TIDMOTT
For RNS Release
30(th) June 2015
Oxford Technology 3 Venture Capital Trust Plc
Announcement for the year ended 28 February 2015
Headlines for the Year
-- Net asset value per share at the year end was 95.6p (compared to 98.3p at
28 February 2014)
-- The net assets at 28 February 2015 were GBP6.48m (GBP6.67m)
-- HMRC issues resolved successfully
-- New Common Board Structure announced
-- Manager's fee reduced to 1%
-- Performance fee threshold hurdle now subject to escalation
Financial Headlines
Year Ended Year Ended
28 February 2015 28 February 2014
Net Assets at Year End GBP6.48m GBP6.67m
Net Asset Value per Share 95.6p 98.3p
Cumulative Dividend 10.0p 10.0p
NAV + Cumulative Dividend
Paid from Incorporation 105.6p 108.3p
Share Price at Year End 72.5p 65p
Earnings Per Share
(Basic & Diluted) (2.7)p 1.0p
Chairman's Statement
I am pleased to be writing my first report to shareholders as your
Chairman.
Your company's net asset value per share at year end is down 2.7p at
95.6p and the total return per share since the initial 2002 flotation is
down 2.7p at 105.6p from the values at the beginning of the year. The
main reason for the small decrease was due to an accrual for the
performance fee under the terms of the original prospectus. I will
discuss this and underlying financial performance later.
Ongoing VCT Status
This time last year the main concern was the threatened loss of our VCT
status. HMRC had considered that an earlier purchase of shares in
Scancell Holdings Plc to be in breach of VCT rules. Following corrective
action, your Company's holding in Scancell is now as it was prior to
July 2013. The corrective action undertaken resulted in no financial
gain or loss to the VCT. I am pleased to report that this issue has been
resolved and HMRC have confirmed that VCT status was retained throughout
the year.
I would place on record my thanks to the Manager, his staff and all the
Oxford Technology VCTs directors for their collective, vigorous and
ultimately successful efforts in getting VCT status retained. I would
specifically like to mention the outstanding work done by Joseph Hage
Aaronson LLP for their legal work at no cost to your VCT.
In August last year changes in governance were put in place whereby a
clear segregation of duties between Board and Manager was achieved by
Lucius Cary not seeking re-election. A comprehensive and transparent
nomination process for seeking new NED candidates had been put in place
using an ad hoc independent committee comprising an institutional
shareholder, a representative from ShareSoc and a private shareholder
with an HR background.
As a result of that process, I was appointed to the Board and re-elected
at the last AGM. At the same time Richard Vessey stood down as Chairman
but remained a valued director on your Board. I would also like to thank
Lucius Cary for his long service as director of your company.
The Board has reviewed all internal governance procedures to avoid the
possibility of further breaches of VCT rules. We have worked with the
Manager to upgrade policies and procedures in this area and have closely
reviewed the outcomes.
HMRC were satisfied with this work and with the revised governance
procedure of a clear segregation of Board and Manager's
responsibilities. The Directors now have a review and update on VCT
compliance as the first item on the agenda for their quarterly meetings.
This closes a difficult period in your company's history but we can now
move forward with greater confidence for shareholders who still have all
their tax reliefs preserved and without reduction in their net assets.
Financial Performance & Investment Portfolio
Without the performance fee accrual of GBP95,000 or 1.4p per share,
Oxford Technology 3 VCT Plc's ("OT3") NAV performance was basically
unchanged over the year.
The stated policy of the VCT, which has been fully invested for some
time, is to exit from investee companies once the technology development
and/or the business model has been proved and the companies have floated
or become saleable. Profits from sales on exits will be returned to
shareholders along with original investment by way of dividends subject
to retaining sufficient funds to pay ongoing running costs of the VCT
and to support existing investee companies. During the last year no
exits were achieved.
Telegesis is our largest holding by value. The company has increased
sales and we have increased our valuation accordingly.
Our second largest holding by value is Scancell which is quoted on AIM.
We are a 2.0% shareholder with no representation on their board. Their
board has announced that the company is up for sale and are engaged in
preliminary discussions with several companies under confidentiality
agreements. The result of these discussions could lead to an outright
sale or to licensing deals. If no agreements are reached by the end of
2015 Scancell will need to consider funding for 2016 and beyond. Your
Board is monitoring this situation closely.
Another of our companies appointed a sales agent last year and received
an offer from a third party buyer. After close consideration by the VCT
and the investee company board, the offer was rejected as being too low.
The investee is cash rich and profitable and we anticipate that it will
shortly begin paying dividends. At the same time the company is
developing its market position which may lead to a more attractive and
realistic offer being made in 2 or 3 years' time.
None of our other remaining unquoted investee companies is currently
ready for an optimum sale. The Manager is being pressed by the Directors
to find profitable exits for as many as possible by the end of 2017. We
will update shareholders on progress of this initiative.
We made no top up investment in any of our existing portfolio companies.
We will consider any investee company requests for additional funds on
their merits for further investment or as a potential opportunity to
make some realisations. Since year end we have received one request
which, subject to due diligence, we anticipate approving.
We have not invested in any new companies. During the year Abzena (a new
company formed by a merger with Polytherics which in turn had previously
acquired our initial investee Warwick Effect Polymers) floated on AIM at
over twice our carrying cost. The directors have been considering
whether Abzena, as a listed company, has any near term value inflection
points or whether the time for realisation is approaching. Since year
end we have chosen to sell 41% of our holding in Abzena at above our
year end carrying price to be able to support another of our investee
companies in its final round of fundraising.
So to sum up the financial performance, there has been an increase in
the value of the portfolio of GBP117k. The major increases are
Telegesis up GBP425k and Abzena up GBP150k offset by a lower Scancell
bid price GBP111k and a more cautious valuation of Ixaris GBP315k to
reflect the last fundraising round and slightly lower sales. Also
Insense has been written down by GBP44k after spin outs of some of its
component parts.
Shareholders should be aware that the valuation of Glide our fourth
largest investment is very dependent on continuing satisfactory
performance. In the February 2013 fund raising Investec subscribed to a
tranche of preference shares which rank above our equity. A downturn in
performance could lead to a disproportionate decrease in the value of
our equity. We have applied a discount to our valuations to reflect this
possibility.
The Directors note the fund's flat performance this year. The technology
area in which we are primarily invested has not yet produced the returns
seen by more generalist VCT funds. Since 2002 the total return of
dividends paid to shareholders plus remaining NAV is 105.6p. The
Directors consider this long term performance to be very disappointing.
As a result the Directors have been considering all ways of increasing
fund performance both by profitable exits and by reducing costs.
Management Fees
In the light of the fully invested nature of OT3, which is now in its
14(th) year, your Directors have considered the level of ongoing
management fees. The existing fee arrangement covered a range of
responsibilities, some of which are no longer applicable, such as
regularly considering and reviewing new investment opportunities. In
conjunction with further changes outlined below that improve the board
structure and improve the Company's corporate governance, the Board
renegotiated the ongoing management fees from 2% (of which recently 1.5%
has been paid out while 0.5% has been deferred) to a reduced rate of
1.0% per annum. At the same time we have agreed to pay off the deferred
management fee balance of GBP141,000 over the next 3 years.
We have also reconfirmed that the annual regular running costs
(excluding directors' fees and any performance fees payable) are subject
to a cap of 3.0% of the Company's net assets. Any running costs in
excess of this are borne by Oxford Technology Management. The new
arrangements start from 1 March 2015.
Performance Fees
The existing OT3 performance fee structure saw Oxford Technology
Management, past and current directors sharing in 20% of the returns
achieved beyond 100p. Thus taking into account dividends paid to date
of 10.0p, there was a net target as at 28 February 2015 of 90.0p. Since
our NAV on that date was above the net target, we have accrued for a
potential performance fee liability in this year's accounts.
As outlined below, the Board is optimistic about the potential for
increasing shareholder value. However Directors are of the view that it
would be inappropriate for the existing performance fee structure to
remain, as it would reward performance that, in terms of annual return
on investment, is actually relatively low. The Board has therefore
negotiated with relevant parties and agreed that a compound annual 6%
increase shall be applied retrospectively to the performance threshold
from the end of the tenth year of full trading following the year of the
first major allotment under the original OT3 prospectus, namely 1 March
2013. In recognition of dividends paid, actual returns to shareholders
will be subtracted from the compounding threshold in the year these are
paid.
This will maintain the purpose of the performance fee as an appropriate
and achievable incentive for Oxford Technology Management (who would
receive three quarters of any performance fee payable) to maximise
shareholder value, yet also ensure that the performance threshold cannot
be 'inflated away' over time. The level of the performance fee remains
at 20%. Note also that your company will only pay out a performance fee
after cash returns to shareholders have achieved the performance
threshold - many other VCTs pay out performance fees based on growth in
asset values before actual cash returns have been made to shareholders.
The new arrangements will apply from 1 March 2015. Shareholders should
note that no performance fee accrual will be made on 29 February 2016
unless the OT3 total return of dividends paid plus NAV on that date is
above 117.2p. No forecast is implied that this hurdle will be reached.
Your Directors believe that the lower level of management fees, together
with a performance fee incorporating an escalating hurdle and only
payable once shareholders have received back more than their original
investment prior to any additional tax reliefs, makes this management
arrangement market-leading and continues the principle always adopted by
the VCT to keep its costs as low as possible.
Board Structure and Remuneration
Shareholders will be aware that the Company was considering the
possibility of a merger with some, or all, of the other Oxford
Technology VCTs.
Following clear feedback from shareholders the directors realised that,
should they decide to merge the four companies, they would still need to
maintain four separate listed share classes as some shareholders did not
wish their holdings in certain specific assets to be diluted by
consolidation with the other funds. The OT3 Board determined that such
a structure would not deliver sufficient savings to offset the costs of
its introduction now.
The directors have therefore considered other methods by which OT3 can
benefit from a more robust board structure. At present, your company has
a board of just two directors. A similar situation applies to the other
three VCTs within the Oxford Technology stable. Whilst directors from
the other three VCTs provide ad hoc support, the board believes it is
better to formalise this relationship.
It is therefore proposed to form a common board across each Company,
each with its own chairman. To achieve this whilst retaining the
independence that is required by generally accepted corporate governance
(specifically AIC guidelines), the Directors have resolved that the
Company should be self-managed by its own subsidiary company, OT3
Managers Limited. In turn, this subsidiary will sub-contract in services
from Oxford Technology Management, thereby ensuring continuity from the
team led by Lucius Cary. This type of self-managed format has been
adopted very successfully by a number of other VCTs that are keen to
maintain good and cost-effective corporate governance.
Three new directors will be appointed to the board of OT3 in early July
2015, David Livesley, Chairman of OT4 and Alex Starling and Richard Roth,
respectively Chairman and Director of OT1. Richard Vessey will not
stand for re-election as a director at the AGM. I would like to pay
tribute to Richard for his service to OT3 and his wise counsel to me
over the last year. Shareholders will be asked to ratify these
appointments at the forthcoming AGM.
Shareholders will also note that the remuneration committee has proposed
a different structure to directors' fees. Fees are still much lower than
those earned by directors of many other VCTs but represent an increase
from that paid in recent years by any of the Oxford Technology funds.
This also recognises, to some extent, the actual amount of work
currently performed by your directors and the incremental cost is more
than offset by the reduction in management fees discussed above.
Reducing Share Premium Account
In line with normal market practice, the company is planning to clear
the remaining balance on its share premium account. This has been
approved by shareholders in the past, but the Board wishes to clear the
amount that accrued from the share issues since that date. Once the
process has been completed, this will increase the reserves ultimately
available for distribution to shareholders.
Shareholder Approvals
Shareholders are invited to approve the appointment of the new directors,
the revised remuneration structure and the reduction in the share
premium account at the AGM on 26 August 2015, and the Board encourages
you to vote in favour of all the resolutions.
Share Buybacks
The Company has the ability to buy back shares but the Directors do not
think this is the best use of money at this time, preferring to reserve
resources to support our investees and to pay dividends. To date this
authority has never been exercised and the Directors have no current
intention to do so. It is however a useful facility to have and the
Company wishes to maintain this policy.
Outlook
The Directors look forward to 2015 with a degree of cautious optimism.
The future of our four largest investments will determine the outturn of
this fund and our ability to pay future dividends. The Directors are
focussed on finding profitable exits from the VCT's major holdings at
the earliest practicable date. The Directors are not in a position to
recommend a dividend at this time.
AGM
Shareholders should note that the AGM for Oxford Technology 3 VCT will
be held on Wednesday 26 August 2015 at the Magdalen Centre, Oxford
Science Park, starting at 11 am and will include presentations by some
of the companies in which the Oxford Technology VCTs have invested. A
formal notice of the AGM has been separately included with these
Financial Statements together with a Form of Proxy for those not
attending.
I am always pleased to hear from shareholders. I have met many at Annual
General Meetings over the last few years. If shareholders have questions
or comments for me, please get in touch via our Manager, Oxford
Technology Management, or by email to lucius@oxfordtechnology.com. I
hope that as many shareholders as possible will be able to attend our
AGM.
Robin Goodfellow
Chairman
29 June 2015
Table of Investments held by Company at 28 February 2015
Change
in
Carrying value
value at for the
Net cost of 28/02/15 year % equity
Company Description Date of initial investment investment GBP'000 GBP'000 GBP'000 held
Zigbee
Telegesis technology Oct 2003 147 1,999 425 27.2
Internet
Ixaris payments Aug 2002 218 1,461 (315) 7.1
Scancell Cancer
Quoted on AIM therapeutics Dec 2003 325 1,350 (111) 2.0
Glide Needle free
Technologies injector Nov 2003 225 814 28 3.3
Protein &
Abzena peptide based
Quoted on AIM drugs Nov 2002 115 268 150 0.3
Parallel
Allinea Software computing May 2009 15 132 - 2.3
Directional
Plasma Antennas antennas Sep 2004 108 109 - 5.3
Photocopier
Select Technology Interfaces Nov 2004 47 89 19 2.8
ImmunoBiology Novel vaccines May 2003 250 87 - 2.3
Protein
Arecor stabilisation Jul 2007 24 46 - 0.7
Insense Wound healing May 2003 333 44 (44) 4.1
Data
transformation
Inaplex software Mar 2003 58 30 (10) 13.3
Concurrent Cluster
Thinking computing Nov 2009 97 24 (25) 2.0
Bone graft
Orthogem material Dec 2004 114 22 5 2.5
Low power
Invro electronics Apr 2004 40 20 - 33.1
Production of
Metal Nanopowders metal powders Nov 2002 153 13 - 20.0
Production of
Superhard hard
Materials materials Feb 2012 11 11 - 21.8
Dataflow Accountancy
Sold software Jul 2002 4 4 (5) -
Microarray Insense spinout Dec 2013 2 2 - 1.1
Totals 2,286 6,525 117
Other Net Assets (40)
NET ASSETS 6,485
Directors' Remuneration Report
Introduction
This report has been prepared by the Directors in accordance with the
requirements of the Companies Act 2006. The Company's independent
auditor, James Cowper Kreston, is required to give its opinion on
certain information included in this report. This report includes a
statement regarding the Directors' remuneration policy. Resolutions to
approve the Directors' remuneration report and policy will be proposed
at the Annual General Meeting on 26 August 2015.
A policy was approved at the AGM on 27 August 2014, together with the
resolution regarding the directors' remuneration report for the year
ended 28 February 2014 on a show of hands, which reflected overwhelming
support amongst proxies submitted.
This report sets out the Company's forward looking Directors'
Remuneration Policy, and the Annual Remuneration Report which describes
how this policy has been applied during the year.
Directors' Terms of Appointment
The Board consists entirely of non-executive Directors who meet at least
4 times a year and on other occasions as necessary to deal with
important aspects of the Company's affairs. Directors are appointed with
the expectation that they will serve for at least three years, and are
expected to devote the time necessary to perform their duties. All
Directors retire at the first general meeting after election and
thereafter every third year, with at least one director standing for
election or re-election each year.
Re-election will be recommended by the Board but is dependent upon
shareholder vote. Directors who have been in office for more than 9
years will stand for annual re-election in line with the AIC Code. There
are no service contracts in place, but Directors have a letter of
appointment.
Directors' Fees
The Board acts as the Remuneration Committee and meets annually to
review Directors' fees to ensure it remains appropriate given the need
to attract and retain candidates of sufficient calibre and ensure they
are able to devote the time necessary to lead the Company in achieving
its strategy. The Board has not engaged any third party consultancy
services but carefully considers the opinions of other Oxford Technology
VCT fund directors.
Given the proposed introduction of a common board across the four Oxford
Technology VCTs, the additional focus on effective corporate governance
(as outlined in the Chairman's statement) and the greater involvement of
the Directors in the day-to-day running of the VCT, the Remuneration
Committee has proposed a revised fee structure. This new fee structure
also takes into account the additional responsibilities and workload for
the Company Chairman and responsibilities within the Audit Committee.
In proposing the revised levels, the Remuneration Committee took note of
an internal report providing an extensive analysis of fees paid by the
rest of the VCT industry, with particular focus on other VCTs managed in
a similar manner to the Company, and other relevant information. They
were also mindful of the low cost philosophy of the Oxford Technology
VCTs and fund affordability. Fees continue to be amongst the lowest in
the industry. During the process a range of stakeholders including
retiring board members from several of the Oxford Technology VCTs were
consulted to provide expertise and input to reach a balanced
recommendation.
As the levels and structure of remuneration have been modified, the
Directors consider that this once again requires shareholder approval,
as Shareholders must now vote on the remuneration policy every three
years, or sooner if the Company wants to make changes to it.
The Articles of Association of the company state that the aggregate of
the remuneration (by way of fee) of all the Directors shall not exceed
GBP50,000 per annum unless otherwise approved by ordinary resolution of
the Company. Following the changes outlined above, the following
Directors' fees will be payable by the Company with effect from 1 July
2015, the date of the proposed implementation of the Common Board:
per annum
Director Base Fee GBP3,500
Chairman's Supplement GBP2,000
Audit Committee Chairman GBP3,000
Audit Committee Member GBP1,500
Robin Goodfellow will continue to chair the Company and Richard Roth
will chair the Audit Committee, with Robin Goodfellow as a member of the
Committee. As the VCT will be self-managed after implementation of the
new structure, the Audit Committee will be carrying out a particularly
important role for the VCT and will play a greater part in the
production of the annual accounts compared to recent years.
These figures compare to the previous individual fee of GBP7,500 per
annum for each director independent of the manager and GBP2,500 per
annum for Lucius Cary, who was a director of the Company up until 27
August 2014. Richard Vessey will be paid GBP3,750 for his services from
1 March 2015 to his resignation on 26 August 2015.
The directors may at their discretion pay additional sums in respect of
specific tasks carried out by individual Directors on behalf of the
Company.
Fees are currently paid annually. The fees are not specifically related
to the Directors' performance, either individually or collectively. No
expenses are paid to the Directors. There are no share option schemes
or pension schemes in place but Directors are entitled to a share of the
carried interest as detailed below.
The revised performance incentive fee is described in the Chairman's
statement and becomes payable if a certain cash return hurdle to
shareholders is exceeded - the excess is then subject to a 20% carry
that is distributed to Oxford Technology Management, past directors and
current directors; the remaining 80% is returned to shareholders.
At 28 February 2015 the cash return to shareholders would have had to
have been in excess of 111.1p for a performance fee to have been
payable. If a performance fee is not triggered (as it was not in this
financial year) the hurdle, net of dividends paid, increments by a
compound annual growth rate of 6%, applied quarterly.
Should the new director appointments as outlined in the Chairman's
Statement go ahead as planned and any fee be payable at the end of the
year to 29 February 2016, Alex Starling, Richard Roth and Robin
Goodfellow would each receive 0.10% of any amount over the hurdle,
whilst David Livesley would be entitled to 0.60%.
No performance fee is payable for the year ending 29 February 2016
unless original shareholders have received back at least GBP1.17 in cash
for each GBP1 (gross) invested; no forecast is implied that the hurdle
will be reached in the year to 29 February 2016.
Relative Spend on Directors' Fees
The Company has no employees, so no consultation with employees or
comparison measurements with employee remuneration are appropriate.
Loss of Office
In the event of anyone ceasing to be a Director, for any reason, no loss
of office payments will be made. There are no contractual arrangements
entitling any Director to any such payment.
Directors' Emoluments
As outlined in the Chairman's statement, it is proposed to appoint Alex
Starling, Richard Roth and David Livesley to the Board of OT3 on 1 July
2015. Richard Vessey is not expecting to stand for re-election at this
year's AGM. The Directors consider it helpful to shareholders to
therefore set out the full expected cost for Director's emoluments for
the year to 29/2/16. Given the partial year timing for the creation of
the Common Board, they have also set out the expected remuneration for
each director for the year ended 28/2/17, all other things being equal.
Directors' Year End Year End Year End 28/02/15 Year End 28/02/14
Fees 28/02/17 29/02/16 (audited) (audited)
(unaudited) (unaudited)
Alex GBP3,500 GBP2,333 - -
Starling
Richard Roth GBP6,500 GBP4,333 - -
Richard - GBP3,750 GBP7,500 GBP7,500
Vessey
Lucius Cary - - GBP1,041 GBP2,500
Robin GBP7,000 GBP7,167 GBP4,375 -
Goodfellow
David GBP3,500 GBP2,333 - -
Livesley
Total GBP20,500 GBP19,916 GBP12,916 GBP10,000
Prior to his appointment as an OT3 director Richard Roth received a one
off payment of GBP2,000 as compensation for executive work undertaken in
relation to setting up of the common board structure.
Income Statement
Year to 28 February 2015 Year to 28 February 2014
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain on
disposal of
investments - 2 2 - 73 73
Unrealised
gain on
fair value - 94 94 - 167 167
Other income 2 - - - 2 - 2
Performance
fees 8 - (95) (95) - - -
Investment
management
fees 3 - (133) (133) - (132) (132)
Other
expenses 4 (53) - (53) (40) - (40)
Return on
ordinary
activities
before tax (53) (132) (185) (38) 108 70
Taxation on
return on
ordinary
activities 5 - - - - - -
Return on
ordinary
activities
after tax (53) (132) (185) (38) 108 70
Earnings per
share -
basic and
diluted 6 (0.8)p (1.9)p (2.7)p (0.6)p 1.6p 1.0p
The 'Total' column of this statement is the profit and loss account of
the Company, the supplementary revenue and capital columns have been
prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in the above statement derive from
continuing operations.
The accompanying notes are an integral part of the financial statements.
Reconciliation of Movement in Shareholders' Funds
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Shareholders' funds at start of year 6,670 6,600
Return on ordinary activities after tax (185) 70
Dividends paid - -
Shareholders' funds at end of year 6,485 6,670
Balance Sheet
Year to 28 February 2015 Year to 28 February 2014
GBP'000 GBP'000 GBP'000 GBP'000
Fixed Asset Investments at fair value
(Note 7) 6,525 6,405
Current Assets
Debtors 1 112
Cash at Bank 203 267
Creditors: amounts falling due in less
than 1 year (55) (114)
Net Current Assets 149 265
Creditors: amounts falling due after
more than 1 year (94) -
Provisions (Note 8) (95) -
Net Assets 6,485 6,670
Called up equity share capital 679 679
Share Premium 718 718
Unrealised Capital Reserve 4,315 4,224
Profit and Loss Account Reserve 773 1,049
Total Equity Shareholders' Funds 6,485 6,670
Net Asset Value Per Share 95.6p 98.3p
The accompanying notes are an integral part of the financial statements.
The statements were approved by the Directors and authorised for issue
on 29 June 2015 and are signed on their behalf by:
Robin Goodfellow
Director
Cash Flow Statement
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Net cash outflow from operating
activities (76) (212)
Financial investment
Purchase of investments - (85)
Disposal of investments 12 222
(Decrease) in cash at bank (64) (75)
Reconciliation of Net Cash Flow
to Movement in Net Funds
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Decrease in cash resources at bank (64) (75)
Opening net funds 267 342
Net funds at 28 February 2015 203 267
Reconciliation of Operating Profit/(Loss) before Taxation to Cash Flow
from Operating Activities
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Return on ordinary activities before tax (185) 70
Gain on disposal of investments (2) (73)
(Gain) on valuation of investments (94) (167)
(Increase)/decrease in debtors 75 (75)
Increase in creditors 130 33
Outflow from operating activities (76) (212)
Notes to the Financial Statements
These schedules and notes have been extracted from the Financial
Statements prepared to Year End 28 February 2015.
1. Principal Accounting Policies
Basis of Accounting
The financial statements have been prepared under the historical cost
convention except for the measurement at fair value of certain financial
instruments, and in accordance with UK Generally Accepted Accounting
Practice (UK GAAP) and the Statement of Recommended Practice (SORP)
'Financial Statements of Investment Trust Companies' (revised in 2009).
Investments
The company invests in financial assets with a view to profiting from
their total return through income and capital growth. These investments
are managed and their performance is evaluated on a fair value basis.
Accordingly as permitted by Financial Reporting Standard 26 (FRS 26) the
investments are designated as fair value through profit and loss.
Unrealised gains or losses on valuation are recognised through the
income statement.
Valuation of Investments
Quoted investments are stated at the bid price. Unquoted investments are
stated at fair value, where fair value is estimated after following the
guidelines laid down by the International Private Equity and Venture
Capital Guidelines. The Directors' policy is to initially state
investments at cost and then to review the valuation every three months.
The Directors may then apply an appropriate methodology which, as far as
possible, draws on external, objective market data such as where fair
value is indicated by:
-- a material arms length transaction by a third party in the shares
of the company, with discounting for more junior asset classes, and
reviewed for impairment; or
-- a suitable revenue or earnings multiple where the company is well
established and generating maintainable profits. The multiple will be
based on comparable listed companies but may be discounted to reflect a
lack of marketability; or
-- the net assets of the business.
Where such objective data is not available the Directors may choose to
maintain the value of the company as previously stated or to discount
this where indicated by underperformance against plan.
The Directors consider that this basis of valuation of unquoted
investments is consistent with the International Private Equity and
Venture Capital Guidelines.
The preparation of the financial statements requires the Board to make
judgments and estimates that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. Estimates
and assumptions mainly relate to the fair valuation of the fixed asset
investments particularly unquoted investments. Estimates are based on
historical experience and other assumptions that are considered
reasonable under the circumstances. The estimates and the assumptions
are under continuous review with particular attention paid to the
carrying value of the investments.
Deferred Tax
Deferred tax is not provided on capital gains and losses arising on the
revaluation or disposal of investments because the company was approved
as a Venture Capital Trust during the current year. HMRC has approved
the company as a Venture Capital Trust for the purpose of Section 259 of
the Income Tax Act 2007. The approval was given in the financial period
ended 28 February 2003.
2. Income
Income represents realised gains on the disposal of investments along
with dividends and interest receivable on cash deposits and loans.
Dividends receivable on unquoted equity shares are brought into account
when the company's right to receive payment is established and there is
no significant doubt that payment will be received. Dividends receivable
on quoted equity shares are brought into account on the ex-dividend
date.
Fixed returns on debt securities and non-equity shares are recognised on
a time apportionment basis so as to reflect the effective yield on the
debt securities and shares, provided there is no significant doubt that
payment will be received in due course. Interest receivable from cash
and short term deposits are accrued to the end of the year.
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Bank interest receivable - 2
Loan note interest receivable - -
Total - 2
3. Investment Management Fees
Expenses are charged wholly to revenue with the exception of the
investment management (including performance fee) which has been charged
100% to the capital return.
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Investment management fee 133 132
Total 133 132
In the year to 28 February 2015 (and previous financial years), the
manager received a fee of 2% of the net asset value as at the previous
year end. As indicated in the Chairman's statement, the Board have
agreed with Oxford Technology Management that as from 1 March 2015, this
will be reduced to 1.0% of net asset value as at the previous year end.
The Manager had agreed to defer 25% of the management fee to which it
was contractually entitled (ie 0.5% of net assets) until a time when the
Company was more able to afford it. As part of the revised agreement
with effect from 1 March 2015 the Board have agreed to pay over the
deferred balance over a 36 month period.
In all previous years to 28 February 2015, a performance incentive has
been payable to the Investment Manager once the original shareholders
have received back GBP1.00 in cash for each GBP1 (gross) invested. Each
extra GBP1 distributed goes 80p to the shareholder and 20p to the
beneficiaries of the performance incentive fee, of which Oxford
Technology Management receives 15p.
As reported in the Chairman's statement, the hurdle of GBP1.00 has now
been increased, by compounding that portion that remains to be paid to
shareholders by 6% per annum with effect from 1 March 2013.
Annual running costs are capped at 3%, including the management fee but
excluding Directors fees.
4. Other Expenses
All expenses are accounted for on an accruals basis. All expenses are
charged through the profit and loss account except as follows:
-- those expenses which are incidental to the acquisition of an
investment are included within the cost of the investment
-- expenses which are incidental to the disposal of an investment
are deducted from the disposal proceeds of the investment.
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Directors' remuneration 13 10
Auditors' remuneration 6 5
Legal and professional expenses 10 6
Accounting and administration services 4 2
Other expenses 20 17
Total 53 40
5. Tax on Ordinary Activities
Corporation tax payable is applied to profits chargeable to corporation
tax, if any, at the current rate. The corporation tax charge for the
period was GBPnil (2014: nil)
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Return on ordinary activities before tax (185) 70
Current tax at standard rate of taxation (39) 14
Unrecognised tax losses 39 (14)
Total current tax charge - -
Unrelieved management expenses of GBP1,716,092 (2014: GBP1,435,542)
remain available for offset against future taxable profits.
6. Earnings per Share
The calculation of earnings per share (basic and diluted) for the period
is based on the net loss of GBP185,000 (2014: profit of GBP70,000)
attributable to shareholders divided by the weighted average number of
shares 6,785,233 (6,785,233) in issue during the period.
There are no potentially dilutive capital instruments in issue and,
therefore, no diluted returns per share figures are relevant. The basic
and diluted earnings per share are therefore identical.
7. Investments
Fixed asset investments are valued at fair value. Unquoted investments
are carried at fair value as determined by the Directors in accordance
with current venture capital industry guidelines. Purchases and sales
of investments are recognised in the financial statements at the date of
the transaction.
Where financial instruments are measured in the balance sheet at fair
value, FRS 29 requires disclosure of the fair value measurements by
level based on the following fair value investment hierarchy.
Level 1: quoted prices in active markets for identical assets and
liabilities. The fair value of financial instruments traded in active
markets is based on quoted market prices at the balance sheet date. A
market is regarded as active if quoted prices are readily and regularly
available, and those prices represent actual and regularly occurring
market transactions on an arm's length basis. The quoted market price
used for financial assets held is the current bid price. These
instruments are included in level 1 and comprise AIM quoted investments
classified as held at fair value through profit or loss.
Level 2: the fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. These
valuation techniques maximise the use of observable data where it is
available and rely as little as possible on entity-specific estimates.
Level 3: the fair value of financial instruments that are not traded in
an active market (for example investments in unquoted companies) is
determined by using valuation techniques such as earnings or sales
multiples. Level 3 valuations include assumptions based on
non-observable market data, such as discounts applied either to reflect
fair value of financial assets held at the price of recent investment,
or, in the case of unquoted investments to adjust earnings or sales
multiples.
AIM quoted investments Unquoted investments Total
Level 1 Level 3 investments
GBP'000 GBP'000 GBP'000
Valuation and net
book amount:
Book cost as at 28
February 2014 325 1,967 2,292
Cumulative
revaluation 1,135 2,978 4,113
Valuation at 28
February 2014 1,460 4,945 6,405
Movement in the
year:
Purchases at cost - 2 2
Redeemed/Disposed - (8) (8)
IPO during year at
28/2 valuation 119 (119) -
Revaluation in
year 39 87 126
Valuation at 28
February 2015 1,618 4,907 6,525
Book cost at 28
February 2015 440 1,846 2,286
Revaluation to 28
February 2015 1,178 3,061 4,239
Valuation at 28
February 2015 1,618 4,907 6,525
8. Provisions
28 February 2015 28 February 2014
GBP'000 GBP'000
Performance Fee 95 -
Total 95 -
In all previous years to 28 February 2015, a performance incentive has
been payable to the Investment Manager once the original shareholders
have received back GBP1.00 in cash for each GBP1 (gross) invested. Each
extra GBP1 distributed goes 80p to the shareholder and 20p to the
beneficiaries of the performance incentive fee, of which Oxford
Technology Management receives 15p. As reported in the Chairman's
statement, the hurdle of GBP1.00 has now been increased, by compounding
that portion that remains to be paid to shareholders by 6% per annum
with effect from 1 March 2013. No forecast is implied that this hurdle
will be reached.
Based on the net asset value per share and cumulative dividends paid to
date this is more than likely to occur and the Directors assessed that
the costs should be included in the accounts. The value of the
liability arising to date can be estimated, however the timing of the
future payment is uncertain.
9. Events after the Balance Sheet Date
OT3 sold 73,534 shares in Abzena Plc in May 2015 at a price of 81.83p.
In June 2015 it subsequently sold an additional 58,000 shares at a price
of 86p. The company retains 190,541 shares.
10. Notes
The financial information set out in these statements does not
constitute the Company's statutory accounts for the year ended 28
February 2015 in terms of section 434 of the Companies Act 2006 but is
derived from those accounts.
Statutory accounts for the year ended 28 February 2015 will be delivered
to Companies House following the Company's Annual General Meeting. The
auditors have reported on those accounts: their report was unqualified
and did not contain a statement under Section 489 of the Companies Act
2006.
The Annual Report for the year ended 28 February 2015 will shortly be
made available on the Company's website www.oxfordtechnology.com.
Shareholders will be notified of this by email or post or sent a hard
copy in the post in accordance with their instructions.
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Oxford Technology 3 VCT plc via Globenewswire
HUG#1932897
http://www.oxfordtechnology.com
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