TIDMOXT
For RNS Release
30(th) June 2015
Oxford Technology Venture Capital Trust Plc
Announcement for the year ended 28 February 2015
Headlines for the Year
-- NAV of GBP3.5m (65p per share) at 28 February 2015 (unchanged
from 28 February 2014)
-- Good growth, cash generation and technological progress within
portfolio companies
-- VCT status retained after resolution with HMRC
-- Common Board structure announced across the Oxford Technology
VCTs
-- Management fees reduced from 1.5% to 1%
-- Performance fee escalating threshold introduced (backdated to 1
March 2008) to increase potential returns to shareholders
Financial Headlines
Year Ended Year Ended
28 February 2015 28 February 2014
Net Assets at Year End GBP3.53m GBP3.53m
Net Asset Value per Share 65p 65p
Cumulative Dividend 52.7p 52.7p
NAV + Cumulative Dividend
Paid from Incorporation 117.7p 117.7p
Share Price at Year End 53p 75p
Earnings Per Share
(Basic & Diluted) 0.0p 0.7p
Chairman's Statement
Following my appointment at the end of July 2014, I am pleased to
present to shareholders the 2015 annual report.
Ongoing VCT Status
Though thankfully now fully resolved, the first half of the Company's
year was dominated by a period of uncertainty while the Directors and
Investment Manager addressed an issue that had come to light in the
first days of the financial year: shareholders will be aware from an RNS
on 13 March 2014 that HMRC had considered a previous purchase of shares
in Scancell Holdings Plc ("Scancell") to be in breach of the VCT rules.
On 12 September 2014, following the completion of certain corrective
actions, we were able to announce a satisfactory conclusion to this
episode with the confirmation that HMRC had decided that the matter
would be closed subject to Oxford Technology VCT Plc's ("OT1") continued
compliance with VCT rules. This means that the tax reliefs previously
given to the VCT and its shareholders were not and will not be disturbed,
and the entitlement to benefit from future reliefs available to VCTs
will likewise continue.
Following the corrective action, the 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 Company.
I wish to reiterate my appreciation for the constructive way in which
HMRC engaged with us during this period and worked with us to reach a
satisfactory conclusion. I would like to place on record my thanks to
the Manager, his staff and all the Oxford Technology VCT directors for
their collective, vigorous and ultimately successful efforts in this
endeavour. I also wish to thank the Company's advisors, Joseph Hage
Aaronson LLP and Jonathan Bremner of Counsel for their pro-active and
professional work that helped ensure a satisfactory outcome at no cost
to your VCT.
Ongoing Review
The Board has reviewed and continues to review all aspects of internal
governance to avoid the possibility of breaches of VCT rules or company
law. Since taking up our appointment, the new Directors of the Company,
Richard Roth and I, have been putting in place more robust procedures
and are actively working with Oxford Technology Management and other
stakeholders to ensure that its procedures comply with best practice
commensurate for a VCT of the Company's size and type.
Portfolio Review
The net asset value per share on 28 February 2015 was 65p compared to
65p on 28 February 2014. Dividends paid to date are 52.7p, giving a
total return to date of 117.7p. The earnings per share in the year to
28 February 2015 were nil.
The Company has a relatively concentrated portfolio dominated by its
holding in Scancell, listed on the AIM market of the London Stock
Exchange, which continues to make good progress with the development of
novel immunotherapies for the treatment of cancer. There is evidence to
believe that Scancell has an attractive combination of technologies in
this newly developing field, but as ever the commercial and scientific
risks are high.
The bid price of Scancell's shares used for the calculation of the
Company's net asset value on 28 February 2015 was 30.5p. Since that
date, the Scancell share price has fluctuated, briefly dropping below
23p in early April 2015 before recovering, then reaching 45p before
falling back, encompassing a GBP1.5 million swing on our net assets,
i.e. 27p per share. At close of business on 26 June 2015 the Scancell
share price was 29.5p.
The second-largest holding in the Company's portfolio is a 30% stake in
Select Technology Limited, a photocopier software company that has been
growing revenues at a compound annual rate of over 75% since the Summer
of 2010, is generating regular monthly profits and has built up a
substantial cash reserve as it addresses some particularly interesting
market opportunities with key partners.
Together with the Company's cash balance, Scancell and Select Technology
make up more than 90% of Oxford Technology VCT Plc's portfolio. Only
three other companies remain in the portfolio - they are performing
adequately and we are continuing to collect dividends and capital
returns from these companies as and when appropriate.
Further details on our investments are contained within the Investment
Portfolio Review.
We are also continuing to assess the opportunity for divestments so as
to crystallise shareholder value as and when appropriate - at least two
such opportunities arose during the financial year but it was decided
that the cash offers on the table, though comparable to book value, were
unattractive given the potential for near-term growth and cash
generation from the relevant assets.
Dividends
The ongoing strategy is to seek to crystallise value from the portfolio
and distribute cash to shareholders via dividend payments. The
Directors are not in a position to recommend a dividend at this time,
but cash generation within the portfolio should enable the Directors to
recommend a distribution in the medium term.
Director Resignations
I would like to take this opportunity to thank Lucius Cary and John
Jackson, both of whom retired as Directors of the Company in the Summer
of 2014. Lucius and John have been instrumental in the founding and
running of the Company, and I would like to extend my thanks and that of
all of those involved for their efforts since the Company's inception.
Both Lucius and John remain as shareholders, and of course Lucius
remains actively involved as managing director of the Investment Manager,
Oxford Technology Management.
Management Fees
In the light of the stage of OT1, which is now in its 19th year, your
Directors have considered the ongoing management fees payable to the
Manager of the fund. The existing fee arrangement of 1.5% per annum
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
optimise the board structure and improve the Company's corporate
governance, the Board has renegotiated the ongoing management fees to a
reduced rate of 1.0% per annum and confirmed that the overall fee cap of
3% (excluding Directors' fees) covers all of the running costs incurred
by the VCT. This is in effect from 1 March 2015.
Performance Fees
The existing performance fee structure sees Oxford Technology Management,
past Directors and current Directors sharing in 20% of the returns paid
out beyond 125p; taking into account dividends paid to date of 52.7p, a
further 72.3p would need to be paid out as at 28 February 2015. As this
net target is above NAV, no performance fee has yet been accrued nor
paid as at 28 February 2015. For clarity, the Company's total return was
117.7p per share at that date, over 7p below the performance fee hurdle
of 125p.
As I have outlined elsewhere in this statement, the Board is satisfied
with progress within its portfolio and cautiously optimistic about the
potential for increasing shareholder value. However, given the age of
the VCT, it is clear that shareholder value has not risen by as much as
one might have hoped since the inception of the VCT. In part this can
be explained by the high risk nature of the early stage venture capital
space that the VCT has concentrated on. Directors are of the view that
it would, however, 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 125p
performance threshold from 1 March 2008. The escalation is therefore
applied after ten years of full trading following the year of the first
major allotment under the original prospectus. Prior to 1 March 2015
the compound increase shall be applied annually; post this date it will
be applied quarterly. In recognition of dividends paid, actual returns
to shareholders will be subtracted from the compounding threshold in the
year these are paid. The effect of this change is to increase the net
target for the performance threshold for the financial year ending 28
February 2015 from 72.3p to 116p, (i.e. a total return of 168.7p if
dividends paid to date are taken into account) incrementing quarterly
thereafter as described above.
This will maintain the purpose of the performance fee as an appropriate
- and achievable - incentive for Oxford Technology Management (who would
receive approximately three quarters of any performance fee payable) to
maximise shareholder value, yet also ensure that the performance
threshold cannot be 'inflated away' over time. 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.
Your Directors believe that the lower level of management fees, together
with a performance fee incorporating a challenging hurdle and payable
only once shareholders have received back significantly 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. Such a potential merger was driven by a desire to keep
costs low, provide a more robust board structure and provide a mechanism
to manage the rump issue that may eventually ensue once the portfolio
reduces to an unviable size, which has particular consequences for those
shareholders who deferred capital gains on their original subscriptions.
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 share pools as enough shareholders did not wish
their holdings in certain specific assets to be diluted by consolidation
with the other funds. Further examination has therefore led us to
believe that any savings would be modest and not justify the costs of
carrying out the merger until further exits have been achieved, such
that the remaining VCT portfolios are more similar and there would be no
requirement for separate share classes.
The Directors of each fund, separately and collectively, have therefore
resolved that a merger of the four companies is not in shareholders'
best interest at this time. This decision is in keeping with the
historical view of Oxford Technology Management and the directors of all
four Oxford Technology VCTs to be cost conscious - this approach has not
changed. The Directors will, however, keep this decision under review
and will consider it again as the portfolios of each of the VCTs
develop. They have therefore considered other methods by which each
company can benefit from a more robust board structure. At the moment,
your company has a board of just two Directors; given that the chairman
has a casting vote, this in effect means that your company could
currently be controlled by one individual. A similar situation applies
to the other three VCTs in 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 (the
"Common Board"), 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, OT1 Managers Limited. In turn, this subsidiary will contract in
services from Oxford Technology Management following the template of the
Company's initial prospectus, ensuring continuity of service by 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.
Two new directors, Robin Goodfellow and David Livesley, the chairmen of
OT3 and OT4 respectively, will be appointed to the board of OT1 in early
July 2015. Shareholders will be asked to ratify these appointments at
the forthcoming AGM.
As shareholders will be aware, since taking up their Directors'
responsibilities in the Summer of 2014, your Board has been reviewing
all internal governance procedures. We have worked with Oxford
Technology Management 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 procedures that include more
clarity on the roles of your Board and the Manager. I believe that
these proposed changes to the structure provide a further improvement to
the structure of OT1, namely:
-- Further formalising the roles of the Directors and Oxford Technology
Management;
-- Four independent Directors (with the chairman holding a casting vote) to
ensure the Board cannot be controlled by a single person;
-- Providing a framework for OT1 to benefit from the differing expertise of
its newly enlarged board of Directors, with those Directors having a
specific mandate to contribute as best they can (rather than concerning
themselves with possible shadow directorship considerations);
-- Retention of the option of pursuing a merger (or other combination) at a
later date as and when portfolio developments permit; and
-- Minimising costs by not pursuing a major restructuring at this moment in
time whilst leaving options open to maximise shareholder value should
other corporate actions become attractive.
Shareholders should also note that the remuneration committee has
proposed a different structure to Directors' fees. Fees are much lower
than those earned by directors of almost all other VCTs but represent an
increase from those paid in recent years by any of the Oxford Technology
funds. This is to recognise a greater proportion of work performed by
your Directors as part of the proposed self-managed structure than for
many other VCTs and is more than offset by the reduction in management
fees discussed above.
Reducing the 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 top-up share issues since that date. Once
the process has been completed the reserves ultimately available for
distribution to shareholders will increase, though reserves will remain
negative until further returns have been generated by the portfolio.
Share Buy Backs
The Company has the ability to buy back shares. To date this authority
has never been exercised and the Directors have no current intention to
do so, preferring instead to preserve resources to support our investees
and pay dividends to all shareholders. It is, however, a useful
facility to have available should circumstances change and the Company
therefore wishes to maintain this capability.
Shareholder Approvals
Shareholders will be asked to approve the appointment of the new
Directors, the revised remuneration structure, the reduction in the
share premium account and the continuing ability for the Company to buy
back its own shares at the AGM. The Board encourages you to vote in
favour of all the resolutions.
AGM
Shareholders should note that the AGM for the Company will be held on
Wednesday 26 August 2015 at the Magdalen Centre, Oxford Science Park,
starting at 11am 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 enclosed with these Financial Statements together with
a Form of Proxy for those not attending. We appreciate the input of our
shareholders and look forward to welcoming as many of you as possible on
the day.
Outlook
Looking ahead, I believe the portfolio - though concentrated - is well
positioned for growth. We continue to work to maximise value for
shareholders and will, as per our stated strategy, seek to crystallise
this value and distribute to shareholders via dividend payments when
valuations and liquidity allow.
Alex Starling - 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 held by
Company Description Date of initial investment investment GBP'000 GBP'000 GBP'000 OT1
Scancell Antibody based
Quoted on AIM cancer therapeutics Aug 1999 344 2,099 (172) 3.1
Photocopier
Select Technology Interfaces Sep 1999 488 958 210 30.0
Getmapping Aerial photography Mar 1999 518 213 49 3.9
Bactericidal powder
Biocote coating Dec 1997 85 66 - 6.6
Radiotherapy
DHA Ltd products Sep 1999 150 10 - 26.9
Dataflow
Sold Accountancy software Mar 1998 7 7 4 -
Totals 1,592 3,353 91
Other Net Assets 180
NET ASSETS 3,533
Number of shares in issue: 5,431,656
Net Asset Value per share at 28 February 2015: 65p
Dividends paid to date: 52.7p
This table shows the current portfolio holdings. The investments in
Avidex, Concept Broadcast, Coraltech, Eurogen, Im-Pak, Freehand Surgical,
IMPT, Nexus, OST, Rapier, Sirius and Synaptica have been written off.
The investments in Valid, Dataflow, MET and Equitalk have been sold.
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 unanimous 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
four 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 nine 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' Remuneration Policy
The Board acts as the Remuneration Committee and meets annually to
review Directors' pay 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 of
the Company Chairman and responsibilities within the Audit Committee.
In proposing the revised levels to the Board, 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
Alex Starling will continue to chair the Company. 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.
The Directors may at their discretion pay additional sums in respect of
specific tasks carried out by individual Directors on behalf of the
Company. In this context, an additional one off payment has been made to
Richard Roth of GBP2,000 as compensation for executive work undertaken
in relation to the setting up of the Common Board structure.
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 performance incentive fee is described in the Chairman's Statement.
As mentioned there, current Directors are entitled to benefit from any
payment made, subject to a formula driven by relative lengths of
service. The performance fee 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 168.7p (compared to a total return at
that date of 117.7p) 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 0.11% of any amount over the hurdle,
whilst David Livesley would be entitled to 0.68%. No performance fee
will be payable for the year ending 29 February 2016 unless original
shareholders have received back at least GBP1.75 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 Robin
Goodfellow and David Livesley to the Board of OT1 on 1 July 2015, and
the Directors consider it helpful to shareholders to therefore set out
the full expected cost for Directors' 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 28/02/17 Year End 29/02/16 Year End 28/02/15 Year end
Fees (unaudited) (unaudited) (audited) 28/02/14
(audited)
Alex GBP5,500 GBP6,167 GBP4,375 -
Starling
Richard GBP6,500 GBP8,833 GBP4,375 -
Roth
John - - GBP3,750 GBP7,500
Jackson
Lucius - - GBP1,041 GBP2,500
Cary
Robin GBP5,000 GBP3,333 - -
Goodfellow
David GBP3,500 GBP2,333 - -
Livesley
Total GBP20,500 GBP20,666 GBP13,541 GBP10,000
Income Statement
Year Ended Year Ended
28 February 2015 28 February 2014
Note Revenue Capital Total Revenue Capital Total
Ref. GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/Gain
on disposal
of
investments - - - - (59) (59)
Unrealised
(loss)/gain
on fair
value - 104 104 - 198 198
Other income 2 - - - - - -
Investment
management
fees 3 - (53) (53) - (61) (61)
Other
expenses 4 (52) - (52) (42) - (42)
Return on
ordinary
activities
before tax (52) 51 (1) (42) 78 36
Taxation on
return on
ordinary
activities 5 - - - - - -
Return on
ordinary
activities
after tax (52) 51 (1) (42) 78 36
Earnings per
share -
basic and
diluted 6 (0.9)p 0.9p 0.0p (0.7)p 1.4p 0.7p
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 3,534 4,041
Return on ordinary activities after tax (1) 36
Dividends paid - (543)
Shareholders' funds at end of year 3,533 3,534
Balance Sheet
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000 GBP'000 GBP'000
Fixed Asset Investments at fair value
(Note 7) 3,353 3,271
Current Assets
Debtors 2 112
Cash at Bank 186 162
Creditors: amounts falling due within
1 year (8) (11)
Net Current Assets 180 263
Net Assets 3,533 3,534
Called up equity share capital 543 543
Share Premium 176 176
Unrealised Capital Reserve 3,104 2,940
Profit and Loss Account Reserve (290) (125)
Total Equity Shareholders' Funds 3,533 3,534
Net Asset Value Per Share 65p 65p
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:
Richard Roth
Director
Cash Flow Statement
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Net cash outflow from operating
activities (33) (156)
Financial investment
Purchase of investments - -
Disposal of investments 57 83
Dividends paid - (543)
Increase/(Decrease) in cash at bank 24 (616)
Reconciliation of Net Cash Flow
to Movement in Net Funds
Year Ended Year Ended
28 February 2015 28 February 2014
GBP'000 GBP'000
Increase/(Decrease) in cash resources
at bank 24 (616)
Opening net funds 162 778
Net funds at year end 186 162
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 (1) 36
Gain on disposal of investments - 59
(Gain) on valuation of investments (139) (198)
(Increase)/decrease in debtors 110 (23)
(Decrease)/increase in creditors (3) 5
Outflow from operating activities (33) (156)
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 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 arm's 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 1998.
2. Income
Income represents realised gains on the disposal of investments along
with dividends, 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 - -
Loan note interest receivable - -
Total - -
3. Investment Management Fees
Expenses are charged wholly to revenue with the exception of the
investment management (including any 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 53 61
Total 53 61
In the year to 28 February 2015 (and previous financial years), the
manager received a fee of 1.5% 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.
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 GBP1.25 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 14p. No performance fee has been paid to
date. As reported in the Chairman's statement, the hurdle of GBP1.25 has
now been increased by compounding that portion that remains to be paid
to shareholders by 6% per annum with effect from 1 March 2008. This has
the effect of increasing the hurdle to just over GBP1.68p as at 28
February 2015.
Expenses are, and remain, capped at 3%, including the management fee but
excluding Directors' fees and any performance fee.
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 14 10
Auditors' remuneration 6 5
Legal and professional expenses 10 9
Accounting and administration services 6 3
Other expenses 16 15
Total 52 42
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 (1) 36
Current tax at standard rate of taxation - 7
Unrecognised tax losses - (7)
Total current tax charge - -
Unrelieved management expenses of GBP1,123,276 (2014: GBP1,018,059)
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 GBP1,000 (2014: profit of GBP36,000)
attributable to shareholders divided by the weighted average number of
shares 5,431,656 (5,431,656) 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 344 1,516 1,860
Cumulative
revaluation 1,927 (516) 1,411
Valuation at 28
February 2014 2,271 1,000 3,271
Movement in the
year:
Purchases at cost - - -
Redeemed/Disposed - (117) (57)
Revaluation in
year (172) 371 139
Valuation at 28
February 2015 2,099 1,254 3,353
Book cost at 28
February 2015 344 1,399 1,743
Revaluation to 28
February 2015 1,755 (145) 1,610
Valuation at 28
February 2015 2,099 1,254 3,353
8. 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 VCT plc via Globenewswire
HUG#1932702
http://www.oxfordtechnology.com/
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