Maven Income and Growth VCT 3 PLC Annual Financial Report (7552R)

TIDMMIG3

RNS Number : 7552R

Maven Income and Growth VCT 3 PLC

11 March 2016

Maven Income and Growth VCT 3 PLC

Final results for the year ended 30 November 2015

The Directors report the Company's financial results for the year ended 30 November 2015.

Highlights for the Year

-- NAV total return of 138.3p per share (2014: 128.2p) at the year end, up 7.9% over the year

   --              NAV at period end of 91.1p per share (2014: 86.5p) 
   --              Five new private equity investments added to the portfolio 
   --              Sale of Cash Bases, achieving a total return of 7.1 times cost 
   --              Realisation of Steminic, for a total return of 3.3 times cost 
   --              Exit from Six Degrees Group, generating a total return multiple of 2.1 times cost 
   --              Disposal of XPD8 Solutions, delivering a 1.75 times return on cost 
   --              Increased final dividend of 3.75p per share (2014: 3.50p) proposed 

Strategic Report

Chairman's Statement

On behalf of your Board I am pleased to report another successful year for the Company. During the 12 months to 30 November 2015 NAV total return increased by 7.9% year-on-year driven by four profitable realisations, valuation uplifts and investment income generated from the portfolio. Given the robust performance achieved in the year the Board is recommending an increase in the final dividend to 3.75p per share, bringing the total for the year to 5.75p.

During the period under review the Manager has continued to follow the proven strategy of investing in a diversified portfolio of attractive growth businesses, and has delivered improvements in Shareholder value through a number of profitable exits; the most significant being the sale of Cash Bases in October 2015 which achieved a premium return of 7.1 times cost. Your Company has also added five new private equity investments, and supported a number of existing portfolio companies. The yield derived from the portfolio continues to be a core focus of the Manager in order to maintain attractive tax-free distributions to Shareholders.

Developments within the portfolio are detailed in the Investment Manager's Review. Notably the further progress achieved by Crawford Scientific, Just Trays, John McGavigan, Nenplas, SPS (EU) and Westway Services Holdings has enabled the Board to adjust the valuations to reflect increased fair value. Others, such as Cat Tech International, ISN Solutions Group, R&M Engineering Group, D Mack and Maven Co-invest Fletcher, have had their valuations reduced in response to challenging trading conditions.

The Board is pleased to note that Maven received industry recognition for its performance during the year when it was named Private Equity House of the Year at the 2015 M&A Awards, one of the leading events in the corporate finance calendar. This category recognises private equity managers that have displayed the keenest judgement and opportunism in completing acquisitions or exit transactions, including an acknowledgement of their contribution in increasing the value of investee businesses. Maven was also shortlisted at the 2015 unquote" British Private Equity Awards in the VCT House of the Year category, whilst the 3.8 times cost exit achieved by your Company in 2014 from EFC Group was nominated for VCT Exit of the Year.

Shareholders may be aware of the significant legislative changes which were introduced to the UK VCT scheme during the period. The July 2015 Budget announced a number of amendments designed to bring the UK into line with European Union (EU) State Aid rules for smaller company investment. The revised legislation imposes restrictions on the types of transactions and companies which VCTs are able to invest in, with strict limitations around acquisitions (specifically prohibiting the financing of management buy-outs), restrictions on providing follow-on funding to existing portfolio companies, a lifetime cap on the amount of funding a company can receive and an age restriction on investee companies. The Board has reviewed the new legislation and, following detailed discussions with the Manager, has concluded that Maven remains well placed to adapt to the new requirements. The Directors believe Maven's track record and experience in sourcing and executing similar transactions for non-VCT clients, for whom over 40 development capital transactions have been completed since 2011, provides the Manager with sufficient flexibility and resource to identify and complete transactions which qualify under the terms of the new legislation.

Dividends

The Board recommends that an increased final dividend of 3.75p per Ordinary Share, comprising 1.5p of revenue and 2.25p of capital, be paid on 29 April 2016 to Shareholders on the Register at 1 April 2016. This would bring total dividends for the year to 5.75p per share, an increase of 4.5% over the prior year, representing a yield of 7.59% based on the year end closing mid-market share price of 75.75p.

Since the Company's launch, and after receipt of the proposed final dividend, Shareholders will have received 50.95p per share in tax-free dividends. The effect of paying the proposed final dividend would be to reduce the NAV of the Company by the total cost of the distribution.

On 24 August 2015 the Board announced that, under the Terms and Conditions of the Company's Dividend Investment Scheme (DIS) which allow the Directors to suspend or terminate its operation without prior notice and revert to making monetary payments to all Participants, the Directors had resolved that, in light of the investment restrictions proposed in the Government's July 2015 Budget, the DIS was to be suspended with immediate effect to allow the Directors and the Manager to review the changes to the VCT legislation and to consider the full potential impact of these on the Company's future investment strategy. As a result, until further notice, all future dividends will be paid to Shareholders either by cheque or direct bank transfer using existing mandate instructions.

Fund Raising

In October 2014 the Company announced that it planned to raise up to GBP4 million in an Offer for Subscription alongside offers by four other Maven VCTs. The Offer by your Company was fully subscribed by 30 January 2015 and, consequently, closed early. Relevant details regarding shares issued during the year under review in respect of the Offer can be found in Note 12 to the Financial Statements.

As the Company currently enjoys significant cash liquidity for new investment, the Board has elected not to raise further funds at present.

Share Buy-backs

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 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.

Management and Administration Fees

HM Revenue & Customs (HMRC) has confirmed that VAT is no longer payable on secretarial fees. The Manager has sought the recovery of amounts paid previously and the total sum of GBP76,000 received during the year has been reflected in the Financial Statements.

Regulatory Developments

The July 2015 Budget received Royal Assent on 18 November, bringing into statute a number of material changes to the legislation governing UK VCT schemes, aligning them with EU State Aid rules for smaller company investments. The new rules impose specific restrictions on the types of companies and transactions which VCTs are able to pursue in order to retain qualifying status including specific restrictions on a VCTs ability to finance management buy-outs and fund acquisitions, limitations on the ability to provide follow on funding to existing portfolio companies, a lifetime cap on the amount of funding a company can receive and an age restriction for investee companies. In order to ensure ongoing compliance with the new rules, the Company has engaged the services of investment advisers to assist in interpreting the revised legislation and to offer specific expertise and advice on new transactions.

Since the announcement of the new rules, the Manager has been actively involved in the consultation process through the industry representative body, the Association of Investment Companies (AIC), which, supported by other leading VCT managers, has engaged with HM Treasury and HMRC on the practical application of the new rules.

The 2014 UK Corporate Governance Code introduced a new requirement to include a viability statement regarding the Directors' assessment of the future prospects of the Company. The Board has fully considered the Company's current position, principal risks and future expectations, and the Directors' statement of viability can be found in the Annual Report.

With effect from 1 January 2016 new tax legislation under The OECD (Organisation for Economic Co-operation and Development) Common Reporting Standard for Automatic Exchange of Financial Account Information ("the Common Reporting Standard") is being introduced. The legislation will require investment trust companies, including VCTs, to provide personal information to HMRC on certain investors who purchase shares in investment trusts and VCTs. As a result, the Company, will have to provide information annually to the local tax authority on the tax residencies of a number of non-UK based certificated shareholders, and corporate entities.

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All new Shareholders, excluding those whose shares are held in CREST, entered onto the share register from 1 January 2016 will be sent a certification form for the purposes of collecting this information. For further information, please see HMRC's Quick Guide: Automatic Exchange of Information - information for account holders: https://www.gov.uk/ government/publications/exchange-of-information-account- holders.

Board of Directors

Your Board has previously intimated its intention to implement its succession plan and, as detailed in the 2014 Annual Report, I intend to stand down and not seek re- election following conclusion of the Annual General Meeting (AGM) to be held on 13 April 2016. It is proposed that Atul Devani be appointed as Chairman following conclusion of the AGM. Keith Pickering was appointed as a Director on 15 April 2015 and is proposed for election at the 2016 AGM. As previously stated, Alec Craig will stand down at the AGM to be held in 2017. The appointment of new Directors and the future constitution of the Board will be confirmed and communicated fully to Shareholders in due course.

The Future

The Company has previously adopted a strategy of investing in a diversified portfolio of later-stage businesses capable of generating high levels of income and capital growth. Whilst the asset mix of the portfolio is likely to alter over time to include a number of younger and earlier-stage businesses, the Board is confident that the selective and conservative investment approach adopted by the Manager will continue to deliver positive Shareholder returns.

Gregor Michie

Chairman

10 March 2016

Maven Income and Growth VCT 3 PLC

Business Report

Introduction

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 report.

Investment Objective

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

Business Model and Investment Policy

The Company intends to achieve its objective by:

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

-- investing no more than GBP1 million in any company in one year and no more than 15% of the Company's assets by cost in one business at any time; and

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

Principal 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 attached to the investment portfolio as a whole by ensuring that a structured selection, monitoring and realisation process is applied. The Board reviews the investment portfolio with the Manager on a regular basis.

The Company manages and minimises investment risk by:

   --           diversifying across a large number of companies; 
   --           diversifying across a range of economic sectors; 
   --           actively and closely monitoring the progress of investee companies; 

-- 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 16 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.

Maven Income and Growth VCT 3 PLC

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 available to Shareholders as a result of a breach of the VCT Regulations;

-- loss of VCT status and reputational damage as a result of serious breach of other regulations such as the FCA Listing Rules and the Companies Act 2006; and

-- investment restrictions resulting from the EU State Aid Rules enacted through the Finance Act 2015.

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 EU State Aid rules. Changes in the future to UK legislation or the EU 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 AIC or the British Venture Capital Association (BVCA).

The Company has retained Gowling WLG (UK) LLP as VCT advisers to the Company.

Breaches of other regulations, including the Companies Act 2006, the FCA Listing Rules, the Common Reporting Standard or the Alternative Investment Fund Managers Directive (the AIFMD), could lead to a number of detrimental outcomes and reputational damage. Breaches of control by service providers, such as Capita who manage the Company's Common Reporting Standard requirements, could also lead to reputational damage or loss. However, to mitigate these risks the Board has established controls and reviews to ensure that the Company continues to meet its regulatory responsibilities.

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 this Annual Report, and from information provided in the Chairman's Statement and the Investment Manager's Review. A review of the Company's business, its position as at 30 November 2015 and its performance during the year then ended is included in the Chairman's Statement, which also includes an overview of the Company's strategy and 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 industry 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 Audit and Risk Committee quarterly.

Key Performance Indicators

At each Board Meeting, the Directors consider a number of financial performance measures to assess the Company's success in achieving its objectives, and these also enable Shareholders and investors to gain an understanding of its business. The key performance indicators are as follows:

   --           NAV total return; 
   --           dividend growth; 
   --           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 dividend growth 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.

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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

The Company has no direct employee or environmental responsibilities, nor is it responsible for the emission of greenhouse gases. However, the Directors will consider economic, regulatory and political trends and features that may impact on the Company's future development and performance. The Board's principal responsibility to Shareholders is to ensure that the investment portfolio is managed and invested properly. The management of the portfolio is undertaken by the Manager through members of its portfolio management team. The Manager engages with the Company's underlying investee companies in relation to their corporate governance practices and in developing their policies on social, community and environmental matters and further information may be found in the Statement of Corporate Governance. In light of the nature of the Company's business, there are no relevant human rights issues and, therefore, the Company does not have a human rights policy.

Auditor

The Company's Auditor is required to report if there are any material inconsistencies between the content of the Strategic Report and the Financial Statements.

Future Strategy

The Board and Manager intend to maintain the policies set out above for the year ending 30 November 2016 as it is believed that these are in the best interests of Shareholders.

Gregor Michie

Chairman

10 March 2016

Maven Income and Growth VCT 3 PLC

Income Statement

For the Year Ended 30 November 2015

 
 
                                                      Year ended 30 November 
                                                       2014 
                            ======= 
                                       Year ended 30   Revenue   Capital     Total 
                                       November 2015   GBP'000   GBP'000   GBP'000 
                                     Revenue Capital 
                                               Total 
                                     GBP'000 GBP'000 
                                             GBP'000 
 ========================   ========================  ========  ========  ======== 
 Gains on investments             -   3,512    3,512         -     3,076     3,076 
 Income from investments      1,849       -    1,849     1,437         -     1,437 
 Other income                     1       -        1         2         -         2 
 Investment management 
  fees                        (175)   (699)    (874)     (147)     (589)     (736) 
 Other expenses               (215)       -    (215)     (415)         -     (415) 
 -------------------------  -------  ------  -------  --------  --------  -------- 
 Net return on ordinary 
  activities                  1,460   2,813    4,273       877     2,487     3,364 
 
 before taxation 
 
 
   Tax on ordinary 
   activities                 (257)     141    (116)     (173)       118      (55) 
 -------------------------  -------  ------  -------  --------  --------  -------- 
 Return attributable 
  to Equity Shareholders      1,203   2,954    4,157       704     2,605     3,309 
 -------------------------  -------  ------  -------  --------  --------  -------- 
 
   Earnings per share 
   (pence)                     2.98    7.33    10.31      1.96      7.26      9.22 
 -------------------------  -------  ------  -------  --------  --------  -------- 
 
 
 
 

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.

Maven Income and Growth VCT 3 PLC

Reconciliation of Movements in Shareholders' Funds

For the Year Ended 30 November 2015

 
 
                                  Year ended          Year ended 
                                 30 November    30 November 2014 
                                        2015             GBP'000 
                                     GBP'000 
=============================  =============  ================== 
Opening Shareholders' 
 funds                                31,958              26,838 
Net return for year                    4,157               3,309 
Net proceeds of 
 share issue                           3,966               4,088 
Net proceeds of 
 DIS issue                                39                   - 
Repurchase and cancellation 
 of shares                             (209)               (336) 
Dividends paid - 
 revenue                               (827)               (741) 
Dividends paid - 
 capital                             (1,448)             (1,200) 
-----------------------------  -------------  ------------------ 
Closing Shareholders' 
 funds                                37,636              31,958 
-----------------------------  -------------  ------------------ 
 

The accompanying Notes are an integral part of the Financial Statements

 
Maven Income and Growth 
 VCT 3 PLC 
 Balance Sheet 
 As at 30 November 2015 
 
 
                                    30 November    30 November 
                                           2015           2014 
                                        GBP'000        GBP'000 
===============================   =============  ============= 
Fixed assets 
Investments at fair value 
 through profit or loss                  36,521         29,118 
 
  Current assets 
Debtors                                     444          1,552 
Cash                                        866          1,385 
--------------------------------  -------------  ------------- 
                                          1,310          2,937 
Creditors: amounts falling 
 due within one year                      (195)           (97) 
--------------------------------  -------------  ------------- 
Net current assets                        1,115          2,840 
--------------------------------  -------------  ------------- 
Net assets                               37,636         31,958 
--------------------------------  -------------  ------------- 
 
 
  Capital and reserves 
Called up share capital                   4,132          3,694 
Share premium account                    13,820         10,280 
Capital reserve - realised              (2,064)        (3,405) 
Capital reserve - unrealised              3,315          3,150 
Distributable reserve                    16,563         16,772 
Capital redemption reserve                  713            686 
Revenue reserve                           1,157            781 
--------------------------------  -------------  ------------- 
Net assets attributable 
 to Ordinary Shareholders                37,636         31,958 
--------------------------------  -------------  ------------- 
 
  Net asset value per ordinary 
  share (pence)                            91.1           86.5 
--------------------------------  -------------  ------------- 
 

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:

Gregor Michie

Director

10 March 2016

The accompanying Notes are an integral part of the Financial Statements

Maven Income and Growth VCT 3 PLC

Cash Flow Statement

For the Year Ended 30 November 2015

 
                                                                              Year                                Year ended 
                                                                             ended                                        30 
                                                                                30                                  November 
                                                                          November                                      2014 
                                                                              2015                                (restated) 
                                                                           GBP'000                                   GBP'000 
------------------------------------------  --------------------------------------  ---------------------------------------- 
                              Net 
                               cashflows 
                               from 
                               operating 
                               activities                                  (1,132)                                   (1,236) 
 
                              Cashflows 
                              from 
                              investing 
                              activities 
                              Investment 
                               income 
                               received                                      2,012                                     1,536 
                              Deposit 
                               interest 
                               received                                          1                                         2 

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                              Purchase of 
                               investments                                (23,944)                                  (10,743) 
                              Sale of 
                               investments                                  20,989                                     8,622 
------------------------------------------  --------------------------------------  ---------------------------------------- 
                              Net 
                               cashflows 
                               from 
                               investing 
                               activities                                    (942)                                     (583) 
------------------------------------------  --------------------------------------  ---------------------------------------- 
 
                              Cashflows 
                              from 
                              financing 
                              activities 
                              Equity 
                               dividends 
                               paid                                        (2,275)                                   (1,941) 
                              Issue of 
                               Ordinary 
                               Shares                                        4,005                                     4,088 
                              Repurchase 
                               of Ordinary 
                               Shares                                        (175)                                     (336) 
------------------------------------------  --------------------------------------  ---------------------------------------- 
                              Net 
                               cashflows 
                               from 
                               financing 
                               activities                                    1,555                                     1,811 
------------------------------------------  --------------------------------------  ---------------------------------------- 
 
                              Net decrease 
                               in cash                                       (519)                                       (8) 
------------------------------------------  --------------------------------------  ---------------------------------------- 
 
                              Cash at 
                               beginning 
                               of 
                               year                                          1,385                                     1,393 
                              Cash at end 
                               of year                                         866                                     1,385 
 

*The 2014 cashflow has been restated for presentation requirements of FRS 102.

The accompanying notes are an integral part of the Financial Statements.

Maven Income and Growth VCT 3 PLC

Notes to the Financial Statements

For the Year Ended 30 November 2015

Accounting Policies

(a) Basis of preparation

The Financial Statements have been prepared under 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 Association of Investment Companies (AIC) in November 2014. The early adoption of FRS 102 and the SORP for this financial year was recommended by the Audit and Risk Committee. There are no significant changes to the Company's accounting policies as a result of the adoption of FRS 102 and the SORP.

(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 for 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.

For investments completed 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.

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

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

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

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

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

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.

All unlisted investments are valued individually by the portfolio management team of Maven Capital Partners UK LLP. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

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 

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