTs to support older companies, including portfolio holdings, unless certain conditions are met. VCT managers are thereby required to focus on the provision of development capital to younger or earlier stage companies which, given their relatively early stage of maturity, have a different risk profile. In addition, transaction structures are now required to contain a higher proportion of equity, where previously high levels of interest bearing debt was permitted. As the portfolio evolves, and a greater proportion of holdings are invested in earlier stage companies, there is likely to be a consequential impact on income levels. This could result in dividend payments being subject to variation in terms of quantum and timing, and may ultimately be driven by realisation activity, and the requirement to comply with the VCT rules. The Board and the Manager will ensure that this further transition is managed carefully in line with your Company's investment objective.
The Board is pleased to report that the portfolio of investee companies has generally continued to trade well during the year, as can be seen from the detailed analysis in the Investment Manager's Review on pages 18 to 23 of this Annual Report. The continuing positive performance achieved by a number of established private companies has enabled the valuations of these assets to be increased. The Board is also encouraged to note that, after a number of years of exceptionally challenging market conditions, the portfolio companies with exposure to the oil & gas services sector are seeing an improvement, with financial performance showing an uplift over the comparative period in the prior year. The valuations of a number of these assets had previously been reduced in response to market conditions and the conservative valuation of these holdings will be maintained until there is evidence of a sustained market recovery. Inevitably, there are a small number of investments that are operating behind plan, or where a market adjustment has impacted performance and, as a result, the valuations of these assets have been reduced which has constrained the performance for the full year.
An encouraging level of new investment has been achieved during the financial year, with the addition of nine carefully selected growth oriented companies to the portfolio. The pipeline of investment opportunities remains strong and is supported by the Manager's expanded nationwide office network, which is delivering a continuous supply of prospective investments. The Board is, however, aware of the challenges that the Manager is facing with regard to securing advance assurance from HMRC for new investments, and notes that this has resulted in a small number of potential transactions being lost during the year due to slow response times.
Given the maturing profile of a number of assets in the portfolio there has been significant sale and realisation activity during the period. As previously reported, in December 2016 the holding in Nenplas was realised in full, generating a total return of 5.0 times cost over the life of the investment. In October 2017, a complete exit from Crawford Scientific, a leading supplier of chromatography products and services, through a sale to an institutional buyer, delivered a return of 4.5 times cost over the three-year investment period. In addition, exits were achieved shortly after the period end from SPS (EU), the UK's largest provider of promotional merchandise and John McGavigan, a manufacturer and supplier of plastic components for the global automotive industry, both of which delivered a premium to carrying value. The Board is aware that discussions are in process regarding further potential exits from a number of the more mature holdings in the portfolio, although there can be no certainty that these will lead to profitable realisations.
As previously noted, the Directors considered it necessary to distribute an enhanced level of interim dividends during the financial year. This was a result of a build-up of distributable reserves, including the proceeds of recent profitable realisations, and the requirement to ensure ongoing compliance with the VCT regulations.
The first interim dividend in respect of the year ended 30 November 2017, of 2.71p per Ordinary Share and comprising 0.50p of revenue and 2.21p of capital, was paid on 14 July 2017 to Shareholders on the register at close of business on 23 June 2017. The second interim dividend of 5.14p per Ordinary Share, comprising capital only, was paid on 15 September 2017 to Shareholders on the register at close of business on 18 August 2017. The third interim dividend of 6.67p per Ordinary Share, comprising 0.40p of revenue and 6.27p of capital, was paid on 30 November 2017 to Shareholders on the register at close of business on 3 November 2017. No final dividend is proposed and this, therefore, brings the total distributions for the year to 14.52p per Ordinary Share, representing a yield of 21.83% based on the year-end closing mid-market price of 66.50p. The effect of paying dividends is to reduce the NAV of the Company by the total cost of the distribution.
Subsequent to the year end, on 8 March 2018 the Company announced an interim dividend in respect of the year ending 30 November 2018 of 5.70p per Ordinary Share payable on 13 April 2018 to Shareholders on the register on 16 March 2018.
Since the Company's launch, and after receipt of the interim dividends noted above, Shareholders will have received 76.92p per share in tax-free dividends. Decisions on future distributions will take into consideration the availability of surplus revenue, the adequacy of reserves, the proceeds from any further realisations and the VCT qualifying levels of the portfolio, all of which are kept under close review by the Board and the Manager.
As detailed in the 2017 Interim Report, the Directors resolved to re-introduce the Dividend Investment Scheme (DIS), which was subsequently announced on 10 August 2017, ahead of the launch of the Offer for Subscription. The DIS was previously suspended on 24 August 2015 due to the uncertainty regarding the potential impact of the Finance (No. 2) Act 2015.
Shareholders who had previously elected to participate in the DIS will, unless they advise otherwise, revert to receiving their dividends in the form of new shares. The shares issued under the DIS should qualify for VCT tax reliefs, applicable for the tax year in which they are allotted. Full details of the scheme, together with a mandate form, are available from the Company's website. Shareholders who had not previously applied to participate in the DIS and who wish to do so for future dividends should ensure that a mandate form, or CREST instruction, if appropriate, is submitted to the Registrar (Link Asset Services).
On 22 September 2017 the Directors of your Company, together with the Directors of Maven Income and Growth VCT 4 PLC, launched an Offer for Subscription in new Ordinary Shares for up to £30 million, in aggregate, with over-allotment facilities of up to, in aggregate, a further £10 million.
The first allotment of 6,496,645 new Ordinary Shares, in respect of the 2017/18 tax year, was made on 21 November 2017, with a further allotment on 6 February 2018 when 8,588,012 new Ordinary Shares were issued. It is anticipated that a final allotment for the 2017/18 tax year will take place on or before 5 April 2018 and an allotment for the 2018/19 tax year will take place on or before 20 April 2018. The Board is confident that the additional liquidity will enable your Company to continue to expand the portfolio by investing in dynamic earlier stage VCT qualifying businesses, which are capable of delivering growth in Shareholder value over the medium term.
Further details regarding the new Ordinary Shares issued under the Offer can be found in Note 12 to the Financial Statements.
Shareholders should be aware that the Board's primary objective is for the Company to retain sufficient liquid assets for making investments in line with its stated policy and for the continued payment of dividends. However, the Directors also acknowledge the need to maintain an orderly market in the Company's shares and have delegated authority to the Manager to buy back shares in the market for cancellation or to be held in treasury, subject always to such transactions being in the best interests of Shareholders.
It is intended that, subject to market conditions, available liquidity and the maintenance of the Company's VCT status, shares will be bought back at prices representing a discount of between 5% and 10% to the prevailing NAV per share.
During the summer of 2017, the Patient Capital Review was formally extended to consider the effectiveness and value for money provided by the VCT and Enterprise Investment Scheme sector. The Manager contributed to this consultation on behalf of its VCT clients and it was widely anticipated that, as a result of this review, the 2017 Autumn Budget Statement would include a number of amendments.
The Directors were encouraged that the measures announced in the 2017 Autumn Budget Statement were intended to preserve the attractive fundamentals of the VCT scheme, which continues to provide a valuable bridge between private capital and the UK SME sector. The availability of long-term patient capital, in line with Government objectives at what is an increasingly important time for the UK economy, gives comfort to small businesses and ensures that entrepreneurial companies can continue to access equity finance, and allows investors to benefit from their success.
Whilst there were no changes to tax reliefs, or the minimum holding period for these reliefs, and VCT dividends will maintain their tax-free status, a number of less favourable changes were announced, some of which were anticipated. As expected, the focus is to continue to move towards supporting higher risk investments, which includes the introduction of a 'risk to capital' based test, certain sector exclusions and measures designed to assist the financing of knowledge-intensive companies. The percentage of funds that a VCT must hold in qualifying investments will increase from 70% to 80% from 6 April 2019 (in the Company's case from 1 December 2019), with a shorter time period for the investment of newly raised funds. In order to assist with this requirement, the add-back period on sales will be increased from six to twelve months. The loan stock element of investments will now have to be unsecured with a practical cap on coupon rates. The Finance (No. 2) Bill 2017-2019 is expected to receive Royal Assent in the summer of 2018.
The Autumn Budget Statement also announced that HMRC anticipates being able to enhance its approval process for advance assurance clearance during the early part of 2018. This is a welcome development as it should assist the process for completing new investments whilst allowing VCT managers to continue to build their portfolios without unnecessary delay and remain compliant with the qualifying requirements. The Board and the Manager will continue to consider the implications of the Autumn Budget Statement and take these developments into account when planning future strategy.
In January 2018 two major new pieces of legislation were introduced; the Packaged Retail, Investment and Insurance Based Products (PRIIPs) Regulation and the Second Markets in Financial Instruments Directive (MiFID II), came into force on 1 and 3 January respectively. PRIIPs required that a Key Information Document (KID) be published for each VCT; the form and content of the KID is strictly prescribed and includes specific information on investment risks, performance and costs, which must be provided to all potential investors to enable them to compare the performance of different VCTs. With regard to MiFID II, the main practical change for the Company is the requirement for the Manager to report all transactions in quoted shares including share buy-backs as well as those in underlying investments, to the FCA to assist in its continued efforts to combat market abuse.
The General Data Protection Regulation comes into force on 25 May 2018, replacing the Data Protection Act 1998. This regulation enforces the principle of 'privacy by design and by default' and enshrines new rights for individuals, including the right to be forgotten and to data portability. The Manager is currently working with the third parties that process Shareholders' personal data to ensure that their rights under the new regulation are respected.
Notwithstanding the prevailing economic and regulatory challenges, your Board remains confident in the future prospects for your Company, which is continuing to build a diverse portfolio of qualifying investments that can deliver positive investor returns and generate attractive levels of taxfree distributions. Current activity levels are encouraging for both new investments and disposals, and the new assets being acquired are allowing your Company to gain access to a portfolio of younger, high growth companies, which offer the prospect of achieving significant multiples of sums invested as they mature and are ultimately realised. These new investments are complementary to the more mature holdings in later stage companies, which continue to represent the majority of the investee portfolio. The Board and the Manager believe that this hybrid portfolio offers investors' access to an attractive and varied investee company asset base capable of delivering growth in Shareholder value, that will help to support the payment of regular tax-free dividends in the years ahead.
Atul Devani Chairman 9 March 2018
For the Year Ended 30 November 2017
| £'000 | Valuation 30 November 2016 % |
Net investment/ (disinvestment) £'000 |
Appreciation/ (depreciation) £'000 |
£'000 | Valuation 30 November 2017 % |
|
|---|---|---|---|---|---|---|
| Unlisted investments | ||||||
| Equities | 13,363 | 36.1 | (4,022) | 1,101 | 10,442 | 30.7 |
| Loan stock | 17,940 | 48.5 | (4,586) | (1,060) | 12,294 | 36.1 |
| 31,303 | 84.6 | (8,608) | 41 | 22,736 | 66.8 | |
| AIM/NEX investments | ||||||
| Equities | 230 | 0.6 | 197 | (4) | 423 | 1.2 |
| Listed investments | ||||||
| Equities | 16 | - | - | 6 | 22 | 0.1 |
| Investment trusts | 1,041 | 2.8 | 3 | 110 | 1,154 | 3.4 |
| Total investments | 32,590 | 88.0 | (8,408) | 153 | 24,335 | 71.5 |
| Other net assets | 4,430 | 12.0 | 5,250 | - | 9,680 | 28.5 |
| Net assets | 37,020 | 100.0 | (3,158) | 153 | 34,015 | 100.0 |
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 Business Report.
The Company aims to achieve long-term capital appreciation and generate income for Shareholders.
The Company intends to achieve its objective by:
The principal risks and uncertainties facing the Company are as follows:
The majority of the Company's investments are in small and medium sized unquoted UK companies and AIM/NEX quoted companies which, by their nature, carry a higher level of risk and lower liquidity than investments in large quoted companies. The Board aims to limit the risk attached to the investment portfolio as a whole by ensuring that a robust structured selection, monitoring and realisation process is applied. The Board reviews the investment portfolio with the Manager on a regular basis.
The Company manages and minimises investment risk by:
As most of the investments require a mid to long term commitment and are relatively illiquid, the Company retains a portion of the portfolio in cash and listed investments in order to finance any new unquoted investment opportunities. The Company has only limited direct exposure to currency risk and does not enter into any derivative transactions.
The valuation of investment companies may be affected by underlying economic conditions such as fluctuating interest rates and the availability of bank finance. The economic and market environment is kept under constant review and the investment strategy of the Company adapted so far as is possible to mitigate emerging risks.
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.
The Board regularly reviews the system of internal controls, both financial and non-financial, operated by the Company, Maven and other key third party outsourcers such as the Custodian and Registrar. These include controls designed to ensure that the Company's assets are safeguarded and that all records are complete and accurate and that the third parties have adequate controls in relation to the prevention of data protection and cyber security failings.
The Company operates in a complex regulatory environment and faces a number of related risks, including:
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.
In order to maintain its approval as a VCT, the Company is required to comply with current VCT legislation in the UK as well as the EU State Aid Rules. Changes to either legislation could have an adverse impact on Shareholder investment returns whilst maintaining the Company's VCT status.
The Board and the Manager continue to make representations where appropriate, either directly or through relevant industry bodies such as the Association of Investment Companies (AIC) or the British Venture Capital Association (BVCA).
The Company has retained Philip Hare & Associates LLP as VCT adviser.
Breaches of other regulations including, but not limited to, the Companies Act, the FCA Listing Rules, FCA Disclosure Guidance and Transparency Rules or the Alternative Investment Fund Managers Directive (the AIFMD), could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers to the Company could also lead to reputational loss or damage.
The AIFMD, which regulates the management of alternative investment funds, including VCTs, introduced an authorisation and supervisory regime for all investment companies in the EU. The Company was approved by the FCA as a selfmanaged small registered UK AIFM under the AIFMD.
The Company is also required to comply with tax legislation under the Foreign Account Tax Compliance Act and the Common Reporting Standards. The Company has appointed Link Asset Services to act on its behalf to report annually to HMRC and ensure compliance with this legislation.
In a referendum held on 23 June 2016, the UK voted to leave the EU (informally known as "Brexit"). The formal process of implementing this decision exists in Article 50 of the Lisbon Treaty which was invoked on 29 March 2017. The full political, economic and legal consequence of the referendum vote are not yet known. It is possible that investments in the UK may be more difficult to value and to assess for suitability of risk, harder to buy or sell, and may be subject to greater or more frequent rises and falls in value. In the longer term, there is likely to be a period of uncertainty as the UK seeks to negotiate its 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 list of territories in which the shares of the Company may be promoted and sold.
The Board regularly reviews the political situation, together with any associated changes to the economic, regulatory and legislative environment, in order to ensure that any risks are mitigated as effectively as possible.
An explanation of certain economic and financial risks and how they are managed is contained in Note 16 to the Financial Statements.
The Company is adhering to its stated investment policy and managing the risks arising from it. This can be seen in various tables and charts throughout this Annual Report, 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 2017 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 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 to 32 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 show that the portfolio is diversified across a variety of sectors and deal types. The level of qualifying investments is monitored by the Manager on a daily basis and reported to the Audit & Risk Committee quarterly, or as required.
During the year, the net return on ordinary activities before taxation was £27,000 (2016: £2,061,000), gains on investment was £153,000 (2016: £2,066,000) and earnings per share were 0.07p (2016: 5.01p). However, the Directors also use a number of Alternative Performance Measures (APMs) in order to assess the Company's success in achieving its objectives as these are considered to be more appropriate. The APMs also enable Shareholders and prospective investors to gain an understanding of the Company's business. The key performance indicators are as follows:
The NAV total return is a measure of Shareholder value that includes both the current NAV per share and the sum of dividends paid to date. Cumulative dividends paid is the total amount of both capital and income distributions paid since the launch of the Company. The Directors seek to pay dividends to 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 net asset value per share. A historical record of these measures is shown in the Financial Highlights on pages 5 and 6. The change in the profile of the portfolio is reflected in the Summary of Investment Changes on page 12. Definitions of these APMs can be found in the Glossary on page 79. 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, more information can be found in Notes 2 and 4 to the Financial Statements on page 63.
There is no meaningful VCT index against which to compare the performance of the Company. However, for reporting to the Board and Shareholders, the Manager uses comparisons with appropriate indices. 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.
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.
At the forthcoming Annual General Meeting (AGM), the Board will seek the necessary Shareholder authority to continue to conduct share buy backs under appropriate circumstances.
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.
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 on pages 50 to 55.
The Board and Manager intend to maintain the policies set out above for the year ending 30 November 2018, as it is believed that these are in the best interest of Shareholders.
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 9 March 2018
As at 30 November 2017
| Industry sector | Unlisted valuation £'000 |
% | Quoted valuation £'000 |
% | Total valuation £'000 |
% |
|---|---|---|---|---|---|---|
| Support services | 6,193 | 25.4 | 12 | - | 6,205 | 25.4 |
| Automobiles & parts | 3,471 | 14.3 | - | - | 3,471 | 14.3 |
| Energy services | 2,749 | 11.3 | - | - | 2,749 | 11.3 |
| Insurance | 1,473 | 6.1 | 22 | 0.2 | 1,495 | 6.3 |
| Electronic & electrical equipment | 1,475 | 6.1 | - | - | 1,475 | 6.1 |
| Diversified industrials | 1,382 | 5.7 | - | - | 1,382 | 5.7 |
| Investment companies | 159 | 0.6 | 1,154 | 4.7 | 1,313 | 5.3 |
| Telecommunication services | 1,230 | 5.1 | - | - | 1,230 | 5.1 |
| Software & computer services | 1,127 | 4.6 | 35 | 0.1 | 1,162 | 4.7 |
| Household goods & textiles | 650 | 2.7 | 150 | 0.6 | 800 | 3.3 |
| Technology | 605 | 2.5 | - | - | 605 | 2.5 |
| Engineering & machinery | 530 | 2.2 | - | - | 530 | 2.2 |
| Health | 496 | 2.0 | - | 496 | 2.0 | |
| Pharmaceuticals & biotechnology | 377 | 1.5 | - | - | 377 | 1.5 |
| Construction & building materials | 298 | 1.2 | - | - | 298 | 1.2 |
| Leisure & hotels | 291 | 1.2 | - | - | 291 | 1.2 |
| General retailers | 230 | 0.9 | - | - | 230 | 0.9 |
| Chemicals | - | - | 160 | 0.7 | 160 | 0.7 |
| Media & entertainment | - | - | 66 | 0.3 | 66 | 0.3 |
| Total unlisted and quoted | 22,736 | 93.4 | 1,599 | 6.6 | 24,335 | 100.0 |
As at 30 November 2017
| Deal type | Number | Valuation £'000 |
% |
|---|---|---|---|
| Unlisted | |||
| Management buy-out | 13 | 9,717 | 39.8 |
| Development capital - post 20151 | 12 | 4,251 | 17.5 |
| Development capital - pre 20151 | 8 | 3,678 | 15.1 |
| Replacement capital | 4 | 2,382 | 9.8 |
| Buy-in/management buy-out | 3 | 1,671 | 6.9 |
| Management buy-in | 1 | 558 | 2.3 |
| Buy & build | 1 | 479 | 2.0 |
| Mezzanine | 1 | - | - |
| Total unlisted | 43 | 22,736 | 93.4 |
| Quoted | |||
| Listed | 11 | 1,154 | 4.8 |
| AIM/NEX | 9 | 445 | 1.8 |
| Total quoted | 20 | 1,599 | 6.6 |
| Total unlisted and quoted | 63 | 24,335 | 100.0 |
1The Finance (No. 2) Act 2015 introduced new qualifying rules governing the types of investments VCTs can make.
Eight new VCT qualifying private company holdings added to the portfolio, with a further three completed after the period end
One new VCT qualifying AIM investment completed
Large pipeline of VCT qualifying investments currently in progress
Realisation of Nenplas, for a total return of 5.0 times cost
Exit from Crawford Scientific, generating a total return of 4.5 times cost
Two notable exits achieved post the period end, with the sales of SPS (EU) and John McGavigan both at a premium to carrying value
The year to 30 November 2017 has been an active period for your Company, with a significant number of profitable realisations and new investments being completed. During the year, the Offer for Subscription also raised additional capital to allow the Manager to continue the investment strategy, and it is pleasing to report on the completion to date of twelve new VCT qualifying investments in companies operating across a wide range of sectors, with a strong pipeline of further transactions under consideration, or in process.
During the reporting period, and shortly thereafter, a number of notable exits completed including Nenplas, Crawford Scientific, SPS (EU) and John McGavigan all of which delivered returns in excess of carrying value reflecting the quality of these assets. However, Torridon (Gibraltar) encountered issues with a key subsidiary, and the value of this holding was reduced commensurately. Although a modest advance in Shareholder value was achieved, this constrained the performance of NAV total return for the period.
The financial year has been an active one in terms of new investments, with nine carefully selected qualifying growth businesses added to the portfolio. In December 2016, Maven VCTs invested in Whiterock Group, a specialist visual asset management business and QikServe, a business that has developed a patented software application for the hospitality industry. In May 2017, your Company provided development capital to Horizon Cremation, a developer of next generation crematoria, and ebb3, a provider of 3D mobile workspace solutions targeted at high-end computer graphics users. In the second half of the year investments were completed in leading alternative network provider ITS Technology, and in Contego Fraud Solutions, a developer of multi-source compliance and fraud detection software. In September 2017, your Company invested in ADC Biotechnology, a manufacturer of oncology therapies and Cognitive Geology, a petroleum geoscience software company, alongside the investment in AIM quoted anti-microbial technologies specialist Byotrol.
Whilst the VCT rules now require managers to focus on the provision of development capital, or growth finance, to younger and earlier stage companies, Maven remains committed to investing in companies that can demonstrate a disruptive business model capable of scalable growth and also has a preference for supporting proven entrepreneurs, where a team or individual has a successful track record of achievement in a previous business. Since enactment of the rules in November 2015, Maven has successfully adapted its business model to meet the new requirements. This has included expanding the investment team through the addition of a number of deal executives with experience of investing in earlier stage companies and extending the regional presence through the opening of five new offices. This enhanced UK wide footprint will provide a strong foundation for future growth, as new investment opportunities are sourced in the key UK regions, often ahead of competitors as a consequence of that local resource and associated relationships.
Given the complexities of the VCT rules, the Manager continues to work closely with a VCT adviser, appointed by the Company, to assist in the process for securing Advance Assurance from HMRC for new investments. During the financial year, this process became extremely protracted with a small number of opportunities lost due to slow response times. The commitment to significantly reduce approval times from Spring 2018 onwards, as announced in the 2017 Autumn Budget Statement, is therefore welcome as this should improve the speed with which new investments can be completed.
During the period under review the Maven investment team has worked closely with those portfolio companies that have been engaged in an exit process, helping management teams to develop strategies which will optimise value on a sale, and identify buyers that may be willing to pay a premium or strategic price for the business. In December 2016, the holding in Nenplas, was realised in full through a sale to a German trade buyer, achieving a total return of 5.0 times cost over the life of the investment. The exit from Crawford Scientific completed in October 2017, delivering a total return of 4.5 times cost over the three-year investment period. After the period end, exits were also achieved from the holdings in SPS (EU) and John McGavigan, which delivered total return multiples of 2.5 times and 4.2 times respectively. There remains further interest in your Company's assets from a range of potential trade and private equity acquirers, in the UK and from overseas. However, there can be no guarantee that these discussions will lead to profitable realisations.
The private equity portfolio has, in the main, performed well, despite the economic uncertainty resulting from the ongoing negotiations regarding the UK's departure from the EU. While the situation remains fluid, with the full impact still largely unknown, it is reassuring to note that, as at the date of this report, the key effect remains with exporters who are benefitting from the devaluation of Sterling. The longer term potential impact remains important to the future growth of all investee companies and the Manager will continue to monitor the situation closely.
As a result of positive trading, valuations have been increased for a number of the investments in established companies, as detailed below. These companies operate across a diverse range of sectors and the positive performance achieved reflects the quality and resilience of these assets.
Maven clients invested in Attraction World, a leading provider of worldwide theme park and attraction tickets, in 2010 to support the incumbent executive team through a management buy-out. Since investment, the company has made steady progress and the core business continues to trade well with performance in the current year benefiting from the devaluation of Sterling. The ongoing development of Day Out With The Kids (www.dayoutwiththekids.co.uk), an e-commerce site focused on UK attraction information, is encouraging, with significant progress made since it was acquired in March 2016. This supports the management team's view that once fully established this platform will prove to be a valuable addition to the business.
The investment in Cursor Controls, a global leader in the design and manufacture of specialist trackballs, track pads and keyboards for use in the health, defence, marine and other specialist sectors, continues to make good progress and is trading ahead of plan. The integration of NSI, a distributor and low volume manufacturer acquired in April 2016, is now complete and is making a positive contribution to the group. Further commercial and operational synergies have been identified to help drive growth and profitability of the enlarged group. The balance sheet remains strong and the business continues to pay down its term debt.
Good progress continues to be achieved by DPP, a supplier of mechanical and electrical maintenance and installation services for the leisure, hospitality and retail sectors in the south of England and Wales. Over the past twelve months, operational procedures have been further improved, which has led to a meaningful improvement in profitability. The business has also secured a number of new contracts and the outlook for the forthcoming year is positive. DPP has no external bank debt and was able to make a voluntary partial repayment of Maven client loan notes during the period.
Trading at John McGavigan, a manufacturer and supplier of technical plastic components and interior parts for the global automotive industry, continues to exceed growth expectations, through its operations in both China and Scotland, with China significantly outperforming against plan. In light of capacity constraints in the region, the Chinese business is progressing plans to build a new 20,000m2 facility and has signed a land using agreement with the local government. In light of the restrictions to the qualifying criteria resulting from the new rules, Maven VCT client funds were prohibited from supporting this growth and a secondary buy-out, at a significant premium to carrying value, completed shortly after the period end.
SPS (EU), the UK's largest provider of promotional merchandise, has achieved excellent growth following the investment by Maven with the complementary acquisitions of HPP and TEC, which have been integrated successfully and are delivering a positive profit contribution. The business has invested in sales resource to help penetrate European markets and total export sales in the financial year to 31 December 2016 increased significantly. During the year the business received an offer from a large American-based consolidator and the sale completed post the period end, generating a total return of 2.5 times cost over the life of the investment.
Vodat Communications Group supplies data networks, IP telephony, wi-fi solutions and fixed line connectivity to retail customers, with a solid customer base including Fat Face, Beaverbrooks and Welcome Break. Maven clients supported the management buyout in 2012 and, since investment, the business has achieved positive growth and added a number of new customer contracts. During the period, Vodat completed the complementary acquisition of Axonex, a provider of specialist IT solutions, services and support specialising in unified communications, data centre, security and network infrastructure. The acquisition has created cross selling opportunities to help deliver further growth for the enlarged group.
A number of the investments that qualify under the new rules have now been in the portfolio for over a year and although it is early days for these growth businesses, initial indications suggest that the majority are trading to plan and achieving their milestone targets, in line with, or close to, the original investment case. Given the stage of development of these companies, it is likely that some will require additional funding in the near term to help accelerate growth. This was anticipated at the time of investment and was reflected in the relatively modest initial commitments made by your Company. The Manager will apply the same investment appraisal process to any follow-on requirements, only providing additional funding where commercial progress has been achieved or where there is a specific opportunity on which to capitalise. In terms of valuation, all new development capital investments are being held at cost until there is demonstrable evidence of further commercial progress.
Shareholders will be aware of the challenging market conditions that have impacted the oil & gas sector for the past three years. Maven's portfolio companies were swift to act in the face of the deteriorating economic environment and implemented cost cutting and restructuring measures across the board. As a result of this proactive approach, the portfolio assets are now operating with lean structures and limited or no external debt. Although budgets were set conservatively at the start of their respective financial years, there is evidence of a sustained improvement in performance and growing confidence across the industry. As at the date of this Annual Report, the companies in Maven's portfolio with exposure to the sector are showing a significant upturn in profitability over the prior year. The Board and the Manager will continue to monitor this performance and, when appropriate, may revisit some of the provisions, applied in previous periods to reflect the improving outlook.
As well as reflecting the good trading performance highlighted above, your Board has reduced the valuations of a small number of holdings. It is disappointing to report that the valuation of the investment in Torridon (Gibraltar) was reduced to reflect circumstances at a key trading subsidiary, Elite Insurance, where advisers were appointed to sell the business during the period. That formal sale process attracted a number of high value premium offers, in excess of the previous carrying value applied by your Company. However, Elite subsequently experienced challenge from its local regulator over its reserving policy in relation to several lines of insurance. Despite following the advice of its consulting actuaries, and applying an internationally recognised approach to reserving, Elite was forced into run off which had a meaningful impact on its value. After the period end the business was sold to a trade consolidator, delivering a surplus to cost but for a consideration that required a provision against the previous carrying value. In addition, CHS Engineering Services was placed into administration after encountering contract delays and cash flow difficulties.
The investments in private equity investment trusts and real estate investment trusts have continued to perform well over the period. This is particularly important in light of the restrictions introduced in the March 2016 Budget Statement, which prevent investing in traditional instruments such as treasury bills or other government securities for liquidity management purposes.
During the year, your Company provided development capital to eight new private companies operating across a range of sectors:
• ADC Biotechnology is a developer of a proprietary Lock-Release technology, for the efficient development and manufacture of the Antibody Drug Conjugates (ADC) group of cancer therapies. ADCs, also known as 'magic bullets', combine the unique targeting capabilities of antibodies with the cancer-killing ability of cytotoxic drugs, thereby targeting cancer cells whilst minimising damage to healthy cells and tissue, and with the potential for reduced side effects. Maven VCT clients have invested alongside existing shareholders to support an experienced management team as it develops the drug development platform in this high growth sector of oncology therapeutics.
ITS Technology is a leading alternative network provider that owns and maintains fibre networks, providing faster and more reliable broadband connectivity, and related services, to customers, particularly in areas that are not well serviced by the existing infrastructure. The business currently has twelve fibre broadband networks in operation, with a further five under construction. The investment will help to fund growth within the existing networks, build a stable recurring revenue base and also support expansion through the addition of new networks.
QikServe, is a developer of a patented software product aimed at multi-outlet hospitality operators such as restaurants, hotels and casinos. This enables customers to order and pay for food and drinks, and participate in customer loyalty schemes, via an app on a smartphone or tablet device. QikServe is currently the only globally accredited mobile ordering system that is fully integrated with world-leading electronic point of sale provider, Oracle Hospitality. The investment will enable the company to further develop the technology and expand into international markets, particularly the US which is regarded as a key growth area.
to-access assets and facilities, such as oil rigs, nuclear reactors and government buildings, through a cloud-based application. The investment will enable the company to roll out the software and provide additional capacity to deliver on its strong pipeline of current opportunities.
In addition, a qualifying AIM quoted investment was added to the portfolio through participation in a secondary market placing by Byotrol, a provider of specialist anti-microbial technologies for business and consumer users. The £4.3 million total fund raising was approved at a general meeting of the company on 5 September 2017 and is to be used to accelerate growth across three new technology platforms.
| Investment | ||||
|---|---|---|---|---|
| Date | Sector | cost £'000 |
Website | |
| Unlisted | ||||
| ADC Biotechnology Limited | September 2017 | Pharmaceuticals & biotechnology |
377 | www.adcbio.com |
| Cognitive Geology Limited | September 2017 | Software & computer services |
178 | www.cognitivegeology.com |
| Contego Fraud Solutions Limited | July 2017 | Software & computer services |
347 | www.contego.com |
| ebb3 Limited | May 2017 | Software & computer services |
183 | www.ebb3.com |
| Horizon Cremation Limited | May 2017 | Support services | 688 | www.horizoncremation.co.uk |
| ITS Technology Group Limited | June 2017 | Telecommunication services |
446 | www.itstechnologygroup.com |
| QikServe Limited | December 2016 | Software & computer services |
397 | www.qikserve.com |
| Whiterock Group Limited | December 2016 | Technology | 208 | www.whiterockgroup.net |
| Total unlisted | 2,824 | |||
| Quoted | ||||
| Byotrol PLC | September 2017 | Chemicals | 197 | www.byotrol.co.uk |
| Total quoted | 197 | |||
| Private equity investment trust | ||||
| Standard Life Private Equity Trust PLC |
December 2016 | Investment companies |
3 | www.slcapital.com |
| Total private equity investment trust | 3 | |||
| Total investments | 3,024 |
Your Company has co-invested in some or all of the above transactions with Maven Income and Growth VCT, Maven Income and Growth VCT 2, Maven Income and Growth VCT 4, Maven Income and Growth VCT 5 and Maven Income and Growth VCT 6. At the period end, the portfolio stood at 63 unlisted and quoted investments, at a total cost of £24.4 million.
The following investments have been completed during the period:
A number of profitable realisations were achieved during the period. In December 2016, Maven achieved a full exit from plastics manufacturer Nenplas, through a trade sale to a German acquirer at a premium to carrying value. Over the period since investment, the exit achieved a total return of 5.0 times for investors in the 2006 buy-out of Homelux Nenplas.
In October 2017, the holding in Crawford Scientific was sold as part of a secondary MBO transaction to Limerston Capital Partners. During the three years of Maven's investment,
turnover and headcount doubled with profitability almost trebling, driven by the success of the strategic acquisition of Hall Analytical and robust organic growth in the distribution and knowledge transfer divisions. The exit achieved a total return of 4.5 times the original investment and an internal rate of return of 70% over the investment period.
As at the date of this Annual Report, the Manager is engaged with several investee companies and prospective acquirers at various stages in the negotiations process, although there can be no certainty that these discussions will result in exits.
The table below gives details of all realisations during the reporting period:
| Year first invested |
Complete/ partial exit |
Cost of shares disposed of £'000 |
Value at 30 November 2016 £'000 |
Sales proceeds £'000 |
Realised gain/(loss) £'000 |
Gain/(loss) over 30 November 2016 value £'000 |
|
|---|---|---|---|---|---|---|---|
| Unlisted | |||||||
| Assecurare Limited | 2014 | Complete | 600 | 600 | 600 | - | - |
| Broadwave Engineering Limited | 2014 | Complete | 600 | 600 | 600 | - | - |
| Constant Progress Limited | 2015 | Complete | 650 | 650 | 650 | - | - |
| Crawford Scientific Holdings Limited1 | 2014 | Complete | 467 | 1,011 | 2,192 | 1,725 | 1,181 |
| Cyclotech Limited | 2007 | Complete | - | - | 56 | 56 | 56 |
| Equator Capital Limited | 2015 | Complete | 650 | 650 | 650 | - | - |
| Ensco 969 Limited (trading as DPP)1 | 2013 | Partial | 74 | 74 | 74 | - | - |
| Llanllyr Water Company Limited | 2002 | Complete | 32 | 27 | 25 | (7) | (2) |
| Majenta Logistics Limited | 2015 | Complete | 800 | 800 | 800 | - | - |
| Metropol Communications Limited | 2015 | Complete | 800 | 800 | 800 | - | - |
| Nenplas Holdings Limited1 | 2013 | Complete | 766 | 2,598 | 2,663 | 1,897 | 65 |
| Onyx Logistics Limited | 2015 | Complete | 800 | 800 | 800 | - | - |
| Space Student Living Limited | 2011 | Partial | - | - | 72 | 72 | 72 |
| Toward Technology Limited | 2015 | Complete | 650 | 650 | 650 | - | - |
| Vectis Technology Limited | 2015 | Complete | 800 | 800 | 800 | - | - |
| Total unlisted | 7,689 | 10,060 | 11,432 | 3,743 | 1,372 | ||
| Total disposals | 7,689 | 10,060 | 11,432 | 3,743 | 1,372 |
1 Proceeds exclude yield and redemption premiums received, which are disclosed as revenue for financial reporting purposes.
The table includes the redemption of loan notes by a number of investee companies.
One AIM quoted company was struck off the Register of Companies during the year, resulting in a realised loss of £29,000 (cost £29,000). This had no effect on the NAV of the Company as a full provision had been made against the value of the holding in an earlier period.
Since 30 November 2017 a further three new private company assets have been added to the portfolio.
In December 2017, the holding in SPS (EU) was exited in full for a total return of 2.5 times cost, over the life of the investment. Maven clients first invested in SPS in February 2014, supporting the management buy-out from 4Imprint plc. Since investment the business has successfully acquired and integrated two complementary businesses, implemented a valuable enterprise resource planning system and scaled the business internationally, particularly in Europe. SPS has been sold to PF Concept International, the European subsidiary of US based consolidator PF Concept Group, which will enable the acquirer to expand its product offering throughout Europe and to strengthen its UK market position.
Also in December, the holding in John McGavigan was realised for a total return of 4.2 times cost, over the life of the investment. Maven clients first invested in John McGavigan in 2010, providing development capital to support the company's expansion plans, which included establishing a manufacturing facility in China to capitalise on the strong level of growth forecast in the domestic automotive market. Since investment, the business has experienced consistently good levels of growth, particularly in China and in light of this performance, the decision was taken to significantly expand the local presence. The VCT qualifying criteria prohibited Maven client VCTs from supporting this investment a secondary buy-out was completed, at a premium to carrying value.
During the year, your Company achieved a number of exits, which permitted a high level of Shareholder distributions. Although the profile of disposals can be unpredictable the Board and the Manager are committed to making payments to Shareholders when profitable realisations occur. The construction of an enlarged and less concentrated portfolio is actively underway and this process has been assisted by the disposal or revaluation of several large holdings during the year. The pipeline of new investments is strong, with a number of transactions due to complete early in the new financial year and the proceeds of the current Offer will allow the Manager to continue to deliver your Company's investment policy and strategy.
The enlarged Maven network of eleven regional offices allows access to some of the best transactions available across the UK, and is a key differentiator in the development of a diversified and broadly based investee company portfolio that will help in underlying with the VCT rules, and help to support Shareholder returns. Despite the uncertainty associated with the UK's intended withdrawal from the EU, the level of innovation and commercial excellence in the UK remains very positive. Maven remains focussed on identifying and capturing some of the best high growth smaller companies across the country in order to generate Shareholder value and returns.
Maven Capital Partners UK LLP Manager 9 March 2018
As at 30 November 2017
www.mcgavigan.com
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 6
www.spseu.com
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
| Lemac No. 1 Limited (trading as John McGavigan) Glasgow |
||||
|---|---|---|---|---|
| 806 | ||||
| 2,990 | ||||
| Earnings | ||||
| 10.5% | ||||
| 408 | ||||
| December 2010 | ||||
| 31 December | ||||
| 2016 (£'000) | 2015 (£'000) | |||
| 22,744 | 19,332 | |||
| 5,032 | 2,642 | |||
| 6,233 | 2,915 | |||
John McGavigan is a manufacturer and supplier of decorative assemblies and interior parts for the global automotive industry, with a high proportion of the European market. The business supplies tier 1 manufacturers such as Bosch, Visteon, Continental and Yazaki, with components widely used by global brand car makers producing affordable high volume cars, including Ford, GM, Jaguar Land Rover and Toyota. The principal focus of operations is the design, manufacture and supply of parts, and it also provides a logistics management service, enabling just-in-time supply to manufacturing facilities across the world. This holding was sold in December 2017.
| SPS (EU) Holdings Limited | Blackpool | |||
|---|---|---|---|---|
| Cost (£'000) | 801 | |||
| Valuation (£'000) | 1,755 | |||
| Basis of valuation | Earnings | |||
| Equity held | 6.5% | |||
| Income received (£'000) | 231 | |||
| First invested | February 2014 | |||
| Year end | 31 December | |||
| 2016 (£'000) | 2015 (£'000) | |||
| Sales | 24,154 | 21,995 | ||
| EBITDA1 | 2,658 | 2,302 | ||
| Net assets | 2,585 | 2,188 |
SPS is a market-leading supplier of promotional merchandise, operating out of a modern 90,000 ft2 site with manufacturing and storage facilities. The business focuses on new product development and innovative product sourcing, with significant investment in branding technology and a clear commitment to operational and service excellence. SPS is now the UK's largest provider of promotional merchandise, supplying to more than 2,000 independent distributors in the UK and Europe. This holding was sold in December 2017.
| Ensco 969 Limited (trading as DPP) | Southampton | ||
|---|---|---|---|
| Cost (£'000) | 1,133 | ||
| Valuation (£'000) | 1,283 | ||
| Basis of valuation | Earnings | ||
| Equity held | 4.8% | ||
| Income received (£'000) | 352 | ||
| First invested | March 2013 | ||
| Year end | 31 October | ||
| 2017 (£'000) | 2016 (£'000) | ||
| Sales | 10,402 | 9,289 | |
| EBITDA1 | 1,310 | 796 | |
| Net assets | 2,355 | 2,090 |
DPP provides planned and reactive maintenance to the leisure, hospitality and retail sectors in the south of England and Wales. The business has grown from being a heating contractor into a service provider across the mechanical, electrical, HVAC and ventilation sectors, providing maintenance services under medium term contracts alongside project work for minor and major refurbishment programmes.
| Torridon (Gibraltar) Limited | Grantham | |
|---|---|---|
| Cost (£'000) | 400 | |
| Valuation (£'000) | 994 | |
| Basis of valuation | Earnings | |
| Equity held | 4.5% | |
| Income received (£'000) | 364 | |
| First invested | January 2010 | |
| Year end | 31 March2 | |
| 2016 (£'000) | 2015 (£'000) | |
| Sales | 163,753 | 160,423 |
| EBITDA1 | 8,675 | 6,720 |
| Net assets | 47,870 | 37,624 |
Torridon was established to acquire Elite Insurance, a national supplier of financial and legal insurance products and litigation services, in a public-to-private transaction in 2010. Elite provides a range of over 30 lines, including before-the-event, after-theevent and clinical negligence products, as well as medico legal reports and psychological reports to a client base of principally UK based solicitors.
www.dpp.ltd.uk
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
www.elite-insurance.co.uk
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 6 Maven Investor Partners
www.cat-tech.com
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
www.martelinstruments.com
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6
| CatTech International Limited Scunthorpe |
||||
|---|---|---|---|---|
| Cost (£'000) | 627 | |||
| Valuation (£'000) | 982 | |||
| Basis of valuation | Earnings | |||
| Equity held | 6.0% | |||
| Income received (£'000) | 340 | |||
| First invested | March 2012 | |||
| Year end | 31 December | |||
| 2016 (£'000) | 2015 (£'000) | |||
| Sales | 9,489 | 6,416 | ||
| EBITDA1 | 1,838 | 40 | ||
| Net assets/(liabilities) | 721 | (898) |
CatTech provides niche industrial services to oil refineries and petrochemical plants across the major international markets with offices in the UK, China, Singapore and Thailand. The business has developed a range of proprietary products for servicing essential equipment and improving catalyst handling. CatTech operates in a sector where the ability to maintain operational efficiency is critical, with an increasing focus on health and safety, and only a limited number of specialists worldwide have the skilled personnel and equipment to undertake catalyst handling projects.
| Martel Instruments Holdings Limited | Durham | |
|---|---|---|
| Cost (£'000) | 1,026 | |
| Valuation (£'000) | 918 | |
| Basis of valuation | Earnings | |
| Equity held | 12.4% | |
| Income received (£'000) | 234 | |
| First invested | January 2007 | |
| Year end | 31 December | |
| 2016 (£'000) | 2015 (£'000) | |
| Sales | 3,101 | 2,485 |
| EBITDA1 | 744 | 312 |
| Net assets/(liabilities) | (2,740) | (2,490) |
Martel is one of the leading UK manufacturers of custom built compact printer and display units, with a global customer base across a range of industries including automotive, medical, transport and retail. The business differentiates itself from other printer suppliers by offering a complete design and build service for low volume/high customisation printer solutions. Martel offers in-house software and tooling design expertise, as well as injection moulding and surface mount capabilities.
| Vodat Communications Group Limited Stockport |
||
|---|---|---|
| Cost (£'000) | 567 | |
| Valuation (£'000) | 784 | |
| Basis of valuation | Earnings | |
| Equity held | 4.2% | |
| Income received (£'000) | 264 | |
| First invested | March 2012 | |
| Year end | 31 March | |
| 2017 (£'000) | 2016 (£'000) | |
| Sales | 8,850 | 8,500 |
| EBITDA1 | 710 | 657 |
| Net assets | 1,673 | 1,759 |
Vodat provides managed network and communications solutions to business customers, with a particular focus on the UK retail sector. The business was established in 2002 and offers a range of products and services including secure real-time data networks, telephone and VOIP services, card payment solutions, mobile marketing campaigns, wi-fi and disaster recovery services. Vodat's products enable retailers to reduce costs, boost store productivity and increase sales. The business provides services to over 7,000 retail sites with an established customer base that includes Fat Face, Beaverbrooks, Oasis, Poundland, Warehouse and Welcome Break.
| Fathom Systems Group Limited | Aberdeen | |||
|---|---|---|---|---|
| Cost (£'000) | 710 | |||
| Valuation (£'000) | 710 | |||
| Basis of valuation | Earnings | |||
| Equity held | 7.8% | |||
| Income received (£'000) | 44 | |||
| First invested | December 2014 | |||
| Year end | 31 December | |||
| 2016 (£'000) | 2015 (£'000) | |||
| Sales | 5,191 | 4,838 | ||
| EBITDA1 | 83 | 119 | ||
| Net assets | 925 | 1,799 |
Fathom provides niche solutions and products to the commercial diving, remotely operated vehicles and underwater engineering sectors. The company has developed an extensive range of high-quality engineered products and systems for a global blue-chip client base. The diving control systems that Fathom develops are critical to subsea processes and, due to their high safety standards and reliability, are widely used across the diving industry.
www.vodat-int.com
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
www.fathomsystems.co.uk
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
www.horizoncremation.co.uk
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6
www.glacier.co.uk
Maven Income and Growth VCT Maven Income and Growth VCT 2 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
| Horizon Cremation Limited | Kent | ||
|---|---|---|---|
| Cost (£'000) | 688 | ||
| Valuation (£'000) | 688 | ||
| Basis of valuation | Cost | ||
| Equity held | 3.7% | ||
| Income received (£'000) | Nil | ||
| First invested | May 2017 | ||
| Year end | 31 December | ||
| This company has not yet prepared its first report and accounts | |||
Horizon is a developer and operator of purpose built crematoria that are technologically advanced, meet the latest environmental regulations, and offer enhanced levels of care for families when support is most needed. The company is embarking on an ambitious growth strategy in a sector that is experiencing increased demand for next generation local crematoria, reflecting demographic changes and the increasing popularity of cremation over burial. Construction is underway on its first facility, in North Ayrshire, which is expected to be operational in April 2018, and management have identified a number of additional sites across the UK.
| Glacier Energy Services Holdings Limited | Aberdeen | |||
|---|---|---|---|---|
| Cost (£'000) | 686 | |||
| Valuation (£'000) | 686 | |||
| Basis of valuation | Earnings | |||
| Equity held | 2.6% | |||
| Income received (£'000) | 148 | |||
| First invested | March 2011 | |||
| Year end | 31 March | |||
| 2017 (£'000) | 2016 (£'000) | |||
| Sales | 20,198 | 22,692 | ||
| EBITDA1 | 1,202 | 1,109 | ||
| Net liabilities | (7,535) | (3,824) |
Glacier provides specialist services for energy infrastructure including on-site machining; well overlay for pressure control equipment; non-destructive testing; and heat transfer equipment repair and refurbishment. Glacier has a strong international presence in key energy markets, including the North Sea, the Middle East and West Africa, and focuses on developing products in the areas of production and processing equipment, intervention and pipeline components.
1 Earnings before interest, tax, depreciation and amortisation.
2Results for Elite Insurance Company Limited.
As at 30 November 2017
| Investment | Valuation £'000 |
Cost £'000 |
% of total assets |
% of equity held |
% of equity held by other clients¹ |
|---|---|---|---|---|---|
| Unlisted | |||||
| Lemac No. 1 Limited (trading as John McGavigan) | 2,990 | 806 | 8.7 | 10.5 | 26.3 |
| SPS (EU) Holdings Limited | 1,755 | 801 | 5.1 | 6.5 | 36.0 |
| Ensco 969 Limited (trading as DPP) | 1,283 | 1,133 | 3.7 | 4.8 | 29.7 |
| Torridon (Gibraltar) Limited | 994 | 400 | 2.9 | 4.5 | 35.5 |
| CatTech International Limited | 982 | 627 | 2.9 | 6.0 | 24.0 |
| Martel Instruments Holdings Limited | 918 | 1,026 | 2.7 | 12.4 | 31.8 |
| Vodat Communications Group Limited | 784 | 567 | 2.3 | 4.2 | 22.6 |
| Fathom Systems Group Limited | 710 | 710 | 2.1 | 7.8 | 52.2 |
| Horizon Cremation Limited | 688 | 688 | 2.0 | 3.7 | 18.6 |
| Glacier Energy Services Holdings Limited | 686 | 686 | 2.0 | 2.6 | 25.0 |
| GEV Holdings limited | 672 | 672 | 2.0 | 4.1 | 31.9 |
| JT Holdings (UK) Limited (trading as Just Trays) | 650 | 496 | 1.9 | 5.3 | 24.7 |
| TC Communications Holdings Limited | 645 | 980 | 1.9 | 8.3 | 21.7 |
| Flow UK Holdings Limited | 597 | 597 | 1.8 | 7.0 | 28.0 |
| R&M Engineering Group Limited | 572 | 761 | 1.7 | 8.3 | 62.3 |
| CB Technology Group Limited | 558 | 558 | 1.6 | 11.2 | 67.7 |
| HCS Control Systems Group Limited | 539 | 746 | 1.6 | 6.1 | 30.4 |
| Castlegate 737 Limited (trading as Cursor Controls) | 530 | 324 | 1.6 | 3.2 | 44.3 |
| The GP Service (UK) Limited2 | 496 | 496 | 1.5 | 6.0 | 26.5 |
| Rockar 2016 Limited (trading as Rockar) | 481 | 481 | 1.4 | 2.6 | 11.1 |
| Maven Co-invest Endeavour Limited Partnership (invested in Global Risk Partners) |
479 | 417 | 1.4 | 8.1 | 91.9 |
| RMEC Group Limited | 446 | 446 | 1.3 | 2.7 | 47.4 |
| ITS Technology Group Limited | 446 | 446 | 1.3 | 4.4 | 17.7 |
| Attraction World Holdings Limited | 432 | 23 | 1.3 | 6.7 | 31.7 |
| QikServe Limited | 397 | 397 | 1.2 | 4.0 | 16.0 |
| ADC Biotechnology Limited | 377 | 377 | 1.1 | 3.1 | 13.3 |
| Contego Fraud Solutions Limited | 347 | 347 | 1.0 | 3.2 | 13.4 |
| Flexlife Group Limited | 328 | 597 | 1.0 | 2.4 | 12.3 |
| Lambert Contracts Holdings Limited | 298 | 838 | 0.9 | 12.6 | 52.1 |
| Chic Lifestyle Limited (trading as Chic Retreats) | 291 | 291 | 0.9 | 8.4 | 38.4 |
| Endura Limited | 230 | 230 | 0.7 | 0.7 | 5.2 |
| Whiterock Group Limited | 208 | 208 | 0.6 | 4.4 | 20.6 |
As at 30 November 2017
| Investment (continued) | Valuation £'000 |
Cost £'000 |
% of total assets |
% of equity held |
% of equity held by other clients¹ |
|---|---|---|---|---|---|
| Unlisted (continued) | |||||
| ISN Solutions Group Limited | 205 | 321 | 0.6 | 4.5 | 50.5 |
| ebb3 Limited | 183 | 183 | 0.5 | 4.1 | 20.4 |
| Cognitive Geology Limited | 178 | 178 | 0.5 | 2.2 | 10.2 |
| Growth Capital Ventures Limited | 159 | 159 | 0.5 | 4.4 | 26.1 |
| Lawrence Recycling & Waste Management Limited | 130 | 914 | 0.4 | 10.0 | 52.0 |
| Space Student Living Limited | 72 | - | 0.2 | 11.5 | 68.6 |
| Other unlisted investments | - | 2,395 | - | ||
| Total unlisted | 22,736 | 22,322 | 66.8 | ||
| Quoted | |||||
| Byotrol PLC | 160 | 197 | 0.5 | 1.2 | 2.4 |
| Plastics Capital PLC | 150 | 122 | 0.4 | 0.3 | 1.1 |
| Cello Group PLC | 66 | 54 | 0.2 | 0.1 | 0.4 |
| Vianet Group PLC (formerly Brulines Group PLC) | 35 | 31 | 0.1 | 0.1 | 1.4 |
| esure Group PLC | 22 | - | 0.1 | - | - |
| Gordon Dadds Group PLC (formerly Work Group PLC) | 11 | 201 | - | - | 0.1 |
| Other quoted investments | 1 | 434 | - | ||
| Total quoted | 445 | 1,039 | 1.3 | ||
| Private equity investment trusts | |||||
| Princess Private Equity Holding Limited | 125 | 98 | 0.4 | - | 0.1 |
| HgCapital Trust PLC | 122 | 100 | 0.4 | - | 0.1 |
| F&C Private Equity Trust PLC | 121 | 103 | 0.3 | 0.1 | 0.3 |
| Apax Global Alpha Limited | 118 | 99 | 0.3 | - | 0.1 |
| Standard Life Private Equity Trust PLC | 57 | 43 | 0.2 | - | - |
| Total private equity investment trusts | 543 | 443 | 1.6 |
As at 30 November 2017
| Investment (continued) | Valuation £'000 |
Cost £'000 |
% of total assets |
% of equity held |
% of equity held by other clients¹ |
|---|---|---|---|---|---|
| Real estate investment trusts | |||||
| Custodian REIT PLC | 107 | 99 | 0.3 | - | 0.2 |
| British Land Company PLC | 104 | 99 | 0.3 | - | - |
| Schroder REIT Limited | 103 | 99 | 0.3 | - | 0.2 |
| Standard Life Investment Property Income Trust Limited |
103 | 99 | 0.3 | - | 0.2 |
| Target Healthcare REIT Limited | 98 | 98 | 0.3 | - | 0.2 |
| Regional REIT Limited | 96 | 99 | 0.3 | - | 0.2 |
| Total real estate investment trusts | 611 | 593 | 1.8 | ||
| Total investments | 24,335 | 24,397 | 71.5 |
¹ Other clients of Maven Capital Partners UK LLP.
2 Atul Devani is executive chairman of this company.
| Directors' Report | 34 |
|---|---|
| Directors' Remuneration Report | 38 |
| Statement of Corporate Governance | 42 |
| Statement of Directors' Responsibilities | 46 |
| Report of the Audit & Risk Committee | 47 |
| Independent Auditor's Report to the Members of Maven Income and Growth VCT 3 PLC |
50 |
The Directors submit their Annual Report together with the audited Financial Statements of the Company for the year ended 30 November 2017. A summary of the financial results for the year can be found in the Financial Highlights on pages 5 and 6. The Investment Objective and Investment Policy are disclosed in the Business Report on page 13 and the Board's dividend strategy is summarised in the Chairman's Statement on pages 9 to 11.
The Company's affairs have been conducted, and will continue to be conducted, in a manner to satisfy the conditions to enable it to continue to obtain approval as a venture capital trust under Section 274 of the Income Tax Act 2007.
During the year the Company maintained its membership of the Association of Investment Companies (AIC) and its Ordinary Shares are listed on the London Stock Exchange. Further details are provided in the Corporate Summary on page 2.
The Company is a small registered, internally managed, alternative investment fund under the AIFMD. As a venture capital trust pursuant to Section 274 of the Income Tax Act 2007, the rules of the FCA in relation to non-mainstream investment products do not apply to the Company.
The Company's business activities, together with the factors likely to affect its future development and performance, are set out in this Directors' Report and the Strategic Report. The financial position of the Company is described in the Chairman's Statement within the Strategic Report. In addition, Note 16 to the Financial Statements includes: the Company's objectives, policies and processes for managing its financial risks; details of its financial instruments; and its exposures to market price risk, interest rate risk, liquidity risk, credit risk and price risk sensitivity. The Directors believe that the Company is well-placed to manage its business risks.
Following a detailed review, the Board have a reasonable expectation that the Company has adequate financial resources to enable it to continue in operational existence for the foreseeable future and, accordingly, they have continued to adopt the going concern basis when preparing the Annual Report and Financial Statements.
In accordance with Provision C.2.2 of the UK Corporate Governance Code, published in April 2016, and Principle 21 of the AIC Code of Corporate Governance, published in July 2016, the Board has considered the Company's prospects and risks for the forthcoming five year period to 30 November 2022, which is considered appropriate for a VCT business of the Company's size.
In considering and making this statement, the principal risks faced by the Company, together with the steps taken to mitigate them were robustly assessed and considered by the Board, as highlighted in the Business Report on pages 13 to 15 and in the Report by the Audit & Risk Committee on pages 47 to 49. This includes consideration of the new VCT rules and other factors affecting the economic, regulatory and political environment, including the EU State Aid Rules.
The Board also considered the quality of the current portfolio, the Company's current fundraising activity through the Offer for Subscription that was launched on 22 September 2017 and the Manager's ability to source and secure new investment opportunities. As highlighted in the Chairman's Statement on pages 9 to 11, the Board considers the Company's future to be positive. The Board also focused on the major factors that affect the economic, regulatory and political environment, including the EU State Aid Rules and the steps being taken by the Manager to adapt its investment process to take account of the more restrictive VCT rules.
Therefore, after careful consideration of the Company's current position, its future prospects and, taking into account the Board's attitude to risk and its ongoing review of investment objective and policy, the Board have a reasonable expectation that the Company will be able to continue in operation and be able to meet its liabilities as they fall due over the course of the five years ending 30 November 2022.
The Company's financial instruments comprise its investment portfolio, cash balances and debtors and creditors that arise directly from its operations, including accrued income and purchases and sales awaiting settlement. The main risks that the Company faces arising from its financial instruments are disclosed in Note 16 to the Financial Statements.
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emission producing sources under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.
The Statement of Corporate Governance, which forms part of this Directors' Report, is shown on pages 42 to 45.
Biographies of the Directors who held office at the year end and up to the date of signing this Annual Report are shown in the Your Board section of the Annual Report on pages 7 and 8. Alec Craig was also a director from 1 December 2016 to 27 April 2017. The Director's interests in the shares of the Company are noted in that section and are also shown below. No Director has a service contract with the Company. There is no requirement for the Directors to hold shares in the Company.
In accordance with the Articles, one third of the Directors (or, if their number is not a multiple of three, the number nearest to one third) retires by rotation each year at the Company's AGM. The Directors to retire by rotation include any Director who wishes to retire and not offer himself for re-election. In addition, Directors must offer themselves for re-election at least every three years.
Keith Pickering retires by rotation at the forthcoming AGM and, being eligible, offers himself for re-election. As a nonindependent Director, by virtue of his position as Managing Partner of Maven Capital Partners UK LLP, Bill Nixon offers himself for re-election annually.
The Board confirms that, following a formal process of evaluation, the performance of each of the Directors seeking re-election continues to be effective and demonstrates commitment to the role. The Board, therefore, believes that it is in the best interests of Shareholders that Keith Pickering and Bill Nixon be re-elected and Resolutions to this effect will be proposed at the 2018 AGM.
The Directors who held office during the year and as at the date of this Annual Report together with their interests in the share capital of the Company are as follows:
| 30 November 2017 Ordinary Shares of 10p each |
30 November 2016 Ordinary Shares of 10p each |
|
|---|---|---|
| Atul Devani (Chairman) | 184,607 | 115,355 |
| David Allan (appointed on 1 March 2017) | Nil | n/a |
| Alec Craig (retired on 27 April 2017) | n/a | 21,850 |
| Keith Pickering | 40,000 | 40,000 |
| Bill Nixon | 590,369 | 521,117 |
| Total | 814,976 | 698,322 |
Subsequent to the year end, Keith Pickering acquired a further 41,465 shares under the Offer for Subscription. All of the interests shown above are beneficial and there have been no further changes to them since the end of the Company's financial year.
Each Director has a statutory duty to avoid a situation where he has, or could have, a direct or indirect interest which conflicts, or may conflict with the interests of the Company. A Director will not be in breach of that duty if the relevant matter has been authorised by the Board in accordance with the Company's Articles. This includes any co-investment made by the Directors in entities in which the Company also has an interest.
The Board has a protocol for identifying and dealing with conflicts and these are reviewed on a regular basis. As previously reported, the Company is invested in The GP Service (UK) Limited, of which the Chairman, Atul Devani, is executive chairman and has an interest in. The Board has continued to agree that no conflict exists. No new conflicts or potential conflicts were identified during the year
At 30 November 2017, the only party known to the Company who, directly or indirectly, were interested in 3% or more of the Company's issued share capital was as follows:
| Number of Ordinary Shares Held |
% of issued share capital |
|
|---|---|---|
| Hargreaves Lansdown (Nominees) Limited |
3,137,865 | 6.67% |
At 7 March 2018 being the last practicable date before the publication of this Annual Report, the only party known to the Company who, directly or indirectly, was interested in 3% or more of the Company's issued share capital were as follows:
| Number of Ordinary Shares Held |
% of issued share capital |
|
|---|---|---|
| Hargreaves Lansdown (Nominees) Limited |
3,841,467 | 6.94% |
Maven Capital Partners UK LLP (Maven) acted as Manager and Secretary to the Company during the year ended 30 November 2017 and details of the investment management and secretarial fees are detailed in Notes 3 and 4 to the Financial Statements respectively.
The principal terms of the Investment Management Agreement with Maven are as follows:
For the year ended 30 November 2017, the investment management and secretarial fees payable to Maven had been charged on the following basis:
To reflect changes in the Company resulting from the Offer for Subscription which was launched on 22 September 2017, it was agreed that, with effect from 1 December 2017, the Manager would also be entitled to a performance incentive fee, for each six month period ending 31 May and 30 November, of an amount equal to 15% of any increase in the total return (before applying any performance incentive fee) as at the end of the relevant six month period to the total return (after accruing for the performance incentive fee payable for that period) compared to the end of the last six month period on which a performance incentive fee was paid. Payments in relation to any performance incentive fee shall not exceed £890,000 in relation to any rolling twelve month period ending on the date of the proposed payment. Total return for these purposes means net asset value, adjusted dividends, share buy backs and share issues since the period in which the last performance incentive fee was paid. The proposed performance incentive fee will be exclusive of VAT (if any).
The Investment Management Agreement can be terminated, by either the Company or the Manager, by the giving of twelve months' notice. Furthermore, the Company may terminate the agreement without notice and compensation due if:
• the Manager ceases to be authorised to carry out investment business.
Maven also receives the sum of £15,800 (plus VAT) per annum in respect of Bill Nixon's role as a Director of the Company. Maven may also receive fees from investee companies in relation to arranging transactions, monitoring business progress and for providing non-executive directors for their boards.
In order to ensure that the Manager's staff are appropriately incentivised, a co-investment scheme exists which allows individuals to participate in new investments in portfolio companies alongside the Company.
All such investments are made through a nominee and under terms previously agreed by the Board. The terms of the scheme ensure that all investments in voting ordinary shares are made on identical terms to those of the Company.
With effect from 1 December 2017, the level of participation in the voting shares of portfolio companies decreased from 8% to 5% to take into account the introduction of the new performance incentive fee arrangements with the Manager. Notwithstanding the above, co-investment will only be offered alongside the relevant investment if that co-investment would not result in the aggregate of all co-investments made in the relevant calendar year of the scheme exceeding 5% of the Company's net assets.
The Board believes that the scheme provides a useful incentive which closely aligns the interests of key individuals within the Manager's staff with those of the Shareholders.
It should be noted that as at 7 March 2018, Maven Capital Partners UK LLP and certain of its executives held, in aggregate, 1,562,530 of the Company's Ordinary Shares of 10p and that this represented 2.82% of the Company's issued share capital as at that date.
In light of the investment performance achieved by the Manager, together with the standard of company secretarial and administrative services provided, the Board considers that the continued appointment of the Manager and Secretary, on the stated terms, is in the best interests of the Company and its Shareholders.
The Company's Independent Auditor, Deloitte LLP, is willing to continue in office and Resolution 5, to propose its re-appointment, will be put forward at the 2018 AGM, along with Resolution 6, to authorise the Directors to fix its remuneration. Non-audit fees for tax services amounting to £4,055 were paid to Deloitte LLP during the year under review (2016: £4,050). The Directors have received assurances from the Auditor that they remain independent and objective. The Directors have also reviewed the Auditor's procedures in connection with the provision of non-audit services and remain satisfied that objectivity and independence is being safeguarded by Deloitte LLP.
So far as the Directors who held office at the date of approval of this Annual Report are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act) of which the Company's Auditor is unaware, and each of the Directors has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
During the year ended 30 November 2017, the Company bought back a total of 676,000 (2016: 387,000) of its own Ordinary Shares of 10p each for cancellation, being 1.65% of the issued share capital as at 22 March 2017, being the last practicable date before the publication of the previous Annual Report.
Subsequent to the year end, a further 250,000 Ordinary Shares were bought back for cancellation.
A Special Resolution, numbered 9 in the Notice of Annual General Meeting, will be put to Shareholders at the 2018 AGM for their approval to renew the Company's authority to purchase in the market a maximum of 5,535,495 Ordinary Shares (10% of the shares in issue at 7 March 2018). Such authority will expire on the date of the Annual General Meeting in 2019 or after a period of 15 months from the date of the passing of the Resolution, whichever is the earlier.
Purchases of shares will be made within guidelines established from time to time by the Board, but only if it is considered that such purchases would be to the advantage of the Company and its Shareholders when taken as a whole. Purchases will be made in the market at prices below the prevailing NAV per share. Under the FCA Listing Rules, the maximum price that may be paid on the exercise of this authority must not exceed 105% of the average of the mid-market quotations for the shares over the five business days immediately preceding the date of purchase. The minimum price that may be paid is 10p per share. In making purchases, the Company will deal only with member firms of the London Stock Exchange. Any shares which are purchased may be cancelled, or held in Treasury.
Purchases of shares by the Company will be made from distributable reserves and will normally be paid out of cash balances held by the Company from time to time. As any purchases will be made at a discount to NAV at the time of purchase, the NAV of the remaining Ordinary Shares in issue should increase as a result of any such purchase. Shares will not be purchased by the Company in the period from the end of the Company's relevant financial period up to and including the earlier of an announcement of all price sensitive information in respect of the relevant period or the release of the full results.
During the year under review 6,762,092 new Ordinary Shares were allotted (2016: nil), with a further 8,588,012 allotted subsequent to the year end. An Ordinary Resolution, numbered 7 in the Notice of Annual General Meeting will be put to Shareholders at the 2018 AGM for their approval for the Company to issue up to an aggregate nominal amount of £553,549 (equivalent to 5,535,495 Ordinary Shares or 10% of the total issued share capital 7 March 2018).
Issues of new Ordinary Shares may only be made at, or at a premium to, NAV per share, thus ensuring existing investors will not be disadvantaged by such issues. The proceeds of any issue may be used to purchase the Company's shares in the market or to fund further investments in accordance with the Company's investment policy. This authority shall expire either at the conclusion of the AGM in 2019 or on the expiry of 15 months from the passing of the Resolution, whichever is the first to occur.
When shares are to be allotted for cash, Section 561(1) of the Companies Act provides that existing Shareholders have preemption rights and that the new shares are offered first to such Shareholders in proportion to their existing shareholdings.
However, Shareholders can, by special resolution, authorise the Directors to allot shares otherwise than by a pro rata issue to existing Shareholders. A Special Resolution, numbered 8 in the Notice of Annual General Meeting, will, if passed, give the Directors power to allot for cash, Ordinary Shares up to an aggregate nominal amount of £553,549 (equivalent to 5,535,495 Ordinary Shares or 10% of the total issued share capital at 7 March 2018) as if Section 561(1) does not apply. This is the same amount of share capital that the Directors are seeking the authority to allot pursuant to Resolution 7. The authority will also expire either at the conclusion of the AGM of the Company in 2019 or on the expiry of 15 months from the passing of the Resolution, whichever is the first to occur.
As at 30 November 2017, the Company's share capital comprised 47,016,945 Ordinary Shares of 10p each. At 7 March 2018, being the last practicable date prior to the publication of this Annual Report, after the allotment of new shares under the Offer for Subscription and a subsequent buy back of shares, the Company's share capital amounted to 55,354,957 Ordinary Shares of 10p each. Further details are included in Note 12 to the Financial Statements.
Other than those set out in this Directors' Report there are no further related party transactions that require to be disclosed.
Other than those referred to above, and in the Strategic Report, there have been no events since 30 November 2017 that require disclosure.
An indication of the Company's future developments can be found in the Chairman's Statement on pages 9 to 11 and in the Investment Manager's Review on pages 18 to 23, which highlights the Board and Manager's commitment to making returns to Shareholders and delivering the Company's investment strategy.
The AGM will be held on 11 April 2018, and the Notice of Annual General Meeting is on pages 73 to 77 of this Annual Report. The Notice of Annual General Meeting also contains a Special Resolution (Resolution 10) that seeks authority for the Directors to convene a General Meeting, other than an AGM, on not less than fourteen days' clear notice.
The Directors encourage Shareholders to vote at the AGM and votes can be submitted by hard copy proxy form; via Crest or electronically using the Registrar's share portal service at www.signalshares.com. Please refer to the notes to the Notice of Annual General Meeting on pages 73 to 77 of this Annual Report.
The Directors consider that all of the Resolutions to be put to the AGM are in the best interests of the Company and its Shareholders as a whole. The Directors recommend that Shareholders vote in favour of each Resolution to be put to the AGM on 11 April 2018.
9 March 2018
The report has been prepared in accordance with the requirements of Section 421 of the Companies Act and the Enterprise and Regulatory Reform Act 2013. An Ordinary Resolution for the approval of this report, which includes a section on the Company's policy for the remuneration of its Directors, will be put to the Members of the Company at the forthcoming AGM. The law requires the Company's Auditor to audit certain of the disclosures provided herein. Where such disclosures have been audited, they are indicated as such and the Auditor's opinion is included in their report on pages 50 to 55.
The Directors have established a Remuneration Committee comprising the full Board with David Allan as its Chairman. As all of the Directors are non-executive, the Principles of the UK Corporate Governance Code in respect of executive directors' remuneration do not apply.
At 30 November 2017, the Company had four non-executive Directors and their biographies are shown in the Your Board section of this Annual Report. The names of the Directors who served during the year, together with the fees paid during the year, are shown in the table on page 40. The dates of appointment of the Directors in office at 30 November 2017 and the dates on which they will next be proposed for re-election are as follows:
| Date of original appointment |
Date of previous re-election |
Due date for re-election |
|
|---|---|---|---|
| Atul Devani (Chairman) |
5 April 2014 | 27 April 2017 | April 2019 |
| David Allan | 1 March 2017 | 27 April 2017 | April 2020 |
| Keith Pickering | 15 April 2015 | 13 April 2016 | 11 April 2018 |
| Bill Nixon | 1 November 2005 | 27 April 2017 | 11 April 2018 |
During the year ended 30 November 2017, the Board was not provided with advice or services by any person in respect of its consideration of the Directors' remuneration. However, in the application of the Board's policy on Directors' remuneration, defined below, the Board expects, from time to time, to review the fees paid to the directors of other venture capital trusts.
The Remuneration Committee met once during the year ended 30 November 2017 and carried out a review of the Remuneration Policy and the level of Directors' fees and it was agreed that no changes were required to either. This will be reviewed again in 2018.
The Company's Policy is that the remuneration of the Directors should reflect the experience of the Board as a whole and be fair and comparable to that of other venture capital trusts with a similar capital structure and similar investment objectives.
Directors are remunerated in the form of fees, payable quarterly in arrears, to the Director personally, or to a third party specified by him. The fees for the Directors are determined within the limits set out in the Company's Articles, which limit the aggregate of the fees payable to the Directors to £100,000 per annum and the approval of Shareholders in a General Meeting would be required to change this limit. It is intended that the fees payable to the Directors should reflect their duties, responsibilities, the value and amount of time committed to the Company's affairs, and should also be sufficient to enable candidates of a high quality to be recruited and retained. Non-executive Directors do not receive bonuses, pension benefits, share options, long-term incentive schemes or other benefits, and the fees are not specifically related to the Directors' performance, either individually or collectively. A copy of the Remuneration Policy may be inspected by members of the Company at its registered office.
It is the Board's intention that the above Remuneration Policy will be put to a Shareholders' vote at least once every three years. Such a Resolution was put to Shareholder vote, and subsequently approved, at the AGM held on 27 April 2017.
A Resolution for the three year period to 30 November 2019 will be put to Shareholder vote at the AGM in April 2020. Therefore, it is intended that the current policy will continue for the year ending 30 November 2018.
The Company purchases and maintains liability insurance for the Directors and Officers of the Company. This insurance is not a benefit in kind, nor does it form part of the Directors' remuneration.
The Directors' interests in the share capital of the Company are shown in the Directors' Report on page 34. There is no requirement for Directors to hold shares in the Company.
The Board is responsible for the Company's investment strategy and performance, although the management of the Company's investment portfolio is delegated to the Manager through the Investment Management Agreement, as referred to in the Director's Report.
The graph below compares the total returns on an investment of £100 in the Ordinary Shares of the Company, for each annual accounting period for the ten years to 30 November 2017, assuming all dividends are reinvested, with the total shareholder return on a notional investment of £100 made up of shares of the same kind and number as those by reference to which the FTSE AIM All-Share index is calculated. This index was chosen for comparison purposes as it is the most relevant to the Company's investment portfolio.
Source: Maven Capital Partners UK LLP/London Stock Exchange. Please note that past performance is not necessarily a guide to future performance.
The Directors who served during the year received the following emoluments in the form of fees:
| Year ending 30 November 2017 £ |
Year ended 30 November 2016 £ |
|
|---|---|---|
| Atul Devani (Chairman) | 19,500 | 17,880 |
| Alec Craig1 | 5,469 | 15,460 |
| Keith Pickering | 15,800 | 15,460 |
| Bill Nixon2 | 15,800 | 15,460 |
| David Allan3 | 11,850 | - |
| TOTAL | 68,419 | 64,260 |
1 Alec Craig retired as a Director at the conclusion of the 2017 AGM.
2 Bill Nixon's remuneration is paid to Maven Capital Partners UK LLP and is subject to VAT.
3 David Allan was appointed to the Board on 1 March 2017.
The above amounts exclude any employers' national insurance contributions, if applicable. No other forms of remuneration were received by the Directors and no Director has received any taxable expenses, compensation for loss of office or non-cash benefits for the year ended 30 November 2017 (2016: £nil)
The chart below shows, for the years ended 30 November 2016 and 30 November 2017, the cost of Directors' fees compared with the level of dividend distribution:
As noted in the Strategic Report, all of the Directors are non-executive, therefore, the Company does not have a chief executive officer, nor does it have any employees. In the absence of a chief executive officer or employees, there is no related information to disclose.
The Company does not have any employees and Directors' remuneration comprises solely of Directors' fees. The current and projected Directors' fees for the year ended 30 November 2017 and the year ending 30 November 2018, are shown below:
| Year ending 30 November 2018 £ |
Year ended 30 November 2017 £ |
|
|---|---|---|
| Atul Devani (Chairman) | 19,500 | 19,500 |
| Alec Craig1 | n/a | 5,469 |
| Keith Pickering | 15,800 | 15,800 |
| Bill Nixon2 | 15,800 | 15,800 |
| David Allan3 | 15,800 | 11,850 |
| TOTAL | 66,900 | 68,419 |
1 Alec Craig retired as a Director at the conclusion of the 2017 AGM.
2 Bill Nixon's remuneration is paid to Maven Capital Partners UK LLP and is subject to VAT.
3 David Allan was appointed to the Board on 1 March 2017.
Directors do not have service contracts but new Directors are provided with a letter of appointment which is available for inspection by members at the Company's AGM. The terms of appointment provide that Directors should retire and be subject to re-election at the first AGM after their appointment. The Company's Articles of Association require all Directors to retire by rotation at least every three years. There is no notice period and no provision or compensation upon early termination of appointment, save for any arrears of fees which may be due.
During the year ended 30 November 2017, no communication had been received from Shareholders regarding Directors' remuneration. At the AGM held on 27 April 2017, the result in respect of the Ordinary Resolution to approve the Directors' Remuneration Report for the year ended 30 November 2016 was as follows:
| Percentage of | Percentage of | Number of | |
|---|---|---|---|
| votes cast for | votes cast against | votes withheld | |
| Remuneration Report | 89.56 | 10.44 | 98,025 |
The Directors' Remuneration Report was approved by the Board of Directors and signed on its behalf by:
David Allan Director 9 March 2018
The Company is committed to, and is accountable to the Company's Shareholders for, a high standard of corporate governance. The Board has put in place a framework for corporate governance that it believes is appropriate for a venture capital trust and which enables it to comply with the UK Corporate Governance Code (the Code), published in April 2016. The Code is available from the website of the Financial Reporting Council (FRC) at www.frc.org.uk.
During the year under review, the Company was a member of the AIC which has published its own Code on Corporate Governance (the AIC Code) and the AIC Corporate Governance Guide for Investment Companies (the AIC Guide). These were both revised in July 2016 and provide a comprehensive guide to best practice in certain areas of governance where the specific characteristics of investment trusts or venture capital trusts suggest alternative approaches to those set out in the Code. Both the AIC Code and AIC Guide are available from the AIC website at www.theaic.co.uk.
This Statement of Corporate Governance forms part of the Directors' Report.
This statement describes how the main principles identified in the Code and the AIC Code (the Codes) have been applied by the Company throughout the year as is required by the Listing Rules of the FCA. In instances where the Code and AIC Code differ, an explanation will be given as to which governance code has been applied, and the reason for that decision.
The Board is of the opinion that the Company has complied fully with the main principles identified in the Codes, except as set out below:
For the reasons set out in the AIC Guide, and as explained in the Code, the Board considers that these provisions are not relevant to the Company, being an externally managed investment company. The Company has, therefore, not reported further in respect of these provisions.
The Board currently consists of four male Directors, all of whom are non-executive and the majority of whom are considered to be independent of the Manager, Maven Capital Partners UK LLP or Maven. Bill Nixon is not considered to be independent because of his position as the managing partner of Maven.
Atul Devani is executive chairman and has an interest in The GP Service (UK) Limited, in which the Company is invested. However, this conflict was authorised by the Board as outlined in the Conflicts of Interest section on page 35.
David Allan was formerly a partner of a legal firm which has provided legal advice to the Manager in the past. Nevertheless, it is expected that David will perform his duties as a Director in a way that will display his independence and the Board regard him as independent.
The biographies of the Directors appear in the Your Board section of this Annual Report and indicate their high level and range of investment, industrial, commercial and professional experience.
The Board sets the Company's values and objectives and ensures that its obligations to Shareholders are met. It has formally adopted a schedule of matters which are required to be brought to it for decision, thus ensuring that it maintains full and effective control over appropriate strategic, financial, operational and compliance issues. These matters include:
As required by the Companies Act and permitted by the Articles, Directors notify the Company of any situation which might give rise to the potential for a conflict of interest so that the Board may consider and, if appropriate, approve such situations. The potential conflicts of interest for Directors are reviewed regularly by the Board and the Directors notify the Company whenever there is a change in the nature of a registered conflict, or whenever a new conflict situation arises.
Following implementation of the Bribery Act 2010, the Board adopted appropriate procedures.
There is an agreed procedure for Directors to take independent professional advice, if necessary, at the Company's expense.
The Directors have access to the advice and services of the Secretary through its appointed representatives who are responsible to the Boards for:
An induction meeting will be arranged by the Manager on the appointment of any new Director, covering details about the Company, the Manager, legal responsibilities and venture capital trust industry matters. Directors are provided, on a regular basis, with key information regarding the Company's
policies, regulatory and statutory requirements and internal controls. Changes affecting Directors' responsibilities are advised to the Board as they arise.
Atul Devani is Chairman of the Company. He is also Chairman of the Nomination Committee. Keith Pickering is the Chairman of the Audit & Risk and Management Engagement Committees as the other Directors consider that he has the skills and experience relevant to these roles. David Allan is Chairman of the Remuneration Committee.
A senior independent non-executive Director has not been appointed, as the Board considers that each of the Directors has different qualities and areas of expertise on which they may lead.
During the year ended 30 November 2017, the Board held four quarterly Board Meetings. The primary focus of quarterly Board Meetings is a review of investment performance and related matters including asset allocation, peer group information and industry issues. A further four meetings of the Board took place by telephone. Between meetings, the Board maintains contact with the Manager, has access to senior members of the management team and to the company secretarial team. In addition to the Board meetings, there were also four meetings of the Audit & Risk Committee, two meetings of the Nomination Committee and one meeting of each of the Management Engagement and Remuneration Committees.
Director Board Board Committee Audit & Risk Committee Nomination Committee Remuneration Committee Management Engagement Committee Atul Devani 4 (4) 4 (4) 4 (4) 2 (2) 1 (1) 1 (1) David Allan2 3 (3) 3 (4) 3 (3) 1 (1) 1 (1) 1 (1) Bill Nixon3 4 (4) 4 (4) n/a 2 (2) 1 (1) n/a
Keith Pickering 4 (4) 4 (4) 4 (4) 2 (2) 1 (1) 1 (1) Alec Craig4 1 (1) 1 (4) 1 (1) 1 (1) 0 (0) 1 (1)
Directors have attended Board and Committee Meetings during the year ended 30 November 20171 as follows:
1The number of meetings which the Directors were eligible to attend is in brackets.
2 David Allan was appointed to the Board on 1 March 2017.
3Bill Nixon is not a member of the Audit & Risk or the Management Engagement Committees. 4Alec Craig retired from the Board on 27 April 2017.
To enable the Board to function effectively and allow Directors to discharge their responsibilities, full and timely access is given to all relevant information. In the case of Board Meetings, this consists of a comprehensive set of papers, including the Manager's review and discussion documents regarding specific matters. The Directors make further enquiries when necessary.
The Board and its Committees have undertaken a process for their annual performance evaluation, using questionnaires and discussion to ensure that Directors have devoted sufficient time and contribute adequately to the work of the Board and its Committees. The Chairman is subject to evaluation by his fellow Directors.
All non-executive Directors are appointed for an initial period of three years, subject to re-election and Companies Act provisions and, in accordance with the Articles, stand for election at the first AGM following their appointment. The Articles state that Directors must offer themselves for re-election at least once every three years. Bill Nixon is subject to annual re-election in view of his position as managing partner of the Manager.
The Board subscribes to the view expressed in the AIC Code that long-serving Directors should not be prevented from forming part of an independent majority. It does not consider that a Director's tenure necessarily reduces his ability to act independently and, following formal performance evaluations, believes that each Director is independent in character and judgement and that there are no relationships or circumstances which are likely to affect the judgement of any Director.
The Board's policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no limit on the overall length of service of any of the Company's Directors, including the Chairman, has been imposed. The Company has no executive Directors or employees.
Each of the Committees has been established with written terms of reference, which are available on request from the Registered Office of the Company, and are reviewed and re-assessed for their adequacy at each Meeting.
The Audit & Risk Committee is chaired by Keith Pickering. Information regarding the composition, responsibilities and activities of the Audit & Risk Committee is detailed in the Report of the Audit & Risk Committee on pages 47 to 49.
The Management Engagement Committee, which comprises all of the independent Directors and is chaired by Keith Pickering, is responsible for the annual review of the management contract with the Manager, details of which are shown in the Directors' Report. One meeting of the Committee was held during the year ended 30 November 2017, at which the Committee recommended the continued appointment of Maven Capital Partners UK LLP as Manager of the Company.
The Nomination Committee comprises of the full Board and is chaired by Atul Devani. The Committee met twice during the year. The Committee makes recommendations to the Board on the following matters:
succession planning;
the identification and nomination of candidates to fill Board vacancies, as and when they arise, for the approval of the Board;
At its meeting in October 2017, the Committee reviewed the knowledge, experience and skills of Keith Pickering and Bill Nixon, who were both due for re-election. The Board noted that each of these Directors was valued and that they were deemed to enhance the skills and knowledge base of the Board, enabling it to carry out its functions more effectively. The Committee recommended to the Board that Bill Nixon and Keith Pickering be nominated for re-election accordingly, Resolutions 3 and 4 will be put to the 2018 AGM.
Although the Company does not have a formal policy on diversity, as detailed above, consideration of Board diversity forms part of the responsibilities of the Committee.
No external search consultancy was used by the Company during the year ended 30 November 2017.
Where a venture capital trust has only non-executive directors, the Code principles relating to directors' remuneration do not apply. However, the Company does have a Remuneration Committee, comprising the full Board, which is chaired by David Allan. The Committee met once during the year ended 30 November 2017 to review the policy for and the level of Directors' remuneration. Further information about Directors' remuneration can be found in the Directors' Remuneration Report on pages 38 to 41.
The level of remuneration for the Directors has been set in order to attract and retain individuals of a calibre appropriate to the future development of the Company. Details of the remuneration of each Director and of the Company's policy on Directors' Remuneration are provided in the Directors' Remuneration Report.
The Board has contractually delegated certain services to external agencies including custodial services (which include the safeguarding of assets) and registration services. The Board has delegated responsibility for the day to day accounting and company secretarial requirements to the Manager. In addition, the Board has delegated its portfolio management responsibilities to the Manager. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered. The Board receives and considers reports from the Manager and other external agencies on a regular basis. In addition, ad hoc reports and information are supplied to the Board as requested.
The FRC published the UK Stewardship Code (the Stewardship Code) for institutional shareholders on 2 July 2010 and this was revised in September 2012. The purpose of the Stewardship Code is to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and assist institutional investors in the efficient exercise of their governance responsibilities.
The Board is aware of its duty to act in the interests of the Company and the Directors believe that the exercise of voting rights lies at the heart of regulation and the promotion of good corporate governance. The Directors, through the Manager, encourages companies in which investments are made to adhere to best practice in the area of corporate governance. The Manager believes that, where practicable, this can best be achieved by entering into a dialogue with investee company management teams to encourage them, where necessary, to improve their governance policies. Therefore, the Board has delegated responsibility for monitoring the activities of portfolio companies to the Manager and has given it discretionary powers to vote in respect of the holdings in the Company's investment portfolio.
The Directors and the Manager are aware of their duty to act in the interests of the Company and acknowledge that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner. Therefore, the Directors and the Manager take account of the social environment and ethical factors that may affect the performance or value of the Company's investments. Maven and the Directors believe that a company run in the long-term interests of its shareholders should manage its relationships with its employees, suppliers and customers and behave responsibly towards the environment and society as a whole.
The Company places a great deal of importance on communication with its Shareholders, all of whom are welcome to attend and participate in the AGM. The Notice of Annual General Meeting sets out the business of the AGM and the Resolutions are explained more fully in the Explanatory Notes to the Notice of Annual General Meeting as well as in the Directors' Report and in the Directors' Remuneration Report. Separate Resolutions are proposed for each substantive issue and Shareholders have the opportunity to put questions to the Board and the Manager. The results of proxy voting are relayed to Shareholders after the Resolutions have been voted on by a show of hands. Nominated persons, often the beneficial owners of shares held for them by nominee companies, may attend Shareholder meetings and are invited to contact the registered Shareholder, normally a nominee company, in the first instance in order to be nominated to attend the Meeting and to vote in respect of the shares held for them. In general, a venture capital trust has few major shareholders.
As recommended under the Code, the Annual Report is normally posted to Shareholders at least twenty business days before the AGM. Annual and Interim Reports and Financial Statements are distributed to Shareholders and other parties who have an interest in the Company's performance.
Shareholders and potential investors may obtain up-to-date information on the Company through the Manager and the Secretary, and the Company responds to letters from Shareholders on a wide range of issues. In order to ensure that the Directors develop an understanding of the views of Shareholders, correspondence between Shareholders and the Manager or the Chairman is copied to the Board. The Company's web pages are hosted on the Manager's website, and can be visited at www.mavencp.com/migvct3 from where Annual and Interim Reports, London Stock Exchange Announcements and other information can be viewed, printed or downloaded. Access to further information about the Manager can be gained from www.mavencp.com.
The Statement of Directors' Responsibilities in respect of the Financial Statements is on page 46, the Statement of Going Concern and the Viability Statement are included in the Directors' Report on page 34. The Independent Auditor's Report is on pages 50 to 55.
By order of the Board Maven Capital Partners UK LLP Secretary
9 March 2018
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law, the Directors have elected to prepare the Financial Statements in accordance with FRS 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland. The Financial Statements are required by law to give a true and fair view of the state of affairs of the Company and of the net return of the Company for that period.
In preparing these Financial Statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report (including a report on remuneration policy) and Statement of Corporate Governance that comply with applicable law and regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's web pages, which are hosted on the Manager's website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
The Directors are also responsible for ensuring that 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.
Each Director believes that, to the best of their knowledge:
By order of the Board Maven Capital Partners UK LLP Secretary
9 March 2018
The Audit & Risk Committee is chaired by Keith Pickering and comprises of all the independent Directors. The Board is satisfied that at least one member of the Committee has recent and relevant financial experience and that the Committee, as a whole, has competence relevant to the sector in which the Company operates.
The principal responsibilities of the Committee include:
appointing and reviewing service providers, including the main contracts entered into by the Company for such services;
The Board of Directors of Maven Income and Growth VCT 3 PLC has overall responsibility for the Company's system of internal control and risk management systems and procedures and for reviewing their effectiveness, and has considered the requirement for an internal audit function as recommended by Code provision 3.6. However, as the Directors have delegated the investment management, company secretarial and administrative functions of the Company to the Manager, the Board considers that it is appropriate for the Company's internal controls to be monitored by the Manager, rather than by the Company itself.
The principal responsibilities of the Committee include the ongoing review of the effectiveness of the internal control environment of the Company and the review of the Company's risk management systems which allow the Company to identify, measure, manage and monitor all risks on a continuous basis. The Committee keeps the effectiveness of the Company's internal control and risk management systems and procedures under review.
The Directors confirm that there is an ongoing process to identify, measure, manage and monitor the significant risks faced by the Company. This process has been in place up to the date of approval of this Annual Report. This process is reviewed regularly by the Board and accords with internal control guidance issued by the FRC.
The Board reviews the effectiveness of the system of internal control at least annually. In particular the process for identifying and evaluating the significant risks affecting the Company and the policies and procedures by which these risks are managed are reviewed and considered by the Board. The Directors have delegated the portfolio management of the Company's assets to the Manager. Such delegation is in accordance with the delegation requirements of the AIFMD. The delegation embraces implementation of the Manager's system of internal control, including financial, operational and compliance controls and risk management. Internal control systems are monitored and supported by the compliance function of the Manager, which undertakes periodic examination of business processes, including compliance with the terms of the Investment Management Agreement, and ensures that recommendations to improve controls are implemented.
Risks are identified through a risk management framework of each function within the Manager's activities. Risk is considered in the context of the guidance issued by the FRC and includes financial, regulatory, market, operational and reputational risk. This helps the internal audit risk model identify those functions most appropriate for review. Any errors or weaknesses identified are reported to the Company and timetables are agreed for implementing improvements to systems. The implementation of any remedial action required is monitored and feedback is provided to the Board.
The key components designed to provide effective internal control for the year under review, and up to the date of this report are:
The internal control systems are intended to meet the Company's particular needs and the risks to which it is exposed. Accordingly, these systems are designed to manage, rather than eliminate, the risk of failure to achieve business goals and, by their nature, can provide reasonable, but not absolute, assurance against material misstatement or loss.
The principal risks and uncertainties faced by the Company and the Board's strategy for managing these risks are covered in the Business Report on pages 13 to 15.
In terms of the assessment of the key risks facing the Company, it is recognised that the investment portfolio forms a significant element of its assets. The recognition, ownership and valuation of the investment portfolio is, therefore, an area of particular attention by the Committee. Specifically, the risk is that investments are not recognised and measured in line with the Company's stated accounting policy on the valuation of investments as set out in Note 1(e) to the Financial Statements on pages 61 and 62.
As revenue generated from dividend income and loan stock interest is the major source of revenue and a significant item in the Income Statement, a key risk relates to the recognition of investment income. Specifically, the risk is that the Company does not recognise income in line with its stated policy on income recognition. The maintenance of VCT status is another key risk that the Company has to address and the approach to address each of these risks is set out below.
The Company uses the services of an independent custodian (JP Morgan Chase Bank) to hold the quoted investment assets of the Company. An annual internal control report is received from the Custodian which provides details of the Custodian's control environment. The investment portfolio is reconciled regularly by the Manager and the reconciliation is also reviewed by the Independent Auditor. The portfolio is reviewed and verified by the Manager on a regular basis and management accounts, including a full portfolio listing, are prepared quarterly and considered at the quarterly meetings of the Board. The portfolio is also audited annually by the Independent Auditor.
The valuation of investments is undertaken in accordance with the Company's stated accounting policy as set out in Note 1(e) to the Financial Statements on pages 61 and 62. Unquoted investments are valued by the Manager and are subject to scrutiny and approval by the Directors. Investments listed on a recognised stock exchange are valued at their bid price.
The Committee considered and challenged the assumptions and significant judgements in relation to the valuation of each quoted and unquoted investment and was satisfied that they were appropriate. The Committee also satisfied itself that there were no issues associated with the existence and ownership of the investments which required to be addressed.
The recognition of dividend income and loan stock interest is undertaken in accordance with accounting policy Note 1(b) to the Financial Statements on page 61. The management accounts are reviewed by the Board on a quarterly basis and discussion takes place with the Manager at the quarterly Board Meetings regarding the revenue generated from dividend income and loan stock. The Directors are satisfied that the levels of income recognised are in line with revenue estimates. The Committee concluded that there were no issues associated with revenue recognition which required to be addressed.
Compliance with the VCT regulations is monitored continually by the Manager and is reviewed by the Committee on a quarterly basis. The Committee concluded that there were no issues associated with the maintenance of VCT status which required to be addressed.
The principal risks and uncertainties faced by the Company and the Board's strategy for managing these risks are covered in the Business Report on pages 13 and 14.
The Committee met four times during the year and at each Meeting considered the key risks detailed above and the corresponding internal control and risk reports provided by the Manager which included the Company's risk management framework. No significant weaknesses in the control environment were identified. It was also noted that there had not been any adverse comment from the Auditor and nor had the Auditor identified any significant issues in its audit report.
The Committee, therefore, concluded that there were no significant issues which required to be reported to the Board.
At its meeting in January 2017, the Committee reviewed, for recommendation to the Board, the Audit Report from the Independent Auditor and the draft Annual Report and Financial Statements for the year ended 30 November 2016, along with the amount of the final dividend for the year then ended. The Committee concluded that it was satisfied with the performance of Deloitte and recommended its continued appointment.
At its meeting in June 2017, the Committee reviewed the Half Yearly Report for the six months ended 31 May 2017 and also considered the independence, tenure and performance of Deloitte LLP (Deloitte) as Auditor.
Subsequent to 30 November 2017, at its meeting in January 2018, the Committee considered the draft Annual Report and Financial Statements for the year ended 30 November 2017, and provided advice to the Board that it considered that the Annual Report and Financial Statements, taken as a whole, were fair, balanced and understandable and provided the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.
As part of its annual review of audit services, the Committee considers the performance, cost effectiveness and general relationship with the external auditor. In addition, the Committee reviews the independence and objectivity of the external auditor. Key elements of these reviews include: discussions with the Manager regarding the audit service provided; separate meetings with the Independent Auditor; consideration of the completeness and accuracy of Deloitte reporting and a review of the relationship the Independent Auditor has with the Manager.
The Company appointed Deloitte as Auditor on 3 October 2007 and subsequently re-appointed them as Auditor during the year ended 30 November 2016, following the completion of an audit tender process. The Independent Auditor's Report is on pages 50 to 55 and it should be noted that Deloitte rotates the Senior Statutory Auditor responsible for the audit every five years. The Senior Statutory Auditor was last changed in 2012 and, therefore, rotation has taken place during the year under review. Details of the amounts paid to the Auditor during the year for audit and other services are set out in Note 4 to the Financial Statements.
The Company has in place a policy governing and controlling the provision of non-audit services by the independent Auditor so as to safeguard its independence and objectivity. Shareholders are asked to approve the re-appointment, and the Directors' responsibility for the remuneration, of the Auditor at each AGM. Any non-audit work, other than interim reviews, requires the specific approval of the Audit & Risk Committee in each case. Non-audit work, where independence may be compromised or conflicts arise, is prohibited. There are currently no contractual obligations that restrict the Committee's choice of independent Auditor. The Committee has concluded that Deloitte is independent of the Company and recommended that a Resolution for the re-appointment of Deloitte as Independent Auditor should be put to the 2018 AGM.
Keith Pickering Director 9 March 2018
In our opinion the Financial Statements:
We have audited the financial statements of Maven Income and Growth VCT 3 PLC (the 'Company') which comprise:
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the Financial Statements section of our report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC's Ethical Standard were not provided to the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
| Key audit matters | The key audit matters that we identified in the current year were: |
|---|---|
| • Valuation of unlisted investments |
|
| • Existence of listed and unlisted investments |
|
| • Compliance with VCT regulations |
|
| Materiality | The materiality that we used in the current year was £677,000 which was determined on the basis of 2% of the net asset value of the Company at year end. |
| Scoping | All audit work for this Company was performed directly by the audit engagement team. |
| Significant changes in our approach |
We have not identified any significant changes in the business and environment from the prior year that have resulted in a significant change in our approach. |
We have reviewed the Directors' statement regarding the appropriateness of the going concern basis of accounting and the Directors' statement on the longer-term viability of the Company contained within the Directors' Report on pages 34 and 35 of this Annual Report.
We are required to state whether we have anything material to add or draw attention to in relation to:
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
draw attention to in respect of these matters. We agreed with the Directors' adoption of the going concern basis of accounting and we did not identify any such material uncertainties. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company's ability to continue as a going concern.
We confirm that we have nothing material to add or
| Key audit matter description |
Refer to Note 1e of Accounting Policies on pages 61 and 62 and Note 8 on page 66 of the Notes. The Company holds both listed and unlisted investments. These investments represents £24.3 million or 72% (2016: £32.6 million or 88%) of the entity's total net assets. The ownership of the listed and unlisted investments held by the Company is considered a significant risk since if investments are not recorded in line with the holdings per the loan note certificates or custodian confirmation, this could result in a material misstatement of the assets held. |
|---|---|
| How the scope of our audit responded to the key audit matter |
Our testing included: • assessment of the design and implementation of key controls relating to existence of listed and unlisted investments, including the review of the six monthly stock certificate reconciliation for unlisted investments and the quarterly custodian report for listed investments; • obtaining share certificates for unlisted shares and loan notes held by the Manager and reconciling these to the portfolio listing; and • agreeing quoted investment ownership to reports from the underlying custodian. |
| Key observations | Based on our testing, we conclude that key controls around the existence of listed and unlisted investments were adequately designed and implemented. We conclude that the Company has appropriate title to the investments reported in the Financial Statements. |
| Key audit matter description |
Refer to the assessment of the VCT Qualifying Status Risk in the Governance Report on page 48. The Company must comply with Section 274 of the Income Tax Act 2007 to maintain VCT status. Failure to comply would result in the VCT losing its corporation tax exemption on chargeable gains, with investors' gains also no longer being exempt from income tax. The VCT rule changes have become increasingly more complex to administer, with close monitoring required of the use of monies and monitoring of qualifying or non-qualifying investments. |
|---|---|
| How the scope of our audit responded to the key audit matter |
Our testing included: • assessment of the design and implementation of key controls relating to compliance with VCT regulations, including assessing the processes in place over the pre-trade identification of qualifying investments and the ongoing review of VCT Section 274 compliance; • reviewing the Manager's quarterly compliance statements against the Income Tax Act 2007 Section 274 criteria; and • reviewing that each of the criteria that must be met to retain VCT status have been complied with, through a sample reperformance of the relevant calculations and review of the qualifying investment listings. |
| Key observations | Based on our testing and enquiries with management, we conclude that controls in place to monitor the compliance with VCT regulations were adequately designed and implemented. We noted no issue to report to those charged with governance on the Company's compliance with the VCT regulations. |
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
| Materiality | £677,000 (2016: £740,000) |
|---|---|
| Basis for determining materiality |
2% (2016: 2%) of net asset value. |
| Rationale for the benchmark applied |
Net assets is the primary measure used by the Shareholders in assessing the performance of the Company, and this is a generally accepted auditing benchmark used for entities in this industry. |
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £13,500 (2016: £14,700), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.
Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control, and assessing the risks of material misstatement.
Based on that assessment, we focused our audit scope primarily on the key audit matters described above. The investment management and accounting and reporting operations were undertaken by the Manager, whilst the safeguarding of assets resides with the Manager and the Custodian. We have obtained an understanding of the Manager's systems of internal controls and reviewed the Custodian's Service Organisation Report, and undertaken a combination of procedures, all of which are designed to target the Company's identified risks of material misstatements in the most effective manner possible.
| The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the Financial Statements and our auditor's report thereon. |
We have nothing to report in respect of |
|---|---|
| Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. |
these matters. |
| In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. |
|
| If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. |
|
| In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that: |
|
| • Fair, balanced and understandable – the statement given by the Directors that they consider 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 performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or |
|
| • Audit committee reporting – the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; or |
|
| • Directors' statement of compliance with the UK Corporate Governance Code – the parts of the Directors' statement required under the Listing Rules relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the Auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code. |
As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
A further description of our responsibilities for the audit of the Financial Statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor's report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
In our opinion the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors' Report.
| • • • |
Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion: we have not received all the information and explanations we require for our audit; or adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or the Company Financial Statements are not in agreement with the accounting records and returns. |
We have nothing to report in respect of these matters. |
|---|---|---|
| Directors' remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors' remuneration have not been made or the part of the Directors' Remuneration Report to be audited is not in agreement with the accounting records and returns. |
We have nothing to report in respect of these matters. |
Following the recommendation of the Audit Committee, we were re-appointed by the Audit Committee in July 2016 to audit the Financial Statements for the year ended 30 November 2016 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 11 years, covering the years ending 30 November 2007 to 30 November 2017.
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
Chris Hunter CA (Senior Statutory Auditor) For and on behalf of Deloitte LLP Statutory Auditor Edinburgh, United Kingdom
9 March 2018
| Income Statement | 57 |
|---|---|
| Statement of Changes in Equity | 58 |
| Balance Sheet | 59 |
| Cash Flow Statement | 60 |
| Notes to the Financial Statements | 61 |
For the Year Ended 30 November 2017
| Year ended 30 November 2017 | Year ended 30 November 2016 | ||||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | 8 | - | 153 | 153 | - | 2,066 | 2,066 |
| Income from investments | 2 | 1,047 | - | 1,047 | 1,328 | - | 1,328 |
| Other income | 2 | 14 | - | 14 | 4 | - | 4 |
| Investment management fees | 3 | (179) | (717) | (896) | (186) | (743) | (929) |
| Other expenses | 4 | (291) | - | (291) | (408) | - | (408) |
| Net return on ordinary activities before taxation |
591 | (564) | 27 | 738 | 1,323 | 2,061 | |
| Tax on ordinary activities | 5 | (103) | 103 | - | (147) | 147 | - |
| Return attributable to Equity Shareholders | 7 | 488 | (461) | 27 | 591 | 1,470 | 2,061 |
| Earnings per share (pence) | 1.20 | (1.13) | 0.07 | 1.44 | 3.57 | 5.01 |
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.
For the Year Ended 30 November 2017
| Notes | Share capital £'000 |
Share premium account £'000 |
Capital reserve realised £'000 |
Capital reserve unrealised £'000 |
Special distributable reserve £'000 |
Capital redemption reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|---|---|---|
| At 30 November 2016 | 4,093 | 13,820 | (2,115) | 3,499 | 16,251 | 752 | 720 | 37,020 | |
| Net return | - | - | 3,100 | (3,561) | - | - | 488 | 27 | |
| Dividends paid | 6 | - | - | (6,974) | - | - | - | (447) | (7,421) |
| Repurchase and cancellation of shares | 12 | (67) | - | - | - | (502) | 67 | - | (502) |
| Net proceeds of share issue | 650 | 4,042 | - | - | - | - | - | 4,692 | |
| Net proceeds of DIS issue | 26 | 173 | - | - | - | - | - | 199 | |
| At 30 November 2017 | 4,702 | 18,035 | (5,989) | (62) | 15,749 | 819 | 761 | 34,015 | |
| For the Year Ended 30 November 2016 | Notes | Share capital £'000 |
Share premium account £'000 |
Capital reserve realised £'000 |
Capital reserve unrealised £'000 |
Special distributable reserve £'000 |
Capital redemption reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
| At 30 November 2015 | 4,132 | 13,820 | (2,064) | 3,315 | 16,563 | 713 | 1,157 | 37,636 | |
| Net return | - | - | 1,286 | 184 | - | - | 591 | 2,061 | |
| Dividends paid | 6 | - | - | (1,337) | - | - | - | (1,028) | (2,365) |
| Repurchase and cancellation of shares | 12 | (39) | - | - | - | (312) | 39 | - | (312) |
| At 30 November 2016 | 4,093 | 13,820 | (2,115) | 3,499 | 16,251 | 752 | 720 | 37,020 |
As at 30 November 2017
| 30 November 2017 | 30 November 2016 | ||
|---|---|---|---|
| Notes | £'000 | £'000 | |
| Fixed assets | |||
| Investments at fair value through profit or loss | 8 | 24,335 | 32,590 |
| Current assets | |||
| Debtors | 10 | 469 | 394 |
| Cash | 16 | 9,246 | 4,269 |
| 9,715 | 4,663 | ||
| Creditors | |||
| Amounts falling due within one year | 11 | (35) | (233) |
| Net current assets | 9,680 | 4,430 | |
| Net assets | 34,015 | 37,020 | |
| Capital and reserves | |||
| Called up share capital | 12 | 4,702 | 4,093 |
| Share premium account | 13 | 18,035 | 13,820 |
| Capital reserve - realised | 13 | (5,989) | (2,115) |
| Capital reserve - unrealised | 13 | (62) | 3,499 |
| Special distributable reserve | 13 | 15,749 | 16,251 |
| Capital redemption reserve | 13 | 819 | 752 |
| Revenue reserve | 13 | 761 | 720 |
| Net assets attributable to Ordinary Shareholders | 34,015 | 37,020 | |
| Net asset value per Ordinary Share (pence) | 14 | 72.35 | 90.45 |
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 9 March 2018
For the Year Ended 30 November 2017
| Notes | Year ended 30 November 2017 £'000 |
Year ended 30 November 2016 £'000 |
|
|---|---|---|---|
| Net cash flows from operating activities | 15 | (1,203) | (1,453) |
| Cash flows from investing activities | |||
| Investment income received | 978 | 1,348 | |
| Deposit interest received | 14 | 4 | |
| Purchase of investments | (3,212) | (11,105) | |
| Sale of investments | 11,432 | 17,320 | |
| Net cash flows from investing activities | 9,212 | 7,567 | |
| Cash flows from financing activities | |||
| Equity dividends paid | 6 | (7,421) | (2,365) |
| Issue of Ordinary Shares | 4,891 | - | |
| Repurchase of Ordinary Shares | (502) | (346) | |
| Net cash flows from financing activities | (3,032) | (2,711) | |
| Net increase in cash | 4,977 | 3,403 | |
| Cash at beginning of year | 4,269 | 866 | |
| Cash at end of year | 9,246 | 4,269 |
For the Year Ended 30 November 2017
The Financial Statements have been prepared under the historical cost conversion, 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.
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.
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:
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.
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.
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:
When the Company sells or revalues its investments during the year, any gains or losses arising are credited/charged to the Income Statement.
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).
In the opinion of the Board and the Manager, there are no critical accounting judgements.
| 2. Income | Year ended 30 November 2017 £'000 |
Year ended 30 November 2016 £'000 |
|---|---|---|
| Income from investments: | ||
| UK franked investment income | 50 | 2 |
| UK unfranked investment income | 997 | 1,326 |
| 1,047 | 1,328 | |
| Other income: | ||
| Deposit interest | 14 | 4 |
| Total income | 1,061 | 1,332 |
| 3. Investment management fees | Year ended 30 November 2017 | Year ended 30 November 2016 | ||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Investment management fees at 2.5% | 179 | 717 | 896 | 186 | 743 | 929 |
| 179 | 717 | 896 | 186 | 743 | 929 |
Details of the fee basis are contained in the Directors' Report on page 36.
| 4. Other expenses | Revenue £'000 |
Year ended 30 November 2017 Capital £'000 |
Total £'000 |
Revenue £'000 |
Year ended 30 November 2016 Capital £'000 |
Total £'000 |
|---|---|---|---|---|---|---|
| Secretarial fees | 90 | - | 90 | 89 | - | 89 |
| Directors' remuneration | 73 | - | 73 | 74 | - | 74 |
| Fees to Auditor - audit services | 19 | - | 19 | 18 | - | 18 |
| Fees to Auditor - tax compliance services | 5 | - | 5 | 5 | - | 5 |
| Bad debts written off | - | - | - | 113 | - | 113 |
| Miscellaneous expenses | 104 | - | 104 | 109 | - | 109 |
| 291 | - | 291 | 408 | - | 408 |
| 5. Tax on ordinary activities Year ended 30 November 2017 |
Year ended 30 November 2016 | |||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Corporation tax | (103) | 103 | - | (147) | 147 | - |
The tax assessed for the period is at the rate of 20% up to 31 March 2017, thereafter 19% (2016: 20%).
| Revenue £'000 |
Year ended 30 November 2017 Capital £'000 |
Total £'000 |
Revenue £'000 |
Year ended 30 November 2016 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Net return on ordinary activities before taxation | 591 | (564) | 27 | 738 | 1,323 | 2,061 |
| Net return on ordinary activities before taxation multiplied by standard rate of corporation tax |
112 | (107) | 5 | 147 | 265 | 412 |
| Non taxable UK dividend income | (9) | - | (9) | - | - | - |
| Increase in excess management expenses | - | 33 | 33 | - | 1 | 1 |
| Gains on investments | - | (29) | (29) | - | (413) | (413) |
| 103 | (103) | - | 147 | (147) | - |
Losses with a tax value of £32,909 (2016: £1,412) are available to carry forward against future trading profits.
| 6. Dividends | Year ended 30 November 2017 £'000 |
Year ended 30 November 2016 £'000 |
|---|---|---|
| Amounts recognised as distributions to Shareholders | ||
| in the year: | ||
| Revenue dividends | ||
| Final revenue dividend for the year ended 30 November 2016 of 0.20p paid on 28 April 2017 (2015: 1.50p) |
82 | 617 |
| First Interim revenue dividend for the year ended 30 November 2017 of 0.50p paid on 14 July 2017 (2016: 1.00p) |
203 | 411 |
| Second Interim revenue dividend for the year ended 30 November 2017 of Nil (2016: Nil) |
- | - |
| Third Interim revenue dividend for the year ended 30 November 2017 of 0.40p paid on 30 November 2017 (2016: Nil) |
162 | - |
| 447 | 1,028 | |
| Capital dividends | ||
| Final capital dividend for the year ended 30 November 2016 of 3.55p paid on 28 April 2017 (2015: 2.25p) |
1,453 | 926 |
| First Interim capital dividend for the year ended 30 November 2017 of 2.21p paid on 14 July 2017 (2016: 1.00p) |
896 | 411 |
| Second Interim capital dividend for the year ended | ||
| 30 November 2017 of 5.14p paid on 15 September 2017 (2016: Nil) |
2,085 | - |
| Third Interim capital dividend for the year ended 30 November 2017 of 6.27p paid on 30 November 2017 (2016: Nil) |
2,540 | - |
| 6,974 | 1,337 |
| Year ended 30 November 2017 | Year ended 30 November 2016 | |
|---|---|---|
| £'000 | £'000 | |
| We set out below the final dividends proposed in respect of the financial year, which reflect the requirements of Section 274 of the Income Tax Act 2007. |
||
| Revenue available for distribution by way of dividends for the year |
488 | 591 |
| Revenue dividends Final revenue dividend proposed for the year ended 30 November 2017 of Nil (2016: 0.20p) |
- | 82 |
| - | 82 | |
| Capital dividends Final capital dividend proposed for the year ended 30 November 2017 of Nil (2016: 3.55p) |
- | 1,453 |
| - | 1,453 |
| 7. Return per Ordinary Share | Year ended 30 November 2017 | Year ended 30 November 2016 |
|---|---|---|
| The returns per share have been based on the following figures: |
||
| Weighted average number of Ordinary Shares | 40,706,349 | 41,121,125 |
| Revenue return | £488,000 | £591,000 |
| Capital return | (£461,000) | £1,470,000 |
| Total return | £27,000 | £2,061,000 |
| 8. Investments | Year ended 30 November 2017 | |||
|---|---|---|---|---|
| Listed(quoted prices) £'000 |
AIM/NEX (quoted prices) £'000 |
Unlisted (unobservable inputs) £'000 |
Total £'000 |
|
| Valuation at 30 November 2016 | 1,057 | 230 | 31,303 | 32,590 |
| Unrealised (gain)/loss | (24) | 641 | (4,116) | (3,499) |
| Cost at 30 November 2016 | 1,033 | 871 | 27,187 | 29,091 |
| Movements during the year: | ||||
| Purchases | 3 | 197 | 2,824 | 3,024 |
| Sales proceeds | - | - | (11,432) | (11,432) |
| Realised gain/(loss) | - | (29) | 3,743 | 3,714 |
| Cost at 30 November 2017 | 1,036 | 1,039 | 22,322 | 24,397 |
| Unrealised gain/(loss) | 140 | (616) | 414 | (62) |
| Valuation at 30 November 2017 | 1,176 | 423 | 22,736 | 24,335 |
Note 1(f) defines the three-tier hierarchy of investments, and the significance of the information used to determine their fair value, that is required by Financial Reporting Standard 102 Section 11 "Basic Financial Instruments". Listed and AIM/NEX securities are categorised as Level 1 and unlisted investments as Level 3.
FRS 102 requires disclosure, by class of financial instrument, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 to the specific underlying investments is chosen with reference to the circumstances and position of each investee company.
The Directors are of the view that there are no reasonably possible alternative assumptions that will have a significant effect on the valuation of the unlisted portfolio.
There have been no transfers between fair value levels during the year.
| 30 November 2017 £'000 |
30 November 2016 £'000 |
|
|---|---|---|
| Realised gain on historical basis | 3,714 | 1,882 |
| Net (decrease)/increase in value of investments | (3,561) | 184 |
| Gains on investments | 153 | 2,066 |
The principal activity of the Company is to select and hold a portfolio of investments in unlisted securities. Although the Company will, in some cases, be represented on the board of the investee company, it will not take a controlling interest or become involved in the management. The size and structure of the companies with unlisted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement.
At 30 November 2017, the Company held no shares amounting to 20% or more of the equity capital of any of the unlisted or quoted undertakings. The Company does hold shares or units amounting to more than 3% or more of the nominal value of the allotted shares or units of any class in certain investee companies.
Details of equity percentages held are shown in the Investment Portfolio Summary on pages 30 to 32.
| 10. Debtors | 30 November 2017 £'000 |
30 November 2016 £'000 |
|---|---|---|
| Prepayments and accrued income | 469 | 394 |
| 469 | 394 |
| 11. Creditors | 30 November 2017 £'000 |
30 November 2016 £'000 |
|---|---|---|
| Accruals | 35 | 45 |
| Other creditors | - | 188 |
| 35 | 233 |
| 12. Share capital | 30 November 2017 | 30 November 2016 | ||
|---|---|---|---|---|
| Number | £'000 | Number | £'000 | |
| At 30 November the authorised share capital comprised: | ||||
| allotted, issued and fully paid | ||||
| Ordinary Shares of 10p each: | ||||
| Balance brought forward | 40,930,853 | 4,093 | 41,317,853 | 4,132 |
| Ordinary Shares issued during year | 6,762,092 | 676 | - | - |
| Ordinary Shares repurchased during the year | (676,000) | (67) | (387,000) | (39) |
| 47,016,945 | 4,702 | 40,930,853 | 4,093 |
During the year 676,000 Ordinary Shares (2016: 387,000) of 10p each were repurchased by the Company at a total cost of £502,333 (2016: £311,470) and cancelled. Subsequent to the year end, a further 250,000 Ordinary Shares were purchased for cancellation.
During the year the Company issued 6,496,645 shares (2016: Nil) pursuant to an Offer for Subscription at Subscription Prices ranging from 72.20p to 74.83p per share (2016: Nil). Also during the year, the Company issued 265,447 shares (2016: Nil) under a DIS election at prices of 72.20p and 78.97p (2016: Nil). Subsequent to the year end, a further 8,588,012 shares were issued under an Offer for Subscription at Subscription Prices ranging from 72.35p to 73.83p per share.
The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs.
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.
The total cost to the Company of the repurchase and cancellation of shares is represented in the special distributable reserve account.
The nominal value of shares repurchased and cancelled is represented in the capital redemption reserve.
The revenue reserve represents accumulated profits retained by the Company that have not been distributed to Shareholders as a dividend.
The net asset value per Ordinary Share and the net asset value attributable to the Ordinary Shareholders at the year end, calculated in accordance with the Articles, were as follows:
| 30 November 2017 | 30 November 2016 | |||
|---|---|---|---|---|
| Net asset | Net asset | Net asset | Net asset | |
| value per | value | value per | value | |
| share | attributable | share | attributable | |
| p | £'000 | p | £'000 | |
| Ordinary Shares | 72.35 | 34,015 | 90.45 | 37,020 |
The number of shares used in the above calculation is set out in Note 12.
| 15. Reconciliation of net return to cash utilised by operations |
Year ended 30 November 2017 £'000 |
Year ended 30 November 2016 £'000 |
|---|---|---|
| Net return | 27 | 2,061 |
| Adjustment for: | ||
| Gains on investments | (153) | (2,066) |
| Income from investments | (1,047) | (1,328) |
| Other income | (14) | (4) |
| Operating cash flow before movement in working capital | (1,187) | (1,337) |
| Increase in prepayments | (6) | - |
| Decrease in accruals | (10) | - |
| Corporation tax | - | (116) |
| Cash utilised by operations | (1,203) | (1,453) |
The Company's financial instruments comprise equity and fixed interest investments, cash balances, debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company holds financial assets in accordance with its investment policy of investing mainly in a portfolio of VCT qualifying unquoted and AIM/NEX quoted securities. The Company may not enter into derivative transactions in the form of forward foreign currency contracts, futures and options without the written permission of the Directors. No derivative transactions were entered into during the period.
The main risks the Company faces from its financial instruments are: (i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rates; (ii) interest rate risk; (iii) liquidity risk; (iv) credit risk; and (v) price risk sensitivity. In line with the Company's investment objective, the portfolio comprises mainly sterling currency securities and therefore foreign currency risk is minimal.
The Manager's policies for managing these risks are summarised below and have been applied throughout the period. The numerical disclosures below exclude short-term debtors and creditors which are included in the Balance Sheet at fair value.
The Company's investment portfolio is exposed to market price fluctuations, which are monitored by the Manager in pursuance of the investment objective as set out on page 13. Adherence to investment guidelines and to investment and borrowing powers set out in the Investment Management Agreement mitigates the risk of excessive exposure to any particular type of security or issuer. These powers and guidelines include the requirement to invest in a number of companies across a range of industrial and service sectors at varying stages of development, to closely monitor the progress of the investee companies and to appoint a nonexecutive director to the board of each company. Further information on the investment portfolio (including sector analysis, concentration and deal type analysis) is set out in the Analysis of Unlisted and Quoted Portfolio, the Investment Manager's Review, the Summary of Investment Changes, the Investment Portfolio Summary and the Largest Investments by Valuation.
Some of the Company's financial assets are interest bearing, some of which are at fixed rates and some at variable. As a result, the Company is subject to exposure to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates.
The interest rate risk profile of financial assets at the balance sheet date was as follows:
| At 30 November 2017 | Fixed interest £'000 |
Floating rate £'000 |
Non-interest bearing £'000 |
|---|---|---|---|
| Sterling | |||
| Unlisted and AIM/NEX | 12,294 | - | 10,887 |
| Investment trusts | - | - | 1,154 |
| Cash | - | 9,246 | - |
| 12,294 | 9,246 | 12,041 | |
| Fixed | Floating | Non-interest | |
| At 30 November 2016 | interest £'000 |
rate £'000 |
bearing £'000 |
| Sterling | |||
| Unlisted and AIM/NEX | 17,940 | - | 13,609 |
| UK treasury bills | - | - | 1,041 |
| Cash | - | 4,269 | - |
| 17,940 | 4,269 | 14,650 |
The unlisted fixed interest assets have a weighted average life of 1.69 years (2016: 1.94 years) and a weighted average interest rate of 10.3% (2016: 8.1%). The floating rate assets consist of cash.
These assets are earning interest at prevailing money market rates. The non-interest bearing assets represent the equity element of the portfolio. All assets and liabilities of the Company are included in the Balance Sheet at fair value.
The maturity profile of the Company's financial assets at the balance sheet date was as follows:
| At 30 November 2017 | Within 1 year £'000 |
Within 1-2 years £'000 |
Within 2-3 years £'000 |
Within 3-4 years £'000 |
Within 4-5 years £'000 |
More than 5 years £'000 |
Total £'000 |
|---|---|---|---|---|---|---|---|
| Unlisted | 1,906 | 6,135 | 334 | 2,712 | 238 | 969 | 12,294 |
| 1,906 | 6,135 | 334 | 2,712 | 238 | 969 | 12,294 | |
| At 30 November 2016 | Within 1 year £'000 |
Within 1-2 years £'000 |
Within 2-3 years £'000 |
Within 3-4 years £'000 |
Within 4-5 years £'000 |
More than 5 years £'000 |
Total £'000 |
| Unlisted | 1,951 | 6,794 | 4,702 | 708 | 3,412 | 373 | 17,940 |
| 1,951 | 6,794 | 4,702 | 708 | 3,412 | 373 | 17,940 |
Due to their nature, unlisted investments may not be readily realisable and therefore a portfolio of listed assets and cash is held to offset this liquidity risk. Note 8 details the three-tier hierarchy of inputs as at 30 November 2017 in valuing the Company's investments carried at fair value.
The Company, generally, does not hold significant cash balances and any cash held is with reputable banks with high quality external credit ratings.
This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.
The Company's financial assets exposed to credit risk amounted to the following:
| 30 November 2017 £'000 |
30 November 2016 £'000 |
|
|---|---|---|
| Investments in unlisted debt securities | 12,294 | 17,940 |
| Investment trusts | 1,154 | 1,041 |
| Cash | 9,246 | 4,269 |
| 22,694 | 23,250 |
All assets which are traded on a recognised exchange are held by JP Morgan, the company's custodian. Cash balances are held by JP Morgan and Clydesdale Bank. Should the credit quality or the financial position of any of these institutions deteriorate significantly the Manager will move these assets to another financial institution.
The Manager evaluates credit risk on unlisted debt securities and financial commitments and guarantees prior to investment, and as part of the ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. Typically, unlisted debt securities have a fixed charge over the assets of the investee company in order to mitigate the gross credit risk. The Manager receives management accounts from investee companies, and members of the investment management team sit on the boards of investee companies; this enables the close identification, monitoring and management of investment specific credit risk.
There were no significant concentrations of credit risk to counterparties at 30 November 2017 or 30 November 2016.
The following details the Company's sensitivity to a 10% increase and decrease in the market prices of AIM/NEX quoted securities, with 10% being the Manager's assessment of a reasonable possible change in market prices.
At 30 November 2017, if market prices of listed AIM/NEX quoted securities had been 10% higher or lower with all other variables held constant, the increase or decrease in net assets attributable to Shareholders for the year would have been £45,000 (2016: £25,000), due to the change in valuation of financial assets at fair value through profit or loss.
At 30 November 2017, 66.8% (2016: 84.6%) comprised investments in unquoted companies held at fair value. The valuation of unquoted investments reflects a number of factors, including the performance of the investee company itself and the wider market. Therefore, it is not considered meaningful to provide a sensitivity analysis on the net asset position and total return for the year.
| Notice of Annual General Meeting | 73 |
|---|---|
| Explanatory Notes to the Notice of Annual General Meeting |
78 |
| Glossary | 79 |
| Your Notes | 80 |
Notice is hereby given that the Annual General Meeting of Maven Income and Growth VCT 3 PLC (the Company: Registered in England and Wales with registered number 04283350) will be held at the offices of Maven Capital Partners UK LLP, Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF at 10.00 am on Wednesday, 11 April 2018 for the purposes of considering and, if thought fit, passing the following Resolutions:
(b) (other than under paragraph (a) above) of equity securities up to an aggregate nominal amount not exceeding £553,549 (equivalent to 5,535,495 shares) and shall expire at the conclusion of the next Annual General Meeting of the Company or, if earlier, on the expiry of 15 months from the passing of this Resolution, and so that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired.
By order of the Board Maven Capital Partners UK LLP Secretary Fifth Floor 1-2 Royal Exchange Buildings London EC3V 3LF
9 March 2018
1) To be entitled to attend and vote at the Meeting (and for the purposes of the determination by the Company of the votes that may be cast in accordance with Regulation 41 of the Uncertified Securities Regulations 2001), only those members registered in the Company's register of members at 10.00 am on 9 April 2018 (or, if the Meeting is adjourned, close of business on the date which is two business days before the adjourned Meeting) shall be entitled to attend and vote at the Meeting. Changes to the register of members of the Company after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the Meeting.
2) Information regarding the Meeting, including the information required by Section 311A of the Act, is available from www.mavencp.com/migvct3.
3) If you wish to attend the Meeting in person, please bring some form of identification.
9) A form of proxy is enclosed with this document. The notes to the proxy form explain how to direct your proxy to vote or withhold their vote on each Resolution. To appoint a proxy using the proxy form, the form must be completed, signed and sent or delivered to the Company's registrars, Link Asset Services, at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by Link Asset Services no later than 10.00 am on 9 April 2018 or by close of business on a date two business days prior to that appointed for any adjourned Meeting or, in the case of a poll taken subsequent to the date of the Meeting or adjourned Meeting, so as to be received no later than 24 hours before the time appointed for taking the poll. In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form. For the purposes of determining the time for delivery of proxies, no account has been taken of any part of a day that is not a working day.
10) You may submit your proxy electronically using the Share Portal service at www.signalshares.com. Shareholders can use this service to vote or appoint a proxy online. The same voting deadline of 48 hours (excluding non-working days) before the time of the meeting applies as if you were using your personalised form of proxy to vote or appoint a proxy by post to vote for you. Shareholders will need to use the unique personal identification Investor Code printed on your share certificate. Shareholders should not show this information to anyone unless they wish to give proxy instructions on their behalf.
11) CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the Meeting and any adjournment(s) of it by using the procedures described in the CREST Manual (available from https://www.euroclear.com/site/ public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited's (EUI) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer's agent (ID: RA10) by 10.00 am on 9 April 2018.
For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time.
In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
12) In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's register of members in respect of the joint holding, the first-named being the most senior.
13) To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off times for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hardcopy proxy form, please contact Link Asset Services at the address shown in note 9. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.
14) In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Link Asset Services, at the address shown in note 9. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed, or a duly certified copy of such power or authority, must be included with the revocation notice.
The revocation notice must be received by Link Asset Services no later than 48 hours before the Meeting. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.
15) A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a member provided that no more than one corporate representative exercises powers over the same share.
16) As at 7 March 2018, the Company's issued share capital comprised 55,354,957 Ordinary Shares of 10p each. Each Ordinary Share carries the right to one vote at a General Meeting of the Company and, therefore, the total number of voting rights in the Company on 7 March 2018 is 55,354,957. The website referred to in note 2 will include information on the number of shares and voting rights.
Where the Company is required to publish such a statement on its website:
19) In order to be able to exercise the members' right to require the Company to publish audit concerns (see note 18), the relevant request must be made by a member or members having a right to vote at the Meeting and holding at least 5% of total voting rights of the Company, or at least 100 members having a right to vote at the Meeting and holding, on average, at least £100 of paid up share capital. For information on voting rights, including the total number of voting rights, see note 16 above and the website referred to in note 2.
22) Copies of the letters of appointment of the Directors of the Company and a copy of the Articles of the Company will be available for inspection at the registered office of the Company and at Kintyre House, 205 West George Street, Glasgow G2 2LW from the date of this notice until the end of the Meeting.
Registered in England and Wales: Company Number 04283350
An explanation of the Resolutions to be proposed at the AGM is set out below. Resolutions 1 to 7 will be proposed as Ordinary Resolutions requiring the approval of more than 50% of the votes cast and Resolutions 8 to 10 will be proposed as Special Resolutions, requiring the approval of 75% or more of the votes cast.
The Directors seek the approval to receive the Directors' Report and audited Financial Statements for the year ended 30 November 2017, which are included within the Annual Report.
The Board seeks the approval of the Directors' Remuneration Report for the year ended 30 November 2017, which is also included within the Annual Report.
Bill Nixon retires annually because he is not independent and is proposed for re-election by the Company's Shareholders.
Keith Pickering will retire by rotation at the AGM and is proposed for re-election by the Company's Shareholders.
The Company must appoint an auditor at each general meeting at which accounts are presented to Shareholders to hold office until the conclusion of the next such meeting. Resolution 5 seeks Shareholder approval to reappoint Deloitte LLP as the Company's Auditor. In accordance with normal practice, Resolution 6 seeks authority for the Directors to determine the Auditor's remuneration.
Resolution 7, if passed, will authorise the Directors to allot shares or rights to subscribe for them up to an aggregate nominal value of £553,549. This amounts to 5,535,495 Ordinary Shares, representing approximately 10% of the issued share capital of the Company in issue as at 7 March 2018 (this being the latest practicable date prior to the publication of this Annual Report). The Directors authority will expire at the conclusion of the next Annual General Meeting of the Company or on the expiry of 15 months from the passing of the Resolution, whichever is the first to occur.
Resolution 8, if passed, would allow the Board to allot new shares, up to 10% of the current share capital, without implementing pre-emption rights. The authority conferred by Resolution 8 will expire at the conclusion of the next Annual General Meeting of the Company or on the expiry of 15 months from the passing of the Resolution, whichever is the first to occur.
The Board may use the authorities conferred until Resolutions 7 and 8 to allot further Ordinary Shares or rights to subscribe for them.
Under Resolution 9 the Company's Shareholders are being asked to renew the Directors' authority to make market purchases of up to 5,535,495 Ordinary Shares of the Company (representing approximately 10% of the issued share capital as at 7 March 2018, this being the latest practicable date prior to the publication of this Annual Report). The Resolution sets out the minimum and maximum prices that can be paid, exclusive of expenses. Any Ordinary Shares in the Company purchased pursuant to the authority sought under Resolution 9 may be either cancelled, and not be available for reissue, or held in treasury. Once held in treasury, such shares may be sold for cash or cancelled. At the date of this notice the Company does not hold any Ordinary Shares in the capital of the Company in treasury. The Board may use this authority to allow the Company to continue to operate its share buy-back policy.
Resolution 10, which would be effective until the Company's next Annual General Meeting, seeks approval to allow the Company to call general meetings, other than annual general meetings, on 14 days' clear notice. Such authority will only be exercised under exceptional circumstances. The Company will also need to meet the requirements for electronic voting before it can call a general meeting on 14 days' notice.
| Alternative Performance Measures (APMs) |
Measures of performance which are in addition to the earnings reported in the Financial Statements. The APMs used by the Company are marked * in this Glossary. The table in the Financial Highlights section on page 5 shows the movement in net asset value and total return per Ordinary Share over the past three financial years and shows the dividends declared in respect of each of the past three financial years and on a cumulative basis since inception. |
|---|---|
| Annual yield* | The total dividends paid for the financial year expressed as a percentage of the share price at the year end date. |
| Cumulative dividends paid* | The total amount of both capital and income distributions paid since the launch of the Company. |
| Discount /premium to NAV* | A discount is the percentage by which the mid-market price of an investment is lower than the net asset value per Ordinary Share. A premium is the percentage by which the mid-market price per share of an investment exceeds the net asset value per Ordinary Share. |
| Distributable reserves | Comprises capital reserve (realised), revenue reserve and special distributable reserve. |
| Dividend per Ordinary Share | The total of all dividends paid by the Company over the year per Ordinary Share. |
| Earnings per Ordinary Share (EPS) |
The net income after tax of the Company divided by the weighted average number of shares in issue during the year. In a venture capital trust this is made up of revenue EPS and capital EPS. |
| Ex-dividend date (XD date) | The date set by the London Stock Exchange and being the date preceeding the record date. |
| Index or indices | A market index calculates the average performance of its constituents, normally on a weighted basis. It provides a means of assessing the overall state of the economy and provides a comparison against which the performance of individual instruments can be assessed. |
| Investment income* | Income from investments as reported in the Income Statement. |
| NAV per Ordinary Share | Net assets divided by the number of Ordinary Shares in issue. |
| NAV total return per Ordinary Share* |
NAV plus cumulative dividends paid to date divided by the number of Ordinary Shares in issue. |
| Net assets attributable to Ordinary Shareholders or Shareholders' funds (NAV) |
Total assets less current and long-term liabilities. |
| Operational expenses* | The total of investment management fees and other expenses as reported in the Income Statement. |
| Realised gains/losses | The profit/loss on the sale of investments during the year. |
| Record date | The date on which an investor needs to be holding a share in order to qualify for a forthcoming dividend. |
| Revenue reserves | The total of undistributed revenue earnings from prior years. This is available for distribution to shareholders by way of dividend. |
| Total return | The theoretical return including reinvesting each dividend in additional shares in the Company on the day that the shares go ex-dividend. The NAV total return involves investing the same net dividend in the NAV of the Company on the ex-dividend date. |
| Unrealised gains/losses | The profit/loss on the revaluation of the investment portfolio at the end of the year. |
| Directors | Atul Devani (Chairman) David Allan Keith Pickering Bill Nixon |
|---|---|
| Manager and Secretary and Principal place of business |
Maven Capital Partners UK LLP Kintyre House 205 West George Street Glasgow G2 2LW Telephone: 0141 306 7400 E-mail: [email protected] |
| Registered Office | Fifth Floor 1-2 Royal Exchange Buildings London EC3V 3LF |
| Registered in England and Wales | Company Registration Number: 04283350 Legal Identity Identifier: 213800WT2ILF5PBCB432 TIDM: MIG3 ISIN: GBOO31153769 |
| Website | www.mavencp.com/migvct3 |
| Registrars | Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU |
| Website: www.linkassetservices.com | |
| Shareholder Portal: www.signalshares.com | |
| Shareholder Helpline: 0333 300 1566 (Lines are open 9.00am until 5.30pm, Monday to Friday excluding public holidays in England and Wales. Calls are charged at the standard rates used for 01 and 02 UK geographic numbers and will vary by provider. Calls from outside the United Kingdom should be made to +44 371 664 0300 and will be charged at the applicable international rate.) |
|
| Auditor | Deloitte LLP |
| Bankers | J P Morgan Chase Bank |
| Stockbrokers | Shore Capital Stockbrokers Limited Telephone: 020 7647 8132 |
| VCT Adviser | Philip Hare & Associates LLP |
Maven Capital Partners UK LLP Kintyre House 205 West George Street Glasgow G2 2LW Tel: 0141 306 7400
Authorised and Regulated by The Financial Conduct Authority
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.