Maven Grwth 3 Regulatory News (MIG3)

Maven Income and Growth VCT 3 PLC

Final results for the year ended 30 November 2013

The Directors report the Company's financial results for the year ended 30 November 2013.

Chairman's Statement

On behalf of your Board I am pleased to report on another successful performance by your Company over the twelve months to 30 November 2013, with an improvement in NAV total return being achieved for the fifth year in succession, and a further increase in the annual dividend for Shareholders.

During the period your Company participated in eleven new private equity transactions, as well as seven follow-on investments supporting the development of companies in your portfolio. Most of our investee companies are trading well, with a number continuing to attract both trade and private equity interest.

Several successful partial or complete profitable exits have been achieved during the year under review, validating the Manager's investment strategy. The proceeds from those disposals contributed to a total capital gain from realisations of £1.5 million, providing liquidity for further investment. The progress achieved by a number of companies, notably Steminic and Nenplas, enabled the Board to write up their values. Some companies inevitably experienced problems, such as Lawrence Recycling and Training for Travel, leading to their values being substantially reduced or written off. Developments within the portfolio are detailed in the Investment Manager's Review.

In line with the strategy of reducing the exposure to AIM, further disposals were made during the period and listed securities now represent only 2.3% of the asset base. The Manager will continue the policy of reducing quoted holdings and disposing of them for best possible value as opportunity allows.

The Board is also pleased to note a variety of awards in recognition of the quality of the Company's unlisted portfolio and Maven's investment management strategy. In April 2013, Torridon was announced as the Midlands regional winner of the Mid-Market Private Equity-Backed Management Team of the Year award at the BVCA Management Team Awards and in the following month Maven itself was announced as winner of Scottish Investor of the Year at the Acquisition International M&A Awards, which recognise consistent achievement in the private equity/transactional marketplace. Most recently in September 2013, Maven enjoyed a double success at the Business Insider Deal and Dealmakers Awards, with the exit from Nessco Group Holdings winning Sale of the Year and Managing Partner Bill Nixon being named as Dealmaker of the Year in a category focused on individuals with a first class track record in completing or enabling transactions.

Highlights for the year

▪ NAV total return of 119.45p per share (2012: 114.15p) at the year end, up 4.6% over the year

▪ NAV at period end of 83.00p per share (2012: 82.70p)

▪ Eleven new investments added to the portfolio

▪ Realisation of Atlantic Foods Group for a total return of 1.8x cost

▪ Partial exit from Homelux Nenplas at an exit multiple of 3.8x cost alongside a secondary buy-out of the Nenplas business

▪ Successful IPO of esure, generating cash proceeds of £548,000 and an exit multiple of 2.8x cost

▪ Increased final dividend proposed of 3.25p per share (2012: 3.00p)

Dividends

The Board recommends an increased final dividend of 3.25p per Ordinary Share to be paid on 30 May 2014 to Shareholders on the Register at 9 May 2014. This brings total dividends for the year to 5.25p per share, representing a yield of 6.77% based on the year end closing share price of 77.50p.

Since the Company's launch, and after receipt of the proposed final dividend, Shareholders will have received 39.7p per Share to date in tax-free dividends. The impact of paying the final dividend will be to reduce the Company's NAV by the total cost of the distribution.

New Annual Reporting Requirements

Changes have been made to the narrative reporting requirements for annual reports in respect of years ending on or after 30 September 2013, and therefore this report includes a Strategic Report, a revised format for the Directors' Remuneration Report (including a new Remuneration Policy Report) and a number of other consequential changes including enhanced reporting on the activities of the Audit Committee.

Co-investment Scheme of the Manager

The co-investment scheme, which ensures that the Manager's staff are appropriately incentivised in relation to the portfolio by allowing executive members of the Manager to invest alongside the Company, continued in operation during the year. Total investments by participants in the co-investment scheme were set at 8% of the aggregate amount of voting ordinary shares subscribed for by the Company and the co-investment scheme.

Fund Raising and Share Buy-backs

A top-up Offer was launched on 23 January 2013 aiming to raise £1.5 million 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 1,781,572 new Ordinary Shares and raising an additional £1,447,000 of capital after expenses.

In September 2013, the Company announced that it planned to raise up to £4 million in a joint Offer for Subscription alongside the other Maven VCTs. The first allotment under the Offer took place on 3 February 2014 when 2,872,393 new Ordinary Shares were issued. It is anticipated that the Offer will remain open until 5 April 2014 in respect of the 2013/14 tax year and until 30 April 2014 in respect of the 2014/15 tax year, unless fully subscribed at an earlier date and subject to the Directors' right to close or extend the Offer at any time. The full terms of the Offer, which includes an over-allotment facility to allow the Company to raise a further £1 million, are set out in a detailed Prospectus that was issued on 24 October 2013, along with a Circular explaining the necessary authorities required for the Offer to proceed, which were duly confirmed at a General Meeting held on 27 November 2013. A Supplementary Prospectus was issued on 10 February 2014 following a significant increase in the NAV of Maven Income and Growth VCT 5.

The Company may use the money raised under these Offers 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 Offers will also 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.

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 to Shareholders. 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 interest 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 in the range of 5-10% to the prevailing NAV per share.

VCT Regulatory Developments

The Association of Investment Companies (AIC) worked closely with the Financial Services Authority (FSA) on Consultation Paper 12-19 (restrictions on the retail distribution of unregulated collective investment schemes and close substitutes) and its applicability to venture capital trusts. The Board supported the AIC in calling on the FSA to exclude VCTs from the proposals (as investment trusts had been excluded) and was pleased to note the subsequent announcement by the Financial Conduct Authority (FCA, which replaced the FSA) that VCTs had been excluded from the marketing restrictions. 

The AIFM Directive came into force on 21 July 2011 and was implemented within the UK on 22 July 2013. The AIC has published a briefing paper reviewing the key issues, including confirmation that the UK will impose a compliance deadline of July 2014. The Board and the Manager have engaged legal advisers to ensure that the impact of the legislation has been considered fully, and the Directors have taken the decision to register Maven Income and Growth VCT 3 PLC as a self-managed small registered AIFM. This will enable the Company to take advantage of the reduced reporting requirements and avoid the direct and indirect costs of appointing a depositary.

The AIC has participated in a consultation process to ensure the Government's continued long-term support for the VCT sector by addressing concerns from HM Treasury that enhanced shared buy-back schemes conflict with the public policy objectives of venture capital trusts. It is generally expected that enhanced buy-backs will be prohibited, but that the buy-back and cancellation of shares will continue to be permitted.

Board of Directors

Your Board has been considering the issue of orderly succession and Stephen Wood has indicated that he will stand down and not seek re-election at the Annual General Meeting (AGM) to be held on 30 April 2014. Investment in private equity is a long-term and specialist business and we are conscious of the need to maintain continuity in knowledge and understanding of the portfolio in devising and implementing a structured succession plan, whilst at the same time adhering to best practice corporate governance protocols.

I am therefore pleased to announce that after an open recruitment process involving discussions with several candidates Atul Devani will be appointed to the Board with effect from 5 April 2014, and he will also serve on the Company's Audit, Management Engagement, Nomination and Remuneration Committees.

Further changes in Board membership are likely to take place within the next three years, and the Board have agreed in principle that it would be advantageous to reduce the number of independent directors by one from four to three as part of this process, subject to maintaining a satisfactory balance of experience and skills amongst the Board members. The future constitution of the Board will be confirmed and communicated fully to Shareholders in due course, with each new Director being subject to re-election by Shareholders at the AGM immediately following their appointment.

I would like to take this opportunity to thank Stephen for the valued and significant contribution that he has made to the Board since the inception of your Company and to wish him well for the future.

Outlook

The Company's portfolio has benefitted from further expansion and diversification during the year to 30 November 2013 and continues to generate healthy levels of revenue, which is an important component in the ability to sustain an attractive level of tax-free distributions to Shareholders. The Board believes that the Manager's successful later-stage investment focus will continue to deliver growth in Shareholder value and we look forward with confidence to the year ahead.

Gregor Michie

Chairman

4 March 2014

Strategic Report

This Strategic Report has been prepared by the Directors in accordance with Section 414 of the Companies Act 2006, as amended. The Company's Auditor is required to report if there are any material inconsistencies with the Financial Statements.

The Board

The Board, which is responsible for setting and monitoring the Company's strategy, currently consists of five non-executive Directors, all of whom are male. Mr Atul Devani is being appointed to the Board on 5 April 2014 and Stephen Wood will stand down at the AGM on 30 April 2014. Following these changes the Board will consist of five male Directors. The names and biographies of the Directors, as set out under Your Board, indicate their range of investment, commercial and professional experience. Further details are also provided in the Directors' Report and the Statement of Corporate Governance.

Investment Objective

The Company aims to achieve long term capital appreciation and generate maintainable levels of income for Shareholders.

Statement of Investment Policy

The Company intends to achieve its objective by:

· investing the majority of its funds in a diversified portfolio of shares and securities in smaller, unquoted UK companies and AIM/ISDX quoted companies which meet the criteria for VCT qualifying investments and have strong growth potential;

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

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

Principal Risks and Uncertainties

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

Investment Risk

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

The Company manages and minimises investment risk by:

· diversifying across a large number of companies;

· diversifying across a range of economic sectors;

· actively and closely monitoring the progress of investee companies;

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

· co-investing with other funds run by the Manager in larger deals, which tend to carry less risk;

· not investing in hostile public to private transactions; and

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

An explanation of certain risks and how they are managed is contained in Note 17 to the Financial Statements.

Financial and Liquidity Risk

As most of the investments require a mid to long term commitment and are relatively illiquid, the Company retains a portion of the portfolio in cash or cash equivalents in order to finance any new unquoted investment opportunities. The Company has no direct exposure to currency risk and does not enter into any derivative transactions.

Economic Risk

The valuation of investment companies may be affected by underlying economic conditions such as fluctuating interest rates and the availability of bank finance.

Credit Risk

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

Internal Control Risk

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

VCT Qualifying Status Risk

The Company operates in a complex regulatory environment and faces a number of related risks, including: becoming subject to capital gains tax on the sale of its investments as a result of a breach of Section 274 of the Income Tax Act 2007; loss of VCT status and consequent loss of tax reliefs currently available to Shareholders as a result of a breach of the VCT Regulations; and loss of VCT status and reputational damage as a result of serious breach of other regulations such as the UKLA Listing Rules and the Companies Act 2006.

Legislative and Regulatory Risk

In order to maintain its approval as a VCT, the Company is required to comply with current VCT legislation in the UK as well as the European Commission's (EC) state aid rules. Changes in the future to UK legislation or the EC state aid rules 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).

Statement of Compliance with Investment Policy

The Company is adhering to its stated investment policy and managing the risks arising from it. This can be seen in various tables and charts throughout the Annual Report, and from information provided in the Chairman's Statement and the Investment Manager's Review. A review of the business and its performance has been included within the Chairman's Statement. The Chairman's Statement also includes an overview of the Company's strategy and its business model.

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 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 by industrial sector and deal type 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 Board quarterly.

Key Performance Indicators

At each Board Meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. The key performance indicators are as follows:

· NAV total return;

· dividends per share;

· investment income: and

· operational expenses.

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. The dividends per share measure shows how much of that Shareholder value has been returned to original investors in the form of dividends. A historical record of these measures is shown in the Financial Highlights. The change in the profile of the portfolio is reflected in the Summary of Investment Changes. The Board reviews the Company's investment income and operational expenses on a quarterly basis. There is no meaningful venture capital trust 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 and the Company's peer group.

The Directors also consider non-financial performance measures such as the flow of investment proposals and ranking of the VCT sector by independent analysts.

Valuation Process

Investments held by Maven Income and Growth VCT 3 PLC in unquoted companies are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. Investments quoted or traded on a recognised stock exchange, including AIM, are valued at their bid prices.

Share Buy-backs

The Board will seek the necessary Shareholder authority to continue the share buy-back programme under appropriate circumstances.

Employee, Environmental and Human Rights Policy

As a venture capital trust, the Company has no direct employee or environmental responsibilities, nor is it responsible for the emission of greenhouse gases. Its principal responsibility to Shareholders is to ensure that the investment portfolio is properly managed and invested. The Company has no employees and, accordingly, has no requirement to report separately on employment matters. The management of the portfolio is undertaken by the Manager though 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.

Future Strategy

The Board and Manager intend to maintain the strategic policies set out above for the year ending 30 November 2014 as it is believed that these are in the best interests of Shareholders.

Gregor Michie

Chairman

4 March 2014

A Statement of Total Recognised Gains and Losses has not been prepared, as 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 derives its income from investments made in shares, securities and bank deposits.

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

Notes

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

4. 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 (including quoted prices for similar investments, interest rates, prepayment speeds, 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.

Reserves

Return per Ordinary Share

The returns per share are based on the following figures:

Net asset value per Ordinary Share

The net asset value per Ordinary Share as at 30 November 2013 has been calculated using the number of Ordinary Shares in issue at that date of 32,336,464 (2012: 31,128,892).

Basis of preparation of the Financial Statements

This Financial Statements included in this Announcement has been prepared on the same basis as the Annual Report and Financial Statements for the year ended 30 November 2012. The Annual Report and Financial Statements for the year ended 30 November 2013 will be filed with the Registrar of Companies and issued to Shareholders in due course.

The financial information contained within this Announcement does not constitute the Company's statutory Financial Statements as defined in the Companies Act 2006. The statutory Financial Statements for the year ended 30 November 2012 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under S498(2) or S498(3) of the Companies Act 2006.

Directors' responsibility statement

Each Director confirms, to the best of his knowledge, that:

· the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as at 30 November 2013 and for the year to that date;

· the Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces; and

· the Annual Report and Financial Statements taken as a whole are fair, balanced and understandable and provide the information necessary to assess the Company's performance, business model and strategy.

Other information

The Annual General Meeting will be held on 30 April 2014, commencing at 10.00 am, at 1-2 Royal Exchange Buildings, London EC3V 3LF.

Copies of this announcement, and of the Annual Report and Financial Statements for the year ended 30 November 2013, will be available to the public at the office of Maven Capital Partners UK LLP, 205 West George Street, Glasgow G2 2LW; at the registered office of the Company, 1-2 Royal Exchange Buildings, London EC3V 3LF and on the Company's website at www.mavencp.com/migvct3.

Neither the content of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

The Annual Report and the Circular have been submitted to the National Storage Mechanism will be available for inspection at: www.Hemscott.com/nsm.do 

By Order of the Board

Maven Capital Partners UK LLP

Secretary

4 March 2014