Maven Grwth 3 Regulatory News (MIG3)

Maven Income and Growth VCT 3 PLC

Annual Financial Report for the year ended 30 November 2012

The Directors announce the audited Annual Financial Report for the year ended 30 November 2012 as follows.

Chairman's Statement

On behalf of your Board I am pleased to report on another successful year for the Company. The portfolio has continued to perform well despite the challenging environment affecting the UK and global economy.

2012 has been a year dominated by exits of portfolio companies to both trade and private equity buyers. Notably, three holdings were sold to trade buyers from the US, Germany and South Africa at or above carrying value, which in turn has helped to support a further increase in NAV Total Return. These sales validate your Company's strategy of selecting only attractively priced, mature private companies with reliable earnings which can generate income throughout the investment holding period, and which also offer the prospect of capital gain at the point of sale.

In recognition of the value realised from the portfolio during the year, an increased final dividend is declared in line with the strategy to pay Shareholders attractive and regular levels of tax free income. Your Board fully recognises the importance of tax free dividend income to Shareholders, and continues to work closely with the Manager to build and maintain a portfolio of assets which can support this core income distribution objective.

On a more general note, I am pleased to note that in the year under review there has been a wide range of independent industry recognition of the success of your Manager's investment approach and ability to deliver a consistent level of shareholder returns. Maven was announced as the winner in the UK Small Buyout House of the Year category for the ACQ Finance Magazine Global Awards for 2012 and as winner of VCT Exit of the Year at the 2012 British Private Equity Awards as well as being a finalist in the VCT House of the Year category. These awards acknowledge innovation and excellence in the private equity and venture capital sectors.

Highlights

·; Total Return on Ordinary Shares of 114.15p per Share at the year end, up 6.19% (6.65p) since the previous year

·; NAV at period end of 82.7p (2011: 80.8p) per Ordinary Share after payment of the interim dividend of 2.00p

·; Final dividend declared of 3.0p per Ordinary Share, up from 2.75p in 2011

·; Four substantial new investments added to the portfolio during the year

·; Four significant portfolio exits from ATR, TPL (Midlands), Nessco and Oliver Kay for total returns on sale ranging from 2.0 to 2.7 times cost

The Investment Portfolio

The portfolio is now comprised of 38 later-stage private companies and is generally performing well, with most companies trading at acceptable levels and, in some cases, ahead of plan. The exposure to AIM quoted assets has been further reduced during the year and is now a modest 2.6% of net asset value.

During the year to 30 November 2012 your Company made four new private company investments and nine follow-on investments, across a wide range of sectors, and has participated in every private equity deal completed by the Manager. All of the new investments are either in established businesses, or are wholly asset backed. A number of follow-on investments were also made to support the development of existing portfolio companies and, in the case of Glacier Energy Services Group and Six Degrees Group, to fund acquisitions which we expect to further enhance value.

There have been four notable private company exits during the year which generated total capital proceeds of £4.4m. In February 2012 the investment in ATR Holdings was sold to NBGI Private Equity, a UK based mid market private equity house. In June, the holding in TPL (Midlands) was sold to German trade buyer Vossloh Kiepe, and shortly thereafter Nessco Group Holdings was sold to RigNet, a NASDAQ quoted US Telecoms business. Just prior to the year end Oliver Kay was sold to Bidfresh, an internationally focused trading and distribution group.

The Manager is also currently engaged in negotiations to sell other portfolio company holdings, although there can be no certainty that these discussions will progress towards a successful exit.

Performance

Your Company has established a sustained trend of improving returns over recent years, driven by a focused private equity investment strategy, with NAV Total Return having increased by 20.6% since November 2008. NAV Total Return is the most important measure of performance for a VCT, being the long term record of dividend payments out of income and capital gains combined with the current NAV.

Dividends

The Board recommends an increased final dividend of 3.0p per Ordinary Share to be paid on 30 May 2013 to Shareholders on the Register at 10 May 2013. The total dividends for the year including the proposed final dividend are 5.0p per Share to Ordinary Shareholders, which is a yield of 6.25% on an effective investment of 80.0p.

Ordinary Shareholders have, since the Company's launch, received 31.45p per Share to date in tax-free dividends. The impact of paying the final dividend of 3.0p will be to reduce the NAV to 79.7p per Share.

The future level of dividends will depend on performance, and will be consistent with the declared intention of paying not less than 4.0p per Share each year subject to the maintenance of NAV at a suitable level. The Board regards the growing level of dividends as an indication of the success of the Company's investment strategy and is committed to improving Shareholder distributions in future years as the portfolio continues to expand and mature.

Valuation Process

Investments held 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.

Principal risks and uncertainties

The Board has reviewed the principal risks and uncertainties facing the Company, which are set out on page 27 of the Annual Report. The Company has invested in a broadly based portfolio of investments largely in unlisted companies in the UK. The portfolio of investments in the AIM market is reducing as the unlisted portfolio is further developed.

The VCT qualifying status of the Company is reviewed regularly by the Directors and monitored on a continuous basis by the Manager in order to ensure that all of the criteria for VCT status are met. Your Board is pleased to confirm that all tests continue to be met.

Share Buy-back Policy

Shareholders have given the Board authority to buy back Shares for cancellation when it is in the interests of the Shareholders and the Company as a whole and 487,000 Shares were bought back during the year ended 30 November 2012 at a cost of £374,028. Details of the parameters within which the Company may carry out Share buy-backs are given in the Directors' Report on page 29.

Enhanced Share Buy-back (EBB) Scheme

Under the EBB, the Company purchased 4,708,436 Ordinary Shares of 10 pence each ("Ordinary Shares") at a price of 82.6p pence per share and allotted 4,566,741 Ordinary Shares at 85.16p per share. The offer was fully subscribed.

The EBB was successful in raising approximately £3.9 million of funds for investment for the next five years. The fact that many Shareholders have now realised part of their investment could also lessen demand for share buybacks which could in turn help to narrow the discount of the share price to net asset value.

VCT Regulation

The Board was pleased to note the recent approval by the European Commission of proposed increases to the size of companies which can receive VCT funding, and of the amount which can be invested in a qualifying business. This was welcome news for investors and reaffirms the attraction of generalist VCTs as a tax-efficient route to investment in high growth smaller companies.

VCTs came into existence through an Act of Parliament in 1995 when, in order to stimulate the economy, the Government decided to encourage the British public to invest in small companies: by offering tax reliefs as a way of re-balancing the risk/reward ratio to make such investment more attractive; by requiring that they diversify risk across a portfolio of investments; and by requiring them to be subject to the most extensive legislative and regulatory protections for investors. Therefore, VCTs are listed companies governed by the Companies Acts, the UKLA's Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules. They are also subject to HMRC's regulations specifically for VCTs, and all the legislation, regulation and guidance that applies to companies in general. As companies rather than funds or products of an investment management business, they also have boards of directors looking after the interests of their shareholders.

The Board, the AIC (Association of Investment Companies) and others have provided comments to the FSA on its Consultation Paper 12-19 (Restrictions on the retail distribution of unregulated collective investment schemes and close substitutes). Fundamentally, VCTs are not UCIS and should not be affected by such regulations. VCTs are, of course, companies rather than funds or schemes, and they are designed by the Government specifically for investment by the UK taxpayer, as distinct from 'sophisticated investors' to whom the FSA would restrict the promotion of UCIS. The FSA said recently that it is re-considering its views on this issue.

We will continue to monitor all proposals for new legislation or regulation that would affect VCTs.

VCT Offers

A top-up Offer was opened in December 2011 in parallel with similar offers by Maven Income and Growth VCT PLC, Maven Income and Growth VCT 2 PLC and Maven Income and Growth VCT 4 PLC resulting in the issue of 1,491,880 new Shares and raising an additional £1,248,703 of share capital. The Offer was fully subscribed by 29 February 2012 and consequently closed early.

A further top-up offer opened on 23 January 2013 in parallel with similar offers by Maven Income and Growth VCT, Maven Income and Growth VCT 2 and Maven Income and Growth VCT 5. The offer was oversubscribed and closed early on 11 February 2013 resulting in the issue of 326,269 new Ordinary Shares. A further 1,167,649 shares will be issued on 5 April and 287,654 will be issued under the offer on 30 April 2013.

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.

Outlook

In spite of vigorous competition for high quality private company assets in the UK, the Manager has continued to source, manage and successfully exit private company transactions and consistently generate regular improvements in shareholder value. Your Board believes that our current strategy will continue to deliver future growth in shareholder value and looks forward with confidence.

Gregor Michie

Chairman

26 March 2013

Investment Manager's Review

Overview

Your Company's portfolio has benefitted from significant diversification in recent years, with a specific focus on building an asset base of established and high-yielding UK private companies. In the year under review the success of this approach has led to improvements in NAV Total Return and shareholder dividends being achieved.

As the portfolio has expanded and matured, our core strategy of investing selectively at conservative entry multiples in profitable later-stage businesses has been vindicated as a number of these holdings have attracted trade or private equity interest during the year.

Three portfolio companies have been sold to trade buyers from across the globe, including the US, South Africa and Germany. Two other holdings were sold to private equity buyers.

The current scarcity of bank finance means that Maven's investment team, operating from six key regional centres throughout the UK, continue to find a steady flow of good quality private companies seeking new funding.

During the period several significant new assets were added to the portfolio including a joint venture with Moriond in December 2011 and the management buy-outs of Vodat and CatTech which were led by Maven and completed in March 2012. These businesses are all performing in line with expectations and are well placed to add value to your Company. We have also provided additional funding to a number of existing portfolio companies to finance growth or to fund complementary, value enhancing acquisitions.

We believe that the prospects for continuing deal flow in the private equity market remain good, 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 almost 500 new 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.

The UK economy continues to be challenging, but we remain committed to our strategy of investing in a diverse income-producing portfolio of later stage and lower risk private companies in the firm belief this will optimise shareholder returns.

Investment Activity

During the year the Maven team completed four substantial new private equity investments on behalf of your Company, alongside nine follow-on investments in existing portfolio companies. At the year end, the portfolio stood at 53 unlisted and AIM investments at a total cost of £18.2 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, they are able to underwrite a wider range and larger size of transaction than would be the case on a stand-alone basis.

Portfolio Developments

Four substantial private company investments were added to the portfolio during the period under review.

·; Moriond was set up to acquire an established residential property portfolio at a significant discount to open market value. Maven is working on a joint venture basis with an experienced property developer to break up the portfolio into single lots, carry out minor refurbishment, and implement a structured sale of the individual assets over an 18-24 month period. The transaction provides a 6.5% p.a. yield throughout the life of the investment, and is also forecast to generate a significant capital gain when the assets are sold.

·; CatTech International is a leading provider of industrial services to oil refineries and petrochemical plants across several major international markets. The business operates in a sector with significant barriers to entry and is well positioned for future growth given its excellent reputation and established market presence.

·; Vodat Communications Group provides payment and communications solutions to high street businesses, which enable retailers to reduce costs, boost store productivity and increase sales in an increasingly competitive trading environment. The company has an established and diverse customer base, has consistently improved profitability in recent years and enjoys high levels of recurring revenue from a number of long-term service and support contracts.

·; Trojan Capital is a new company established to make acquisitions in the energy services sector. One target oil and gas company was identified during the year but the transaction aborted during the final stages of the contractual negotiations. Trojan continues to seek other acquisition opportunities in the sector.

The following investments in existing portfolio companies were made during the year.

·; 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, invests on a phased basis in a low cost manufacturing operation in China, complementing a more mature trading operation based in the UK.

·; Cash Bases, a leading designer and manufacturer of customised cash drawers, has since its formation in 1981 created more than 10,000 different product variations for its blue chip customer base, which includes major retailers, banks, lottery operators and shipping companies in more than 60 countries.

·; Glacier Energy Services, a profitable oil and gas service group, has two specialist trading subsidiaries, Roberts Pipeline Machining and Wellclad. Roberts designs and manufactures on-site portable cutting machines for 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 and the follow-on investment funded the acquisition of a complementary machining business in the North East of England.

·; Venmar is the holding company for energy services business, XPD8 Solutions, which provides asset maintenance solutions to a blue chip client base of oil and gas operators.

·; Exodus, trading as Six Degrees Group, 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. The follow-on investment was provided as mezzanine loan to fund two additional acquisitions; and

·; Camwatch provides CCTV installation and remote security monitoring services to a variety of businesses with a particular focus on the utilities construction and high net worth residential markets.

Since 30 November 2012 four follow-on investments have been completed in existing portfolio companies and four new private company assets were added to the portfolio.

The Manager is currently engaged with investee companies in negotiations with prospective acquirers. This 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.

New private equity investments added to the portfolio since the year end are described below.

·; Grangeford is a company which owns and manages a large portfolio of ground rents throughout the UK, which are asset backed yielding investments that provide long term, low risk returns. This transaction is projected to generate capital gain over a 42 month term alongside a 9% yield paid throughout the period of investment.

·; Airth Capital is a new company set up to invest in a food services business, a sector in which Maven is active and sees a large number of opportunities.

·; Burray Capital was established to invest in the oil and gas sector. A target manufacturing business has been identified and discussions are at an early stage.

·; Kelvinlea was established by an experienced management team to acquire a small portfolio of residential properties at a discount to market and carry out a refurbishment and sales programme over an 18-24 month period. The transaction provides an 8.5% paid yield throughout the life of the investment, and is also forecast to generate a significant capital gain when the project is completed and all assets are sold.

There were four notable private company exits during the year.

In March 2012, Maven completed the sale of ATR Group for £19.25m via a secondary buy-out funded by the private equity manager, NBGI, realising a total return of 2.4 times the initial cost. ATR provides rental services for specialist plant, equipment and consumables, along with a comprehensive range of support services to offshore and onshore energy services maintenance contractors operating in highly regulated environments.

At the start of June 2012 the holding in TPL (Midlands) was sold to German engineering group, Vossloh Kiepe, with a 2.0 times return on investment cost for your Company, and in early July the realisation of the investment in Nessco in a sale to RigNet Inc, a NASDAQ quoted US telecoms business, resulted in a 2.7 times return on the cost of investment.

In early November 2012, the disposal of Oliver Kay Holdings to Bidfresh Limited, part of the international trading and distribution group Bidvest, resulted in a 2.4 return on cost.

Total returns on cost of investment includes all capital proceeds and income (loan stock interest, dividends and redemption premiums) received over the life of the investment.

One unlisted company was struck off the Register during the year resulting in a realised loss of £160,000 (Cost £160,000). 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 disposing of quoted holdings for best possible value in cases where the investments were underperforming.

The table below gives details of all realisations during the reporting period.

Outlook

The year covered by this report was a very satisfactory year for exits, all of which were concluded after many months of intensive negotiations. The challenge now is to replace these assets and expand the portfolio to continue an upward trend in shareholder returns.

As one of the best resourced private equity teams in the UK, Maven is ideally placed to invest selectively on prudent entry multiples in later stage private companies which are capable of paying regular income and offer significant potential for capital growth. This will continue to be our focus, which we believe is the optimum strategy for creating shareholder value and a progressive dividend programme.

Maven Capital Partners UK LLP

Manager

26 March 2013

Notes to the Financial Statements

For the year ended 30 November 2012

1 Accounting Policies - UK Generally Accepted Accounting Practice

(a) Basis of preparation

The Financial Statements have been prepared under the historical cost convention, modified to include the revaluation of investments, and in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the SORP) issued in January 2009.

The disclosures on Going Concern on page 35 of the Directors' Report form part of these financial statements.

(b) Income

Dividends receivable on equity shares and unit trusts are treated as revenue for the period on an ex-dividend basis. Where no ex dividend date is available dividends receivable on or before the year end are treated as revenue for the period. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective interest rate on the debt securities and shares. Provision is made for any income not expected to be received. Interest receivable from cash and short term deposits and interest payable are accrued to the end of the year.

(c) Expenses

All expenses are accounted for on an accruals basis and charged to the income statement. Expenses are charged through the revenue account except as follows:

·; expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and

·; expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 20% to revenue and 80% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.

(d) Taxation

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods.

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

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

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

(e) Investments

In valuing unlisted investments the Directors follow the criteria set out below. These procedures comply with the revised International Private Equity and Venture Capital Valuation Guidelines (IPEVCV) for the valuation of private equity and venture capital investments.

Investments are recognised at their trade date and are designated by the Directors as fair value through profit and loss. At subsequent reporting dates, investments are valued at fair value, which represents the Directors' view of the amount for which an asset could be exchanged between knowledgeable and willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have an intention to sell their holding in the near future.

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.

1. For Investments completed within the 12 months prior to the reporting date, fair value is determined using the Price of Recent Investment Method, except that adjustments are made when there has been a material change in the trading circumstances of the company or a substantial movement in the relevant sector of the stock market.

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

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

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

3.2 Preference shares, debentures and loan stock are valued using the Price of Recent Investment Method. When redemption premium has accrued, this will only be valued if there is a reasonable prospect of it being paid. Preference shares which carry a right to convert into ordinary share capital are valued at the higher of the Price of Recent Investment Method basis and the price/earnings basis.

4 Where there is evidence of impairment, a provision may be taken against the previous valuation of the investment.

5 In the absence of evidence of a deterioration, or strong defensible evidence of an increase in value, the fair value is determined to be that reported at the previous balance sheet date.

6 All unlisted investments are valued individually by Maven Capital Partners' Portfolio Management Team. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

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

(f) Fair Value Measurement

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

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

Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on best information available in the circumstances. The three-tier hierarchy of inputs is summarised in the three broad levels listed below.

·; Level 1 - quoted prices in active markets for identical investments;

·; Level 2 - other significant observable inputs (included quoted prices for similar investments, interest rates, credit risk etc); and

·; Level 3 - significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments).

(g) Gains and losses on investments

When the Company sells or revalues its investments during the year, any gains or losses arising are credited/charged to the Income Statement.