Annual Report • Feb 29, 2012
Annual Report
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Financial Statements
For the year ended 29 February 2012
| Financial highlights | 2 |
|---|---|
| Statement on behalf of the Board | 3 |
| Table of investments | 4 |
| Review of investment portfolio | 5 |
| Board of Directors | 7 |
| Report of the Directors | 8 |
| Directors' responsibilities for the financial statements | 12 |
| Directors' remuneration report | 12 |
| Report of the independent auditors | 15 |
| Principal accounting policies | 17 |
| Profit and loss account | 19 |
| Balance sheet | 20 |
| Cash flow statement | 21 |
| Notes to the financial statements | 21 |
| Notice of AGM | 26 |
| Form of proxy | 27 |
| Year ended 29 February 2012 |
Year ended 28 February 2011 |
|
|---|---|---|
| Net assets at year end | £4.80m | £4.68m |
| Net asset value per share at year end after distributions | 71p | 73p |
| Cumulative dividend (gross) from incorporation | 10p | 10p |
| Share price at year end | 40p | 54p |
| Loss per share (basic & diluted) | (1.9)p | (6.6)p |
OT3 has a portfolio of 24 investees and several of these are making good or excellent progress and have the potential to become stars and deliver significant returns to OT3 shareholders. Cumulative Dividends to date are 10p.
The net asset value per share was 71p on 29 February 2012, compared to 73p per share on 28 February 2011. The earnings per share in the year to 29 February 2012 were (1.9)p compared to (6.6)p in the year to February 2011. These figures result from the changes to the valuations of the investments during the year as shown in the table on page 4, with some investments being valued upwards and some being downvalued based on their performance.
The Company has built a balanced portfolio of investments with the following characteristics:
Interest on bank deposits and investee loans produced gross income of £2,000 (2011: £2,000) in the year. The loss for the year was £131,000 (2011: loss of £423,000) and earnings per share for the year showed a loss of 1.9p (2011: loss of 6.6p). The graph on page 14 shows the historical Net Current Assets and other investments per share. Together, these two figures make up the total Net Asset Value per share. The graph also shows cumulative dividends paid to date.
Shareholders should note that the AGM for Oxford Technology 3 VCT (OT3) will be held on Wednesday 4th July 2012, at the Magdalen Centre, Oxford Science Park, starting at 12.00 noon and will include presentations by some of the companies in which the Oxford Technology VCTs have invested. A formal Notice of AGM has been included at the back of these Accounts together with a Form of Proxy for those not attending.
Richard Vessey Chairman 28 May 2012
| Company | Description | Date of initial investment |
Net cost of investment £'000 |
Carrying value at 29/02/12 £'000 |
Change in value for the year £'000 |
% equity held by OT3VCT |
|---|---|---|---|---|---|---|
| Scancell | Cancer therapeutics | Dec 03 | 325 | 232 | (91) | 2.3 |
| Insense | Skin treatments | May 03 | 317 | 107 | (68) | 3.7 |
| Telegesis | Zigbee technology | Oct 03 | 250 | 890 | 238 | 27.6 |
| Glide Pharma | Needle-free injector | Nov 03 | 225 | 642 | (286) | 6.5 |
| Ixaris | Internet payments | Aug 02 | 218 | 1,707 | 301 | 8.8 |
| ImmunoBiology | Novel vaccines | May 03 | 175 | 57 | 1 | 2.2 |
| Metal | Production of metal | Nov 02 | 153 | 23 | 13 | 20.0 |
| Nanopowders Superhard Materials |
nanopowders Super hard materials |
Feb 12 | 11 | 11 | 11 | 21.8 |
| Inscentinel | Vapour detection | Mar 04 | 113 | 67 | - | 14.2 |
| Equitalk/X-Fone | Internet telecoms | Jan 03 | 102 | 20 | (40) | <0.1 |
| Orthogem | Bone graft material | Dec 04 | 103 | 19 | (17) | 13.5 |
| Streamline Computing |
Cluster computing | Nov 09 | 96 | - | (8) | 6.9 |
| OST | Sensors for car production lines |
Sep 04 | 85 | - | (13) | 5.3 |
| Promic | Novel antibiotics | Nov 02 | 75 | 11 | 1 | 0.3 |
| Dataflow | Accountancy software | Jul 02 | 70 | 74 | 6 | 18.4 |
| Inaplex | CRM Integration | Mar 03 | 58 | 24 | 5 | 13.3 |
| WEP Polytherics |
Drug pegylation Protein based drugs |
Nov 02 Jan 12 |
- 53 |
- 42 |
(32) 42 |
- 1.1 |
| Invro | Electronic energy | Apr 04 | 50 | 30 | 10 | 33.1 |
| Select Technology | Photocopier interfaces | Nov 04 | 47 | 35 | 15 | 3.0 |
| Concurrent Thinking |
High performance computer systems |
Mar 03 | 45 | 38 | 25 | 1.4 |
| Plasma Antennas | Directional antennas | Sep 04 | 33 | 34 | - | 1.3 |
| Archimed | Wound healing | Nov 11 | 30 | 30 | 30 | 1.1 |
| Allinea Software | Parallel software | May 09 | 15 | 112 | 90 | 2.3 |
| Arecor | Protein stabilisation | Jul 07 | 14 | 37 | - | 0.7 |
| Totals | 2,663 | 4,242 | 233 | |||
| Other Net Assets | 564 | |||||
| NET ASSETS | 4,806 |
Number of shares in issue: 6,785,233 Net Asset Value per share at 29 February 2012: 71p This table shows the current portfolio holdings. The investments in Coraltech, Datasoft Medical, IFM, Im-Pak, Novarc, Ciphergird, ReviveR & Freehand Surgical have been written off. The investments in Avidex, BioAnaLab, Commerce Decisions and MET have been sold for £1,615,595.
OT3 owns 6.5% of Glide Pharma which is developing a solid dose injector, a means of giving an injection in solid form and without the use of a needle. Glide has great potential, but has found large pharma companies unwilling to sign up until they can be confident that manufacturing at scale can be achieved. Glide is actively seeking a means of overcoming this problem, with an interim objective therefore being to secure the launch of a drug in Glide format so as to provide a successful exemplar.
OT3 invested £110,000 in Ixaris Systems Ltd in 2002 when the company consisted of just three founders with an idea for a transaction-based financial solution that would give anyone the ability to pay securely online. Today Ixaris' payment service, EntroPay, enables those who are unwilling or unable to access credit card services to spend securely online. EntroPay is a Virtual Visa card that works like other Visa debit cards, but is delivered electronically to a user's computer instead of via a plastic card. EntroPay Virtual Visa cards can be created at the time they are needed, and a new one can be created for each transaction, making EntroPay one of the most secure methods of paying anywhere online. In 2010, Ixaris launched Opn (pronounced 'open') as the first commerce-enabled solution providing open access to the Visa, MasterCard and SWIFT networks. The Opn platform allows developers, businesses and financial institutions to rapidly create payment applications. Sales have expanded from £292,000 in 2004 to just over £9m in 2011. OT3 owns 8.8% of Ixaris. OT3 also took its share of a venture loan to Ixaris, investing a further £108,000 in summer 2011. Datacash Group Plc, a similar company operating in the same space was sold in mid 2010 for £333m, valuing it at a multiple 9x historic sales. Were Ixaris to be sold at the same multiple of sales, this would result in a return to OT3 of about £6.5m. Ixaris currently employs a total of 75 staff members at its headquarters in London and offices in Malta and the US.
OT3 owns 3.8% of Insense which has developed a range of two-part active wound-healing dressings; the two parts combine at the wound surface to produce a low flux of iodine, which keeps the wound clean, and oxygen, which stimulates the natural wound-healing processes. The NHS currently purchases c £14,000 per month of these dressings. It is hoped that these sales will grow. The wound dressings are now managed within a partnership, Archimed, in which in which Insense owns 32%. Insense has also developed other two-part therapies for the treatment of various skin conditions. One of these appears to offer a more effective cure for a common foot ailment than the existing treatments
in this market. It is likely that this opportunity will be exploited either by licensing to a large company or by establishing a new company with its own specialist management.
OT3 owns 2.6% of Select Technology which after a long period of gestation is beginning to make better progress. Sales have now passed the breakeven point and are increasing. The company makes software for Ricoh MFDs (formerly photocopiers) and also markets and distributes Papercut, software which manages and controls printing costs on MFDs.
Scancell Holdings plc, in which OT3 has a shareholding of 2.8%, has been making good progress. The company's shares are listed on AIM. Scancell is a clinical stage immunotherapy company with a novel 'ImmunoBody' DNA vaccine platform for cancer and chronic infectious diseases. Its lead product (SCIB1 for melanoma) entered Phase 1 clinical trials in June 2010 and has made steady progress during in 2011. Patient recruitment for Phase 1 trial is now complete, and dose escalation to highest dose has been achieved with no serious adverse effects. A follow up vaccine for lung and other cancers (SCIB2) has been shown to produce outstanding results in animal studies. During the year, Scancell received a milestone payment of £2.85m from Cephalon Inc. This followed the sale of Scancell's antibody portfolio to Arana Therapeutics (now Cephalon/Teva) in 2006, the final milestone payment being due once an antibody from this portfolio entered Phase 1 clinical trials in USA (achieved November 2011). In addition, Scancell a further raised £1.73m (gross) in June 2011.
Note: At 29th February the bid price for Scancell's shares was 5.25p per share. At the time of writing the accounts, this price had risen to 12.25p per share.
OT3 owns 20% of Metal Nanopowders (MNL) which was founded to develop better methods of making metal nanopowders and to develop applications. It had been near-dormant for some years, but has made better progress during 2011, and has recently won a significant grant to develop a particular nanopowder for defence applications. In addition, a new company, Superhard Materials has been formed with £11,000 investment from OT3 to make samples of a discovery of one of the employees of MNL.
OT3 owns 27.6% of Telegesis which supplies Zigbee modules. ZigBee, like Bluetooth, is a communications protocol and is for transmitting low volumes of data with very low energy consumption over distances of up to 1km. Crucially each ZigBee chip can communicate with up to 64,000 other ZigBee devices, and the chips automatically form themselves into a mesh network, ideal for communicating with multiple devices in the home or, for example, controlling multiple light fittings in commercial buildings. If one node goes down another route is established automatically. While many companies are involved with ZigBee, it is believed that Telegesis is the only company in
the world which does nothing else apart from ZigBee. This has meant that Telegesis is rightly perceived as expert in this field and this has brought benefits as large companies have chosen to work with Telegesis rather than with others to develop their ZigBee applications. Sales will be nearly £2.5m in the year to March 2012, and the prospects for the year after this are looking very encouraging. Sales are divided between many applications with smart meters, solar panels and intelligent lighting being major application areas. Approximately 80% of sales are exports.
OT3 owns 14.3% of Inscentinel, which uses the exquisitely sensitive olfactory sense of bees to detect trace vapours. Sniffer dogs are widely used, can cost more than £40,000 and take 3-6 months to train. Inscentinel believes that bees, which cost 10p, and take 20 minutes to train, after which they have a Pavlovian Proboscis Extension Reflex (PER) in the presence of the odour to which they have been trained, have the same olfactory ability as dogs. Thus far, Inscentinel has survived on a succession of grants and development contracts and with some investment from OT3 and other shareholders. But its technology has not so far been used in any commercial application. However, at 28 Feb 2012, Inscentinel was in negotiations with a global company which wishes to use Inscentinel's technology in a particular application and to offer this service in many countries. First the science will need to be verified in this particular application, but if all goes well, this could be very good for Inscentinel.
During the year, WEP Ltd was acquired by Polytherics Ltd for shares in Polytherics Ltd. At the same time, OT3 made a small investment in Polytherics alongside other WEP shareholders.
Richard Vessey, age 63, Chairman
Richard joined the Board of Oxford Technology 3 Venture Capital Trust on 13 July 2006. His education is as a chemical engineer from Imperial College and MBA from Harvard, and his early career was in manufacturing companies, becoming Sales and Marketing Director of Plastic Engineers Ltd. In 1984 he left the conventional career path and founded Bell Plastics Ltd, a specialist plastics manufacturing business which was sold in 2004 to a private equity fund, of which he is currently a director, and which is building a portfolio of niche plastic companies. Richard is now Chairman of OST, an OT3 investee company and is also an active member of the UK Shareholders Association. Richard Vessey is also an investor in Telegesis, Equitalk (X-Fone), Plasma Antennas, Glide Pharma, WEP (Polytherics) and Select Technology from the OT3 portfolio.
Lucius is the founder and managing director of Oxford Technology Management Ltd (OTM), which has specialised in making and managing investments in start-up technology-based businesses since 1983. He has a degree in engineering and economics from Oxford University, an MBA from Harvard Business School and was an engineering apprentice at the Atomic Energy Research Establishment, Harwell. After forming and raising finance for his first business in 1972, he founded "Venture Capital Report" in 1978 and was its managing director for 17 years. In March 1996, he sold all his shares and became chairman so reducing his day-to-day involvement in order to concentrate more fully on OTM's investment activities. By 2005, OTM had managed or advised ten seed capital funds, including the Oxford Technology VCTs which, between them, have made some 100 investments in early stage and start-up technology companies. In 2003, he was awarded an OBE for services to business and in 2004 was awarded the Judges Award at Investors Allstars, for his contribution over many years to early stage investing. Lucius Cary is an investor in Select Technology from the OT3 portfolio. He is also a Director of Oxford Technology VCT, Oxford Technology 2 VCT and Oxford Technology 4 VCT which have some shared investments with OT3. He is a Director of Inscentinel Ltd and Superhard Materials Ltd.
The Board has always considered carefully all cases of possible conflicts of interest, as and when they arise. For example, every time one of the OTVCTs makes an investment in which another OTVCT is an investor, there is a potential conflict of interest. The general policy is that there is complete transparency and all interests in every situation are declared and known to all, so that practical and sensible decisions can be taken.
The directors present their report together with financial statements for the year ended 29 February 2012.
The company commenced business in April 2000. The company invests in start-up and early stage technology companies in general located within 60 miles of Oxford.
There was a net loss for the period after taxation amounting to £131,000 (2011: loss of £423,000). The profit and loss account comprises income of £2,000 (2012: £2,000) less unrealised loss on fair value of investments of £19,000 (2011: loss of £245,000) plus gain on disposal of investments £18,000 (2011: loss of £32,000) less management and other expenses of £132,000 (2011: £148,000).
The present membership of the board, and their beneficial interests in the ordinary shares of the company at 29 February 2012 and at 28 February 2011, are set out below:
| Name | 2012 | 2011 |
|---|---|---|
| R C Vessey | 226,050 | 226,050 |
| J L A Cary | 64,096 | 64,096 |
Except as disclosed in notes 2 & 3 and set out below, no director had, during the period or at the end of the period, a material interest in any contract which was significant in relation to the company's business. No Director or their families have sold shares during the year.
The company has complied throughout the period with the provisions in Section 1 of the Combined Code on Corporate Governance (the "Code"), except that the Board as a whole performs the functions of both the Audit Committee (Code B.2.1) and the Nomination Committee (Code A.3.3). The Directors do not have formalised service contracts with the company, whereas the recommendation is for fixed term renewable contracts.
The Board confirms that procedures to implement the Turnbull guidance were in place throughout the year ended 29 February 2012. The Board acknowledges that it is responsible for the Company's system of internal control and for reviewing its effectiveness. Such a system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board will now consist of two non-executive directors. JLA Cary represents the Investment Manager and Richard Vessey is the independent Chairman. The Board has put in place corporate governance arrangements which it believes are appropriate to a Venture Capital Trust and which will enable the company to operate within the spirit of the Code.
The Board meets regularly, at least four times a year and between these meetings maintains contact with the Investment Manager. The Investment Manager prepares a written report on the performance of the fund in advance of Board meetings and this is circulated to all members of the Board. In addition, the directors are free to seek any further information they consider necessary. All directors have access to the Company Secretary and independent professionals at the Company's expense. The Code states that the Board should have a formal schedule of matters specifically reserved to it for decision, to ensure that the direction and control of the company is firmly in its hands. This is achieved by a management agreement between the company and its Investment Manager which sets out the matters over which the Investment Manager has authority and the limits above which Board approval must be sought. All other matters are reserved for the approval of the Board. The Board ensures the independence and objectivity of the external auditors. This includes reviewing the nature
and extent of non-audit services supplied by the external auditors to the company, seeking to balance objectivity and value for money. None of the directors has a service contract with the company. The Articles of Association require that one third of the directors (or the number nearest one third) on a rotation basis will be subject to re-election procedures at subsequent Annual General Meetings.
The Board has a number of performance measures to assess the company's success in meeting its objectives. Performance, measured by the change in NAV and total return per share, is also measured against the FTSE All-Share index. This is shown in the graph on page 14 of the Directors' Remuneration Report. This index has been adopted as an informal benchmark. The review of the investment portfolio, on page 3 includes a review of the company's activities and future prospects.
Investment risk - The majority of investments are early stage unquoted companies which are VCT qualifying holdings. This inherently entails a higher level of risk and lower liquidity than investments in large quoted companies. The directors seek to reduce this risk by considered selection of new and continued monitoring of existing investee companies.
Financial risk - The company is exposed to market price risks, credit risk, liquidity risk, fair value and cash flow interest rate risks. All of the Company's income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company does not use derivative financial instruments.
Regulatory risk - The Company is required to comply with the Companies Act, the rules of the UK Listing Authority and United Kingdom Accounting Standards.
The directors are responsible for the company's system of internal control. The Board has adopted an internal operating and strategy document for the company. This includes procedures for the selection and approval of investments, the functions of the Investment Manager and exit and dividend strategies. Day to day operations are delegated under agreements with the Investment Manager who has established clearly defined policies and standards. These include procedures for the monitoring and safeguarding of the company's investments and regular reconciliation of investment holdings. This system of internal control, which includes procedures such as physical controls, segregation of duties, authorisation limits and comprehensive financial reporting to the Board, is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The Board has considered the need for an internal audit function but has decided that the size of the company does not justify it at present. However, it will keep the decision under annual review. The Board has reviewed, with its Investment Manager, the operation and effectiveness of the company's system of internal control for the financial period and the period up to the date of approval of the financial
statements. The Board has continued to prepare the financial statements in accordance with UK Financial Reporting Standards rather than International Financial Reporting Standards. This is permitted as the financial statements present the results of an individual company rather than a group.
So far as the directors are aware, there is no relevant audit information (as described in Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.
The company values the views of its shareholders and recognises their interest in the company's strategy and performance, Board membership and quality of management. The company's website provides information on all of the company's investments, as well as other information of relevance to shareholders (www.oxfordtechnology.com).
After making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. For this reason they have adopted the going concern basis in preparing the financial statements.
At 29 February 2012, the company has been notified of two investors whose interest exceeds three percent of the company's issued share capital (Richard Vessey (Chairman), 3.3%; Oxfordshire County Council Pension Fund 8.7%). The company has several investors, all individuals, who with their families have invested £100,000 or more in the shares of the company. The Directors shareholdings are listed above.
The company's policy is to pay creditors within the normal terms of the invoice, which usually means immediately.
James Cowper LLP offer themselves for reappointment in accordance with Section 489 of the Companies Act 2006.
On behalf of the Board JLA Cary 28 May 2012
Company law in the UK requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing those financial statements, the directors are required to:
The directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the entity and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for ensuring that the directors' report and other information included in the annual report is prepared in accordance with company law in the United Kingdom. They are also responsible for ensuring that the annual report includes information required by the Listing Rules of the Financial Services Authority.
The maintenance and integrity of the web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the information contained in the financial statements since they were initially presented on the web site.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions.
The Board has prepared this report in accordance with the requirements of Schedule 7A to the Companies Act 2006. An ordinary resolution for the approval of this report will be put to the members at the forthcoming Annual General Meeting. The law requires the company's auditors to audit certain of the disclosures provided. Where disclosures have been audited, they are indicated as such.
The Board consists solely of two non-executive directors. JLA Cary represents the Investment Manager and Richard Vessey is the independent chairman. Since the company is a Venture Capital Trust with no executive directors, there are certain relaxations of the Code permitted to the company under the Listing Rules of the Financial Services Authority. Accordingly, there is no separate remuneration committee and the Board performs collectively the duties of the committee. The Board's policy is that the remuneration of non-executive Directors should be sufficient to reflect the duties and responsibilities of the Directors and the amount of time committed to the company's affairs. The Articles of Association of the company state that no Director can be paid more than £50,000 without an ordinary resolution of the shareholders.
The company's investment manager is Oxford Technology Management Ltd, a company of which JLA Cary is a director and the controlling shareholder. The Investment Management fee is laid out in the prospectus dated 12 February 2002 and in the more recent Investment Memorandums and the fee payments for the years ended 29 February 2012 and 28 February 2011 are laid out in note 2 to the financial statements. As detailed in the company prospectuses dated 12 February 2002 and in the more recent Investment Memorandums, once investors have received a return of 100% of the gross sums invested by way of dividends and capital distributions, a performance incentive fee (expressed as a percentage of all distributions thereafter) will be payable as to 15 per cent of such distributions to the Investment Manager collectively and 5 per cent of such distributions to the directors collectively.
No director has a service contract with the company. At each AGM one of the directors is obliged to retire and offer themselves for re-election by shareholders. At the AGM for the current year, Lucius Cary will retire and offer himself for re-election. There is no notice period and no provision for compensation upon early termination of the appointment of any director.
The Board is responsible for the company's investment strategy and performance, although the creation, management and monitoring of the investment portfolio is delegated to the Investment Manager, as described in the prospectus dated 12 February 2002.
The graph below compares the performance of the company with the performance of the FTSE All-Share index over the period from 28 February 2002 to 29 February 2012. It shows the change over the period in the total return to ordinary shareholders (assuming all dividends are reinvested) compared to the change over the period in total shareholder return on a notional investment of the same composition as the FTSE All-Share Index.
This index was chosen as it represents a comparable broad equity market index. The net asset value per share (NAV) of the company has been selected as the most appropriate performance measure, as this best reflects progress of the investments made by the company; shareholders will ultimately realise value on disposal of these investments. All measures are rebased to 100 at the start date of the period.
The information in this part of the report has been audited by the company's auditors. The Directors' fees for the year were £10,000 (2011: £10,000):
| 2012 | 2011 | |
|---|---|---|
| £000 | £000 | |
| RC Vessey (Chairman) | 7.5 | 7.5 |
| JLA Cary | 2.5 | 2.5 |
| _ | _ | |
| 10 | 10 | |
| _ | _ |
The directors are not eligible for pension benefits, share options or other benefits.
On behalf of the Board Richard Vessey Chairman 28 May 2012
We have audited the financial statements of Oxford Technology 3 Venture Capital Trust Plc for the year ended 29 February 2012 which comprise the income statement, balance sheet, cashflow statement, accounting policies and related notes. We have also audited the information set out in the Directors' Remuneration Report that is described as having been audited. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
As explained more fully in the Statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
A description of the scope of an audit of financial statements is provided on the APB's web-site at www.frc.org.uk/apb/scope/UKP.
In our opinion the financial statements:
In our opinion:
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
Under the listing rules we are required to review:
Mr Alexander Peal (Senior Statutory Auditor) For and on behalf of James Cowper LLP Chartered Accountants and Statutory Auditors Oxford 28 May 2012
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of investments. The financial statements have been prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice 'Financial statements of investment trust companies' issued in 2009. The principal accounting policies of the company are set out below.
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 profit and loss account.
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.
During the year ended 28 February 2006 the directors revoked the Investment Company status to enable distributions of capital profits to shareholders. Consequently the accounts have been prepared to include a statutory profit and loss account and a note of historical profits and losses in accordance with schedule 4 of the Companies Act 2006 and Financial Reporting Standard 3 (FRS 3). The
directors consider that this basis of valuation of unquoted investments is consistent with the International Private Equity and Venture Capital Guidelines.
Turnover represents realised gains on the disposal of investments along with interest receivable on cash deposits. Dividends receivable on unquoted equity shares are brought into account when the company's right to receive payment is established and there is no reasonable 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 reasonable 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.
All expenses are accounted for on an accruals basis. All expenses are charged through the profit and loss account except as follows:
Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the company meets (and intends to continue for the forseeable future to meet) the conditions for approval as a Venture Capital Trust. The HMRC has approved the company as a Venture Capital Trust for the purpose of Section 247 of the Income and Corporation Taxes Act 2007. The approval was given in the financial period ended 28 February 1998 and the company has subsequently directed its affairs so as to enable it to continue to be so approved.
The calculation of earnings per share for the period is based on the profit attributable to shareholders divided by the weighted average number of shares in issue during the period.
| Year ended 29 February 2012 |
Year ended 28 February 2011 |
||
|---|---|---|---|
| Note | £'000 | £'000 | |
| Gain/(Loss) on disposal of investments held at fair value1 | 18 | (32) | |
| Unrealised (loss) on fair value of investments |
7,11 | (19) | (245) |
| Other income | 1 | 2 | 2 |
| Investment management fees | 2 | (93) | (109) |
| Other expenses | 3 | (39) ______ |
(39) ______ |
| (Loss)/profit on ordinary activities before tax | 4 | (131) | (423) |
| Taxation on (loss)/profit on ordinary activities | 5 | - _____ |
- _____ |
| (Loss)/profit on ordinary activities after tax | (131) _____ |
(423) _____ |
|
| Earnings per share (basic and diluted) | 6 | (1.9)p ======= |
(6.6)p ======= |
| 2012 | 2011 | |
|---|---|---|
| £000 | £000 | |
| (Loss) for the year | (131) | (423) |
| Unrealised loss on fair value of investments | 19 | 245 |
| Loss/(profit) on disposal of investments held at fair value | (18) | 32 |
| Profit/(loss) on disposal of investments held at historical value | (1,051) | (368) |
| Historical cost (loss)/profit before tax | (1,181) | (514) |
| Historical cost (loss)/profit after tax | (1,181) | (514) |
The accompanying accounting policies and notes form an integral part of these financial statements
| 29 February 2012 | 28 February 2011 | ||||
|---|---|---|---|---|---|
| Note | £000 | £000 | £000 | £000 | |
| Fixed assets | |||||
| Investments at fair value | 7 | 4,242 | 4,009 | ||
| Current assets | |||||
| Other debtors & prepayments Cash at bank |
8 | 10 610 |
2 700 |
||
| _____ | _____ | ||||
| 620 | 702 | ||||
| Creditors: amounts falling | 9 | ||||
| due within one year | (56) _____ |
(32) _____ |
|||
| Net current assets | 564 | 670 | |||
| Net assets | _____ 4,806 |
_____ 4,679 |
|||
| ===== | ===== | ||||
| Capital and reserves | |||||
| Called up share capital | 10 | 679 | 644 | ||
| Share premium | 11 | 718 | 495 | ||
| Profit and loss account | 11 | 1,755 | 2,928 | ||
| Unrealised capital reserve | 11 | 1,654 | 612 | ||
| Shareholders' funds | 12 | _____ 4,806 |
_____ 4,679 |
||
| Net asset value per share | ===== 71p |
===== 73p |
|||
| ===== | ===== |
These financial statements were approved by the directors on 28 May 2012.
JLA Cary Director 28 May 2012
| 2012 | 2011 | ||
|---|---|---|---|
| Note | £000 | £000 | |
| Net cash (outflow) from operating activities |
13 | (106) | (116) |
| Capital expenditure and financial investment | |||
| Purchase of investments | (242) | (166) | |
| Disposal of investments | - ______ |
197 ______ |
|
| Net cash (outflow) from capital expenditure | |||
| and financial investment | (242) | 31 | |
| Net cash outflow before financing | (348) | (85) | |
| Financing | |||
| Issue of Shares | 272 | 327 | |
| Expenses paid in connection with share issue | (14) | (16) | |
| Net cash inflow from financing | __ 258 ____ |
__ 311 ____ |
|
| Dividends Paid | - | (644) | |
| (Decrease) in cash | ______ (90) |
______ (418) |
|
| ====== | ====== |
The accompanying accounting policies and notes form an integral part of these financial statements.
| 1 | Income | 2012 £000 |
2011 £000 |
|---|---|---|---|
| Interest receivable | 2 | 2 | |
| Profit / (Loss) on disposal of investments | 18 | (32) | |
| _____ | _____ | ||
| 20 | (30) | ||
| ===== | ===== |
| 2 Investment Management Fees |
|
|---|---|
| --------------------------------- | -- |
| £000 | £000 | |
|---|---|---|
| Investment management fee (see below) | 93 | 109 |
| ____ 93 |
_____ 109 |
|
| ===== | ===== |
Related Party disclosure - JLA Cary is a director of Oxford Technology Management Ltd and of Oxford Technology 3 Venture Capital Trust Plc. OTM is the Investment Manager to the company. During the year OTM charged management fees of £93,000. There were no employees during the year except for the directors.
| 3 | Other Expenses | 2012 £000 |
2011 £000 |
|---|---|---|---|
| Directors' remuneration (see report on page 12) | 10 | 10 | |
| Auditors' remuneration: audit services | 5 | 5 | |
| Other expenses | 24 | 24 | |
| _____ 39 |
_____ 39 |
||
| ===== | ===== | ||
| 4 Operating Profit | 2012 £000 |
2011 £000 |
|
| The operating profit is stated after charging: | |||
| Auditors' remuneration - audit services Directors'remuneration |
5 10 |
5 10 |
|
| _____ 15 ===== |
_____ 15 ===== |
No liability to UK corporation tax arose during the year.
| ===== | ===== | |
|---|---|---|
| UK Corporation tax | - | - |
| £000 | £000 |
The tax charge for the year is different to the small profits rate of corporation taxation in the UK of 20.0% (2011: 21.0%). The differences are explained below:
| (Loss) on ordinary activities before taxation | £000 (131) |
£000 (423) |
|---|---|---|
| ===== | ===== | |
| At standard rate of taxation | (26) | (89) |
| Costs not chargeable to corporation tax | 26 | 89 |
| Current tax credit for year | _____ _ |
_____ _ |
| ===== | ===== |
Unrelieved management expenses of £1,141,954 (2011: £1,011,316) remain available for offset against future taxable profits.
The calculation of earnings per share (basic and diluted) is based on the net loss for the financial period of £131,000 (2011: loss of £423,000) divided by the weighted average number of shares of 6,729,759, (2011: 6,405,819) in issue during the year. There are no potentially dilutive capital instruments in issue and therefore no diluted return per share figures are relevant. The basic and diluted earnings per share are therefore identical.
| 2012 | 2011 | |
|---|---|---|
| Cost | £000 | £000 |
| As at 1 March 2011 | 3,472 | 3,871 |
| Purchases at cost | 285 | 169 |
| Redeemed / disposed during the year | (1,094) | (568) |
| As at 29 February 2012 | _____ 2,663 |
_____ 3,472 |
| Revaluation | ===== | ===== |
| As at 1 March 2011 | 537 | 446 |
| Revaluation movement | 1,042 | 91 |
| _____ | _____ | |
| 1,579 | 537 | |
| ===== | ===== | |
| Net book value | ||
| As at 1 March 2011 | 4,009 | 4,317 |
| As at 29 February 2012 | _____ 4,242 |
_____ 4,009 |
| ===== | ===== |
Details of unlisted investments in which OT3 owns more than 20% are set out below with reference to their most recent published accounts. All companies are incorporated and operate in the UK.
| Name of | Class of | Percentage of voting |
Percentage of voting rights held rights held by Capital and profit/(loss) |
Retained | |
|---|---|---|---|---|---|
| undertaking | % | shares held by company other OT Funds % |
reserves £000 |
for year £000 |
|
| Telegesis1 | Ordinary | 27.6 | 16.4 | 506 | 319 |
| Invro1 | Ordinary | 33.1 | - | (3) | (1) |
As shown above, certain of the company's unlisted investments entitle the company to more than 20% of the voting rights in the investee company. The Board does not consider that these investments fall within the definition of associated undertakings since the company does not exercise significant influence over the operating and financial policies of the investee companies. Most recent published accounts:
| 8 | Debtors | 2012 £000 |
2011 £000 |
|---|---|---|---|
| Prepayments and accrued income | 10 | 2 | |
| ===== | ===== | ||
| 9 | Creditors: amounts falling due within one year | ||
| £000 | £000 | ||
| Other creditors | 6 | 5 | |
| Investment Management Fee Accrual | 50 | 27 | |
| −−−−− 56 |
−−−−− 32 |
||
| ===== | ===== | ||
| 10 Share Capital | |||
| £000 | £000 | ||
| Authorised | |||
| 15,000,000 ordinary shares of 10p each | 1,500 | 1,500 | |
| Allotted, called up and fully paid | |||
| 6,785,233 (2011: 6,436,130) ordinary shares of 10p each | 679 | 644 | |
| ===== | ===== |
| Share Premium Account £000 |
Unrealised Capital Reserve £000 |
Profit and Loss Account £000 |
|
|---|---|---|---|
| At 1 March 2011 | 495 | 612 | 2,928 |
| (Loss)/Profit for the period | - | - | (131) |
| Unrealised (losses)/gains | - | (19) | 19 |
| Issue of share capital | 237 | - | - |
| Cost of share issue | (14) | - | - |
| Dividends | - | - | - |
| Transfer between reserves | - | 1,061 | (1,061) |
| As at 29 February 2012 | _____ 718 |
_____ 1,654 |
_____ 1,755 |
| ===== | ===== | ===== |
| 2012 | 2011 | |
|---|---|---|
| £000 | £000 | |
| Result for the period | (131) | (423) |
| Issue of share capital | 272 | 327 |
| Cost of share issue | (14) | (16) |
| Dividends paid | - | (644) |
| Net increase/(decrease) in shareholders' funds | 127 | (756) |
| Shareholders' funds at beginning of year | 4,679 | 5,435 |
| Shareholders' funds at end of year | _____ 4,806 |
_____ 4,679 |
| ===== | ===== |
| 13 Reconciliation of net revenue before taxation to net cash |
||
|---|---|---|
| outflow from operating activities | 2012 | 2011 |
| £000 | £000 | |
| Operating (loss)/profit | (131) | (423) |
| Increase/(decrease) in creditors | 24 | 25 |
| (Increase)/decrease in debtors | (8) | 5 |
| Unrealised loss/(gain) on investments | (18) | 245 |
| Realised (gain) on investments | 19 | 32 |
| Investment debtor movement | 8 | |
| Net cash (outflow) from operating activities for the year | _____ (106) |
_____ (116) |
| ===== | ===== |
Other than its investments in unquoted companies, the company has cash and a small amount of debtors and creditors through which it finances its activities. The risk faced by these instruments, such as interest rate risk or liquidity risk is considered to be minimal due to their nature. All of these are carried in the accounts at face value. There is no difference between these values and the fair values of the financial instruments.
The company had no commitments at 29 February 2012 or 28 February 2011.
The company had no contingent liabilities at 29 February 2012 or 28 February 2011.
At 29th February the bid price for Scancell's shares was 5.25p per share. At the time of writing the accounts, this price had risen to 12.25p per share. This would increase the valuation of Scancell in the portfolio by a further £310,000.
Notice is hereby given that the Annual General Meeting of Oxford Technology 3 Venture Capital Trust plc will be held at the Magdalen Centre, Oxford Science Park, Oxford OX4 4GA at 12.00 noon on Wednesday 4th July 2012 for the following purposes:
To consider and, if thought fit, pass the following Resolutions:
This authority shall expire at the Company's annual general meeting in 2013. Pursuant to s701(6) of the Act, the Company may make contracts for the purchase of Shares which would or might be executed wholly or partly after the expiry of the time limit referred to above.
This authority is in substitution for all previous authorities conferred on the Directors in accordance with section 80 of the Companies Act 1985 or section 551 of the 2006 Act.
(8) Subject to the passing of the resolution 7 and in accordance with section 570 of the 2006 Act, the Directors be generally empowered to allot equity securities (as defined in section 560 of the 2006 Act) pursuant to the authority conferred by resolution 7, as if section 561(1) of the 2006 Act did not apply to any such allotment.
Notes:
| I/We | |
|---|---|
| (BLOCK LETTERS) | |
| of |
being a member of Oxford Technology 3 Venture Capital Trust plc ("the Company") hereby appoint the Chairman of the meeting or (note 2) ........................................................... as my proxy to vote for me/us on my/our behalf at the annual general meeting of the Company to be held on Wednesday 4 July 2012 and at any adjournment thereof.
I/We direct my/our proxy to vote as follows in respect of the ordinary resolutions set out in notice of meeting (note 1):
| Resolution No. | For | Against | Withheld | |
|---|---|---|---|---|
| 1 | Approval of accounts | |||
| 2 | Re-appointment of Mr Lucius Cary as a Director | |||
| 3 | Approval of the appointment of James Cowper LLP and authorisation of Directors to fix remuneration. |
|||
| 4 | Approval of the Directors remuneration report | |||
| 5 | Approval of authority to make purchases of own shares | |||
| 6 | Company to continue as a Venture Capital Trust | |||
| 7 | Approval of Directors authority to allot shares | |||
| 8 | Approval of issues of shares on non-rights issue basis |
Date this ......................................................day of................................................., 2012
Signature..................................................................................................................................................
Notes
Please indicate how you wish your vote to be cast. If you do not indicate how you wish your proxy to use your vote on any particular matter, the proxy will exercise his discretion both as to how he votes and as to whether or not he abstains from voting. The proxy will act as he thinks fit in relation to any other business arising from the meeting (including any resolution to adjourn the meeting).
If you prefer to appoint some other person or persons as your proxy, strike out the words "the Chairman of the Meeting or ", and insert in the blank space the name or names preferred and initial the alteration. A proxy need not be a member of the Company.
The 'Vote Withheld' option is to enable you to abstain on any particular resolution. Such a vote is not a vote in law and will not be counted in the votes 'For' and 'Against' a resolution.
If the member is a corporation, this Form of Proxy must be executed either under its common seal or under the hand of an officer or attorney duly authorised in writing.
To be effective, this Form of Proxy must be completed, signed and must be lodged (together with any power of attorney or duly certified copy thereof under which this Form of Proxy is signed) with the Company's registrars, Capita Registrars plc, c/o Oxford Technology 3 Venture Capital Trust plc, Magdalen Centre, Oxford Science Park, Oxford OX4 4GA, not less than 48 hours before the time appointed for the meeting.
Lucius Cary Magdalen Centre
Richard Vessey (Chairman) Oxford Technology Management Ltd Oxford Science Park Oxford OX4 4GA
James Gordon Gordons Partnership LLP 22 Great James Street London WC1N 3ES
Capita Registrars Compliance Advisers Northern House James Cowper LLP Woodsome Park Willow Court Fenay Bridge 7 West Way Huddersfield Botley West Yorkshire HD8 0LA Oxford OX2 0JB
JP Morgan Cazenove 10 Aldermanbury London EC2V 7RF
Company Registration Number: 4351474
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