Maven Grwth 3 Regulatory News (MIG3)

Maven Income and Growth VCT 3 PLC

Annual Financial Report for the year ended 30 November 2011

The Directors announce the audited Annual Financial Report for the year ended 30 November 2011 as follows.

Chairman's Statement

Your board is pleased to report a successful year for the Company notwithstanding the continuing, challenging economic conditions affecting the UK and the global economy. The private equity portfolio continues to develop as the Manager builds investment in attractively priced, later-stage companies with defensive characteristics and reliable earnings, which are well placed to withstand the difficult trading conditions likely to persist in the UK for some time to come.

Your Company's strategy is to build a broadly based portfolio focussed on income generation through the use of investment structures employing loan stock alongside equity finance. The growing income received from loan stock, alongside successful realisations, is central to your Company's ability to provide sustainable dividend income to shareholders. The proposed final dividend, an increase over previous years, in tandem with growth in the underlying NAV, is indicative of the success of this strategy.

The exposure to AIM has been significantly reduced with further realisations achieved during the past year, to the point where the portfolio is now almost wholly invested in well-established private companies.

Highlights

·; Total Return of 107.5p (2010: 100.34p) per Ordinary share at the year end, up 7.16% over the year.

·; NAV at the year-end of 80.8p (2010: 77.9p) per Ordinary share after payment of interim dividend of 1.75p (2010: 1.5p).

·; Seven new later-stage, income-yielding investments added during the period.

·; Disposal of Walker Technical Resources, for a return of 3.0 x cost.

·; Final dividend proposed of 2.75p per Ordinary share (2010: 2.5p).

The Investment Portfolio

The uplift of 3.7% in NAV during the twelve month period compares with reductions of 9.2% and 18.3% respectively in the FTSE SmallCap Index and the FTSE AIM All-share Index. There are 43 unquoted investments in the portfolio, after6 realisations completed during the year releasing capital of £2.8 million. The most notable sale was of Walker Technical Resources, sold for nearly three times the original investment made only 25 months previously.

During the year seven substantial new transactions were completed, along with eight follow-on investments to support the development of existing portfolio companies. A further investment was completed after the year end.

The private equity portfolio is generally performing well, with most companies trading acceptably or, in some cases, ahead of plan. In the last year the Manager has seen significant acquisition interest in a number of portfolio companies and is currently working on the potential sale of several holdings.

The Manager has also continued the realisation of the AIM portfolio during the year as opportunities have arisen. The process is nearing completion and AIM securities now represent only 2.8% of the asset base (2010: 4.4%).

Your Company also continues to co-invest in each transaction with other Maven client funds, which allows the Manager to invest in a greater range and size of transactions on behalf of VCT clients than would otherwise be the case.

The most important measure of performance for a VCT is the total return, which is the long term record of dividend payments out of income and capital gains combined with the current NAV. The NAV in isolation is a less relevant measure of performance as the underlying investments are long-term in nature and not readily realisable.

Dividends

The Board is proposing a final dividend of 2.75p per Ordinary Share (pps) to be paid on 30 May 2012 to shareholders on the Register at 11 May 2012.

The Company paid an interim dividend of 1.75p (2010:1.5p) to Ordinary Shareholders on 25 August 2011. The proposed final dividend will bring the total dividend for the year to 4.5p (2010: 4.0p) which is equivalent to a gross yield of 7.5% from an equity investment to a higher rate taxpayer, or 8.8% to an Additional Rate taxpayer, on an effective investment of 80.0p when the initial tax relief of 20% is taken into account. For former C Ordinary shareholders the equivalent yield is 11.9% based on 40% tax relief, or 13.9% for an Additional Rate taxpayer.

Since the Company's launch, Ordinary shareholders have received 26.70pps in tax free dividends. The effect of paying the proposed final dividend of 2.75pps will be to reduce the NAV to 78.05pps. The future level of dividends will depend on performance, and will be consistent with the Board's declared intention of paying not less than 4p per share each year subject to the maintenance of NAV at a suitable level.

Share Buy-back Policy

Shareholders have given the Board authority to buy back shares for cancellation when it is in the interests of the Company and the Shareholders as a whole to do so. During the year, the discount of the share price to net asset value rose to 37.5% and the Board implemented a series of share buy-backs resulting in the purchase for cancellation of 321,000 shares. By 30 November 2011 the discount had narrowed to 18.6%. Since then, the Company has been in a close period and no further share buy-backs have taken place. Fuller details of the parameters within which the Company may carry out share buy-backs is given in the Directors' Report on page 24.

Principal risks and uncertainties

The Board has reviewed the principal risks and uncertainties facing the Company, set out in the annual report, which are the risks involved in investment in small and unquoted companies. In order to reduce the exposure to investment risk, the Company has invested in a broadly-based portfolio of investments in the United Kingdom.

The VCT qualifying status of the Company is reviewed regularly by your Board and monitored on a continuous basis by the Manager in order to ensure that all of the criteria for VCT qualifying status continue to be met. I am pleased to confirm that the results of all tests remain satisfactory.

Investment Strategy

The Manager's underlying investment strategy is to build a large and diversified portfolio of income producing, later stage private companies across a range of sectors and industries. The principal domicile of these companies will generally be in the UK, although some have an export dimension or overseas operations.

Shareholder value is created through a combination of generating revenue from loan stock holdings and capital proceeds arising from profitable realisations, normally via trade sales. To achieve this goal new transactions are typically structured with 70% to 90% in secured, yielding loan stock in companies where an equity stake can also be acquired at a reasonable entry price with the prospect of a capital profit when the business achieves greater scale and maturity.

As in previous years the revised Listing Rules require your Board to ensure that this and subsequent reports carry additional information on investment policy, in particular statements concerning asset mix, the spread of risk and maximum exposures. This information is contained in the Directors' Report and in the tabular analyses of the portfolio.

Valuation Process

Investments held by Maven Income and Growth VCT 3 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.

 Recovery of VAT

The Board continues to pursue the recovery of VAT and interest on VAT paid on management fees paid in the years before October 2008. We expect that further sums will be recovered in due course.

Continuation as a VCT

The Board wishes to draw the attention of shareholders to the proposal to continue as a VCT which, in accordance with the Articles of Association, will be put to the AGM in May 2012. The Board believes that it is in the interests of shareholders that the Company maintains its VCT status because that will enable them to continue to:

·; receive tax-free dividends arising from the Company's revenue and capital gains

·; have access to unlisted assets which are not otherwise readily available to private investors

·; participate fully in the Company's long-term prospects.

The consequences of not passing the resolution to continue as a VCT could include one or more of the following:

·; the sale of the portfolio for less than full value

·; the proceeds available to shareholders being reduced by liquidation costs

·; loss of the tax-free status of dividends paid by the Company

·; loss of initial tax relief on investments in the Company's shares made in the past five years.

The Board believes that the long-term continuation of the Company as a VCT is clearly in the best interests of the shareholders as a whole and recommends that they vote in favour of the resolution at the AGM. It is the Board's intention that this Resolution should be placed before the Shareholders every five years.

New VCT Offers and fund raising

In the period to April 2011, the Maven linked VCT offer resulted in the issue of 1,512,311 new shares, raising an additional £1,206,824 for investment at a cost to the Company of only 5.5% of total funds raised.

Your Board recently announced its intention to offer a further opportunity to acquire New Ordinary Shares in the Company through a top-up Offer aiming to raise £1.25 million before expenses, which is within the maximum permitted under the prospectus rules and avoids the higher costs associated with publishing a full prospectus. The Company will not be issuing more than 10% of its issued share capital, which is 1,493,428 New Ordinary Shares and is within existing shareholder authorities. The New Ordinary Shares will be issued at 83.7p which represents the latest NAV per share at the date of publication of the Offers Document plus 5.5% to cover the cost of the Offer so that existing shareholders do not suffer any dilution.

The Company made its Offer in parallel with Maven Income and Growth VCT, Maven Income and Growth VCT 2, and Maven Income and Growth VCT 4, each of which is aiming to raise £1.25 million,. Each investor's subscription will be split equally between the four Companies.

The Company may use the money raised under both the earlier top-up Offers and the latest Offer to pay dividends and general running costs, thereby preserving for investment purposes an equivalent sum of more valuable 'old money' which operates under more advantageous VCT regulations. The proceeds of the Offer will provide additional liquidity for the Company to make further later-stage investments, and enable it to spread its costs over a larger asset base to the benefit of all Shareholders.

By 1 March 2012, the offer was fully subscribed and closed.

Outlook

Although growth prospects for the UK economy are uncertain, the ongoing scarcity of bank debt available to private companies provides continuing opportunities for well managed generalist VCTs to identify and invest in established, profitable businesses, and to use income derived from these assets to support a sustainable dividend programme.

In the current low interest rate environment, your Board and the Manager recognise that significant, regular payments of tax-free dividend income are highly attractive to many investors, and are a key driver for investing in VCTs. The strategic focus of your Company will therefore be to continue to invest in a small number of new private companies each year with the potential to provide yield for shareholders through a combination of income generation and profitable realisations.

Investment Manager's Review

Overview

The prospects for the UK economy remain uncertain, with most indicators suggesting low economic growth is likely to persist for a number of years ahead. This view is further supported by the coalition Government's 2011 Autumn Statement which forecasts that the public sector borrowing requirement will increase over the next five years, and an extended period of spending restraint will be required in order to ensure that the UK maintains its current rating with the key credit agencies. This fiscal control and lower discretionary spend capacity is likely to impact on both consumer and investor confidence over the medium term.

Notwithstanding the challenges facing the UK economy, we are encouraged to note that the majority of private company assets in the portfolio are trading in line with expectations, and are creating value for our client investors through a combination of revenue generation and capital growth.

The fundamental strategy pursued by Maven is to use its national presence and local advisory relationships to generate a high level of new transaction introductions each year, and to invest selectively and conservatively in earnings reliable and well managed private companies on prudent entry multiples. This approach has ensured positive shareholder returns have been consistently achieved in recent years and will continue to be at the cornerstone of our investment approach.

We believe there are continuing positive medium term prospects for potential deal flow in our target private equity market, as well resourced generalist VCT managers continue to be introduced to high quality later-stage private companies seeking capital to expand. Maven has been introduced to over 400 private company transactions around the UK in the past 12 months, mainly by a network of long-established contacts across the corporate finance and business community.

Investment Activity

During the year the Maven team completed seven substantial new private equity investments on behalf for your Company, alongside eight follow-on investments in existing portfolio companies. At the year end, the portfolio stood at 61 unlisted and AIM investments at a total cost of £20.2 million. Since 30 November 2011, one new qualifying investment has been completed at a total cost of £0.6 million.

The following new investments have been completed during the period.

Maven Income and Growth VCT 3 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, Talisman First Venture Capital Trust and Ortus VCT. The Company is expected to continue to co-invest with these as well as other Maven clients, which offers the advantage that, in aggregate, the Companies are able to underwrite a wider range and larger size of transaction than would be the case on a stand-alone basis.

Portfolio Developments

Seven substantial private company investments were added to the portfolio during the period under review:

·; Attraction World Holdings, which offers ticketing solutions to the worldwide travel sector, enjoys exclusive trading partnerships with key UK travel organisations and offers travel agents integrated access to the ticketing systems of major global theme parks

·; CHS Engineering Services, a leading provider of condition monitoring and maintenance services for domestic and international airport terminal operators and major clients in the distribution and materials handling sector

·; John McGavigan, a manufacturer and supplier of decorative assemblies and interior parts to global automotive manufacturers, with a significant share of the Western European market and a strategy to establish a low cost manufacturing operation in China, where it can leverage the overseas experience of its management team to serve the wider Asian markets

·; Glacier Energy Services, a profitable oil and gas service group with two specialist trading subsidiaries, Roberts Pipeline Machining and Wellclad. Roberts designs and manufactures on-site portable cutting machines for blue chip oil and gas clients. Wellclad provides services to the European offshore and sub-sea equipment market. Glacier is focused on growth within its core UK market as well as promoting its technologies to the international oil and gas market

·; Space Student Living, provides contracted property management services to the student housing sector. Space aims to achieve significant growth across its consultancy services operation and to acquire further long term management contracts

·; Exodus: a new company trading as 6o, which was established by Penta Capital to implement a buy-and-build strategy in the business telecommunications service sector based on the converging of mobile, fixed-line, broadband, internet and IT technology businesses. Penta is an established private equity firm with which Maven previously co-invested in the successful 2010 management buy-out of esure

·; LCL Hose: which trades as Dantec, is a specialist manufacturer of hand-built composite hoses for the global petrochemical industry. Composite hoses provide the vital flexible connection in many fluid transfer systems and are used worldwide in applications such as unloading road, rail and marine tankers within chemical and oil plants, and in Formula 1 racing. Dantec exports around 70% of its output and is engaged in a number of significant overseas projects.

After the year end a further investment was made in Moriond, a new company set up to acquire an established residential property portfolio at a significant discount to open market value. Maven will work on a joint venture basis with an experienced developer to break up the portfolio into single lots, carry out minor refurbishment, and then implement a structured sale of the individual assets over an 18 to 24 month period. The transaction will provide a 6.5% paid yield throughout the life of the investment, and is also forecast to generate a significant capital gain when all of the assets are sold at the end of the project.

In a number of cases the Manager is also currently engaged with investee companies and prospective acquirers at various stages of a potential exit process. This realisation activity reflects the increasing maturity of a number of holdings, but it should be noted that there can be no certainty that these discussions will ultimately lead to profitable sales.

There was one notable private company exit during the period. The investment in Dalglen 1150 (Walker Technical Resources) was realised in July. Total proceeds over the life of the investment were £1.4m representing an overall 3.0 x return on the initial investment cost. The exit was via a secondary buy-out, funded by Gresham Private Equity, just two years after Maven originally led the management buy-in in June 2009. Walker, which provides some of the most advanced composite repairs technology available for the global oil & gas industry, has consistently traded ahead of budget and has more than doubled earnings since the initial investment.

The table on page 13 gives details of realisations during the reporting period.

Realisations made during the year

One unlisted investment and two AIM companies were struck off the Register during the year resulting in a realised loss of £491,000 (cost £631,000). This had no effect on the NAV as a full provision had been made in earlier years.

In respect of AIM holdings, the Manager has continued its policy of structured exits from this part of the portfolio. Four AIM securities were purchased by a closed ended investment company established to acquire investments which were underperforming or trading below entry price. These transactions incurred realised losses of £316,000 (cost £404,000) during the period.

Outlook

Your Company's underlying investment portfolio has continued to benefit from significant diversification in recent years, with a specific emphasis on identifying and investing in later-stage private companies with income generating characteristics. There is increased competition among providers of alternative capital for access to attractive private equity transactions. However, with one of the most highly resourced and experienced management teams in the industry, Maven has access to a UK-wide network of introducers and is therefore well placed to continue to expand and diversify the investee company portfolio and grow shareholder value.

The accompanying Notes are an integral part of the Financial Statements

The accompanying notes are an integral part of the financial statements.

The financial statements of Maven Income and Growth VCT 3 PLC, registered number 4283350, were approved by the Board of Directors and were signed on its behalf by:

Gregor Michie

Director