Oxford Technology VCT plc : Annual Financial Report

26 mei 2016

26 May 2016
Oxford Technology VCT plc ("the Company" or "OT1")
Annual Report and Accounts for the year ended 29 February 2016

The Directors are pleased to announce the audited results of the Company for the year ended 29 February 2016 and a copy of the Annual Report and Accounts ("Accounts") will be made available to Shareholders shortly.  Set out below are extracts of the audited Accounts. References to page numbers below are to those Accounts.

The AGM will be held at The Magdalen Centre, Oxford Science Park, Oxford OX4 4GA on Friday 8 July 2016, at 11am.

A copy of the Annual Report and Accounts will be available from the registered office of the Company at The Magdalen Centre, Oxford Science Park, Oxford OX4 4GA, as well as on the Company's website: www.oxfordtechnology.com

Financial Headlines

	Year Ended   29 February 2016	Year Ended 28 February 2015
Net Assets at Year End	£3.33m	£3.53m
Net Asset Value per Share	61.2p	65.0p
Cumulative Dividend	52.7p	52.7p
NAV + Cumulative Dividend Paid from Incorporation	113.9p	117.7p
Proposed Final Dividend	1.3p	-
Share Price at Year End	40.5p	53.0p
Earnings Per Share (Basic & Diluted)	(3.8)p	0.0p

Chairman's Statement

I am pleased to present my Annual Report to Shareholders.

Overview

While there was a modest reduction in our net assets over the course of the financial year, I am delighted to report on further progress within our relatively mature portfolio of investee companies.  Two of our portfolio companies paid dividends this year, representing income of just under 5% of the total equity value of the portfolio, and the Board of OT1 is recommending a final dividend of 1.3p per ordinary share.  Subject to shareholder approval, the dividend will be paid on 20 July 2016 to ordinary shareholders on the register on 1 July 2016. 

Portfolio Review

The net asset value (NAV) per share on 29 February 2016 was 61.2p compared to 65.0p on 28 February 2015.  Dividends paid to date are now 52.7p per ordinary share, giving a total return to date of 113.9p based on the NAV on 29 February 2016.  The loss per share in the year to 29 February 2016 was 3.8p.

Following a period of sustained and profitable growth at photocopier software company Select Technology, it is now the largest holding in the Company's portfolio.  In February 2016 Select Technology paid out its first dividend following the cessation of its printer manufacturing activities (a strategic withdrawal from a difficult market that took place around the time of the recent economic downturn).  Select Technology is now solely an international master distributor of its own and third party software.  The management team at Select Technology is busy implementing a growth strategy with a view to further establishing itself as a key player in its markets.

Scancell Plc (Scancell), listed on the AIM market of the London Stock Exchange, is the Company's second largest holding. Scancell continues to make progress with the development of novel immunotherapies for the treatment of cancer.  There is evidence - albeit from a small sample of patients - that Scancell has an attractive combination of technologies in this newly developing field, but as ever the commercial, scientific and funding risks remain high. 

Progress at Scancell in the 12 months to 29 February 2016 was constrained by a lack of funds.  Scancell appointed a new chairman, John Chiplin, in January 2016.  John has considerable experience in the sector and we are pleased to see him at the helm.  Following the year end, Scancell announced a placing and open offer which was successfully completed in early April 2016 - £6.2 million was raised. Scancell now has a much improved balance sheet which will enable it to continue to push ahead with its commercial activities.

The bid price of Scancell's shares used for the calculation of the Company's net asset value on 29 February 2016 was 17.5p, a substantial reduction from 30.5p on 28 February 2015.  In fact, during the course of the year the share price dipped down to 12p in December 2015. The April 2016 open offer and placing was executed at 17p, and the share price has remained stable around that level since then.

Together with the Company's cash balance, Select Technology and Scancell make up just under 90% of OT1's portfolio.  The 'best of the rest' includes Getmapping, which continues to make headway in international markets, and BioCote, which has seen quite rapid (if volatile) growth in the reporting period and joined Select Technology in paying a dividend.

Further details on our investments can be found in the Investment Portfolio Review.

We continue to assess the opportunity for divestments so as to crystallise shareholder value as and when appropriate.  It should be noted that the cash income derived from our portfolio in the year exceeded the Company's costs for the year - overall, the Company's portfolio provides a blend of growth potential and cash generation.  All the main portfolio companies have the potential for a valuation uplift in the near to medium term, therefore the Directors currently do not envisage exiting these companies in the short term.

Dividends

The ongoing strategy is to seek to crystallise value from the portfolio and distribute cash to shareholders via dividend payments.  Following dividends from Select Technology and Biocote, the Directors are recommending a final dividend of 1.3p per ordinary share for the year ended 29 February 2016.

Management and Performance Fees

Shareholders will recall the changes announced during the year at the time of the announcement of the 2015 results. Management fees were reduced to 1% per annum with effect from the start of this financial year, with an annual cost cap of 3% (excluding directors' fees) to cover all of the running costs incurred by the VCT.  In addition, the threshold at which a performance fee would become payable is now subject to a 6% per annum escalation from the 10 ^th anniversary of the formation of the VCT.   On 29 February 2016 this threshold was raised to 175.6p.  No payment has been made to date under this scheme, nor will be until cash returns to shareholders exceed this threshold.

Your Directors continue to believe that this lower level of management fees, together with a performance fee incorporating a challenging hurdle and payable only 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 VCT Management

Shareholders will also be aware of the changes to the Board and Management arrangements that were implemented during the Summer, implementing a Common Board across the four Oxford Technology VCTs commensurate with the companies becoming 'self-managed'.  

Lucius Cary and his team continue to be involved with the portfolio as OT1 Managers Ltd (the Company's Investment Manager) sub-contracts services from Oxford Technology Management.  The new Common Board structure has worked well since implementation, providing the following corporate governance improvements:

• 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;
   
• 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 time whilst leaving options open to maximise shareholder value should other corporate actions become attractive.

As part of implementation of the Common Board, I was delighted to welcome Robin Goodfellow and David Livesley as Directors of the Company following their appointment on 3 July 2015.

VCT Regulation Changes

Shareholders may be aware of some significant changes to the VCT rules that have been introduced during the year.  These changes have been introduced by the UK Government, but were directed by the EU to make VCTs conform to "State Aid" rules.

The rules introduce new restrictions on the type of investments which can be made by VCTs, specifically prohibiting VCT funds from being used to finance management buy-outs or for the acquisition of existing businesses.  The rules also impose a maximum lifetime amount a company can receive from VCTs, as well as imposing a maximum age for companies which receive VCT funding.

The new restrictions, which apply to non-qualifying holdings as well as VCT qualifying holdings, took effect for investments made on or after 18 November 2015.  The potential penalty for breach of these regulations is withdrawal of VCT status. 

The new legislation is designed to target more VCT money towards the sorts of companies that OT1 has always invested in, and is not expected to have a significant impact on your Company.  However the changes have impacted on HMRC response times.  The Directors will remain alert to the additional requirements of these latest rules with any further investments OT1 may make.  We are studying the recently issued HMRC guidelines.

Change of Registrars

As part of our ongoing focus on costs, we appointed Neville Registrars in place of Capita as our Registrars.  Their details can be found on page 51.  We would also remind you that Annual Reports, notices of shareholder meetings and other documents that are required to be sent to Shareholders are also published on our website at www.oxfordtechnology.com/vct1 , as well as any other announcements made by the Company.

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.  At the AGM, Shareholders will be asked to confirm their ongoing approval for the Company to be able to buy back its own shares.

AGM

Shareholders should note that the AGM for the Company will be held on Friday 8 July 2016 at the Magdalen Centre, Oxford Science Park, starting at 11am and will include presentations by Oxford Technology Management and 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 and continued cash generation.  We continue to work to maximise value for shareholders and will, as per our stated strategy, continue to seek to crystallise this value and distribute to shareholders via dividend payments when valuations and liquidity allow. 

Alex Starling
Chairman
25 May 2016

Investment Portfolio Review

OT1 was formed in 1997 and invested in a total of 21 companies, all start-up or early stage technology companies.  Some of these companies failed with the loss of the investment.  Some have succeeded and have been sold.  Dividends paid to shareholders to date are 52.7p per share.  The table on page 13 shows the companies remaining in the portfolio.

The ultimate outcome for investors will depend on how the remaining investments perform.  In particular, Scancell and Select Technology have the potential to deliver significant returns. 

In summary, Scancell has a vaccine for Melanoma (skin cancer) which is in clinical trials.  Almost four years ago, the vaccine was given to 16 patients with stage 4 melanoma, meaning they had a life expectancy of only a few months.  All 16 patients with resected Stage 3/4 melanoma (in other words the adjuvant melanoma setting) are still alive a median of 43 months from starting the trial and only 5 have had a recurrence of the disease. 
  
Select Technology has been making excellent progress in recent years, consistently growing its sales and profits.  Select paid a maiden dividend of £500,000, of which OT1's share was nearly £150,000 in February 2016.

Getmapping has made solid progress, having come close to failing completely when Ordnance Survey (OS) terminated the reseller agreement 12 years ago.  But Getmapping has survived and had sales of almost £6m in the year to December 2015.  To diversify and become less dependent on the UK where life can be difficult with a market dominated by OS who receive a government subsidy of over £75m per year, Getmapping has increased its operation in Africa.  However, increasing corruption in Africa (much reported in the press) creates its own problems.  Nevertheless, Getmapping has survived and made good progress, but it faces some challenges ahead.

After a difficult period, BioCote has made good progress in recent years.  Its antimicrobial surfaces based on silver are being increasingly widely used throughout the world. The treatment can be applied to almost any type of surface from metals and floors to carpets and curtains.  BioCote's sales increased from £1m to £1.6m in the most recent financial year and BioCote paid OT1 a dividend of £6,600 in February 2016.

New Investments in the year

There were no new investments during the year.

Disposals during the year

No new disposals were made during the year.  A payment of £7,457 was received as the third and final tranche for the disposal of Dataflow. 

Valuation Methodology

Quoted and unquoted investments are valued in accordance with current industry guidelines that are compliant with International Private Equity and Venture Capital Valuation Guidelines and current financial reporting standards.

VCT Compliance

Compliance with the main VCT regulations as at 29 February 2016 and for the year then ended is summarised as follows:

Type of Investment By HMRC Valuation Rules	Actual	Target
VCT Qualifying Investments	78.0%	Minimum obligation of: 70.0%
Non-Qualifying Investments	22.0%	Maximum allowed: 30.0%
Total	100.0%	100.0%

At least 10% of each investment in a qualifying company is held in 'eligible shares' - Complied.

No more than 15% of the income from shares and securities is retained - Complied.

No investment constitutes more than 15% of the Company's portfolio (by value at time of investment) - Complied.

No investment made by the VCT has caused the company to receive more than £5m of State Aid investment in the year - Complied as no new investments made.

Table of Investments held by Company at 29 February 2016

         
                                                                                                          

Company	Description	Date of initial investment	Net cost of investment £'000	Carrying value at 29/02/16 £'000	Change in value for the year £'000	% equity held by OT1
Select Technology	Photocopier Interfaces	Sep 1999	488	1,536	578	30.0
Scancell Quoted on AIM	Antibody based cancer therapeutics	Aug 1999	344	1,205	(895)	3.1
Getmapping	Aerial photography	Mar 1999	518	224	12	3.9
BioCote	Bactericidal powder coating	Dec 1997	85	106	40	6.6
DHA	Radiotherapy products	Sep 1999	150	10	-	26.9
IMPT	Industrial ceramic coatings	Mar 2000	150	-	-	4.2
Totals			1,735	3,081	(265)
Other Net Assets				246
NET ASSETS				3,327

Number of shares in issue:  5,431,656
Net Asset Value per share at 29 February 2016: 61.2p
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, Nexus, OST, Rapier, Sirius and Synaptica have been written off.   The investments in Valid, Dataflow, MET and Equitalk have been sold.

Directors' Report

The Directors present their report together with financial statements for the year ended 29 February 2016.

This report has been prepared by the Directors in accordance with the requirements of s415 of the Companies Act 2006.  The Company's independent auditor is required by law to report on whether the information given in the Directors' Report is consistent with the financial statements. 

Principal Activity

The Company commenced business in March 1997.  The Company invests in start-up and early stage technology companies in general located within 60 miles of Oxford.  The Company has maintained its approved status as a Venture Capital Trust by HMRC.

Directors

The Directors of the Company are required to notify their interests under Disclosure and Transparency Rule 3.12R.  The present membership of the board and their beneficial interests in the ordinary shares of the company at 29 February 2016 and at 28 February 2015 are set out below:

Name                                                                                     2016                                      2015
A Starling                                                                              2,512                                       2,512
R Goodfellow*                                                                 90,932                                        N/A
D Livesley**                                                                          Nil                                           N/A
R Roth                                                                                10,000                                   10,000

* At 3 July 2015, the date of Robin Goodfellow's appointment he held 22,000 shares in OT1.
** Appointed 3 July 2015

Under the Company's Articles of Association one third of the Directors are required to retire by rotation each year.  Richard Roth and Alex Starling will be nominated for re-appointment at the forthcoming AGM.  The Board believes that both non-executive Directors continue to provide a valuable contribution to the Company and remain committed to their roles.  The Board recommends that Shareholders support the resolutions to re-elect Richard Roth and Alex Starling at the forthcoming AGM. 

The Board is cognisant of shareholders' preference for Directors not to sit on the boards of too many larger companies ("overboarding").  Shareholders will be aware that in July 2015, the Company, along with the other VCTs that were managed by Oxford Technology Management, appointed directors such that the four VCTs each had a Common Board.  In addition, Richard Roth has subsequently also become a Director of Hygea VCT plc, a VCT investing in the Med Tech sector which is also self-managed and has a number of investments in common with the Oxford Technology VCTs.  Whilst great care is taken to safeguard the interests of the shareholders of each separate company, there is an element of overlap in the workload of each Director across the four OT funds due to the way the VCTs are managed.  The Directors note that the workload related to the four OT funds is less than it would be for four totally separate and larger funds, and are satisfied that Richard Roth has the time to focus on the requirements of each OT fund.

Investment Management Fees

OT1 Managers Ltd, the Company's wholly owned subsidiary, has an agreement to provide investment management services to the Company for a fee of 1% of net assets per annum.  Alex Starling and Robin Goodfellow, together with Lucius Cary are Directors of OT1 Managers Ltd.

Directors' and Officers' Insurance

The Company has maintained insurance cover on behalf of the Directors, indemnifying them against certain liabilities which may be incurred by them in relation to their duties as Directors of the Company.

Ongoing Review

The Board has reviewed and continues to review all aspects of internal governance to mitigate the risk of breaches of VCT rules or company law.   

Whistleblowing

The Board has been informed that the Investment Manager has arrangements in place in accordance with the UK Corporate Governance Code's recommendations by which staff of Oxford Technology Management or the Secretary of the Company may, in confidence, raise concerns within their respective organisations about possible improprieties in matters of financial reporting or other matters. 

Bribery Act 2010

The Company is committed to carrying out business fairly, honestly and openly.  The Investment Manager has established policies and procedures to prevent bribery within its organisation.  The Company has adopted a zero tolerance approach to bribery and will not tolerate bribery under any circumstance in any transaction the Company is involved in. The Company has instructed the Investment Manager to adopt the same approach with investee companies.

Relations with Shareholders

The Company values the views of its shareholders and recognises their interest in the Company.   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/vct1 ).

Shareholders have the opportunity to meet the Board at the Annual General Meeting.  In addition to the formal business of the AGM the Board is available to answer any questions a shareholder may have.

The Board is also happy to respond to any written queries made by shareholders during the course of the year and can be contacted at the Company's registered office:  The Magdalen Centre, Oxford Science Park, Oxford OX4 4GA.

Going Concern

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.

Substantial Shareholders

At 29 February 2016, the Company has been notified by Neville Registrars of three investors whose interest exceeds three percent of the Company's issued share capital (Richard Vessey, 4.3%; Vidacos Nominees Ltd, 4.2%; and Redmayne Nominees Ltd 3.7%).  On 18 April 2016, Redmayne Nominees Ltd advised that their holding had increased to 4.2%.  The Directors' shareholdings are listed above.

Auditors

James Cowper Kreston offer themselves for reappointment in accordance with Section 489 of the Companies Act 2006.

On behalf of the Board
Alex Starling
Chairman
25 May 2016

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 will be proposed at the Annual General Meeting on 8 July 2016.

The Remuneration Policy was approved at the AGM on 26 August 2015, together with the resolution regarding the Directors' Remuneration Report for the year ended 28 February 2015, 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 did consult with the previous directors, Michael O'Regan and Richard Vessey of the other Oxford Technology VCT funds when the current levels were determined before the last AGM.
               
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 £50,000 per annum unless otherwise approved by ordinary resolution of the Company. Based on the Company sharing a Common Board with the other Oxford Technology VCT funds the following Directors' fees are payable by the Company;

                                                                per annum
Director Base Fee                           £3,500
Chairman's Supplement               £2,000
Audit Committee Chairman       £3,000
Audit Committee Member          £1,500

Alex Starling chairs the Company. Richard Roth chairs the Audit Committee, with Robin Goodfellow as a member of the Committee.  As the VCT is self-managed, the Audit Committee carries out a particularly important role for the VCT and has played a greater part in the production of the annual accounts compared to recent years. 

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. 

Alex Starling and Robin Goodfellow receive no remuneration in respect of their directorships of OT1 Managers Ltd, the Company's Investment Manager.

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 threshold 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 29 February 2016 no performance fee was due.

Should any performance fee be payable at the end of the year to 28 February 2017, Alex Starling, Robin Goodfellow and Richard Roth would each receive 0.16% of any amount over the threshold and David Livesley 0.71%.  No performance fee will be payable for the year ending 28 February 2017 unless original shareholders have received back at least 183p in cash for each 100p (gross) invested.

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

Directors' Fees	Year End 28/02/17 (unaudited)	Year End 29/02/16 (audited)	Year End 28/02/15 (audited)
Alex Starling	£5,500	£6,167	£4,375
Richard Roth	£6,500	£8,833	£4,375
John Jackson	-	-	£3,750
Lucius Cary	-	-	£1,041
Robin Goodfellow	£5,000	£3,333	-
David Livesley	£3,500	£2,333	-
Total	£20,500	£20,666	£13,541

Income Statement
                                                                       

		Year Ended 29 February 2016			Year Ended 28 February 2015
	Note Ref.	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Loss)/Gain on disposal of  fixed asset investments		-	-	-	-	-	-
Unrealised (loss)/gain on valuation of fixed asset investments		-	(265)	(265)	-	104	104
Other income	2	154	-	154	-	-	-
Investment management fees	3	(9)	(26)	(35)	-	(53)	(53)
Other expenses	4	(60)	-	(60)	(52)	-	(52)
Return on ordinary activities before tax		85	(291)	(206)	(52)	51	(1)
Taxation on return on ordinary activities	5	-	-	-	-	-	-
Return on ordinary activities after tax		85	(291)	(206)	(52)	51	(1)
Return on ordinary activities after tax attributable to equity shareholders		85	(291)	(206)	(52)	51	(1)
Earnings per share - basic and diluted	6	1.5p	(5.3)p	(3.8)p	(0.9)p	0.9p	0.0p

There was no other Comprehensive Income recognised during the year.

The 'Total' column of the income statement and statement of comprehensive income is the profit and loss account of the Company, the supplementary revenue and capital return 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.

The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds.

Statement of Changes in Equity

	Share Capital	Share  Premium	Unrealised Capital Reserve	Profit & Loss Reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 1 March 2014	543	176	2,940	(125)	3,534
Revenue return on ordinary activities after tax	-	-	-	(52)	(52)
Expenses charged to capital				(53)	(53)
Current period gains on fair value of investments	-	-	104	-	104
Prior years' unrealised gains/losses now realised	-	-	60	(60)	-
Balance as at 28 February 2015	543	176	3,104	(290)	3,533
					-
Revenue return on ordinary activities after tax	-	-	-	85	85
Expenses charged to capital				(26)	(26)
Current period losses on fair value of investments	-	-	(265)	-	(265)
Reserves transfer (note 11)	-	-	(1,493)	1,493	-
Balance as at 29 February 2016	543	176	1,346	1,262	3,327

The accompanying notes are an integral part of the financial statements. 

Balance Sheet

		Year Ended 29 February 2016		Year Ended 28 February 2015
	Note Ref.	£'000	£'000	£'000	£'000
Fixed Asset Investments At Fair Value	7		3,081		3,353
Current Assets
Debtors	8	2		2
Cash At Bank		253		186
Creditors: Amounts Falling Due Within 1 Year	9	(9)		(8)
Net Current Assets			246		180
Net Assets			3,327		3,533
Called Up Equity Share Capital	10		543		543
Share Premium			176		176
Unrealised Capital Reserve	11		1,346		3,104
Profit and Loss Account Reserve	11		1,262		(290)
Total Equity Shareholders' Funds	11		3,327		3,533
Net Asset Value Per Share			61.2p			65.0p

The accompanying notes are an integral part of the financial statements.

The statements were approved by the Directors and authorised for issue on 25 May 2016 and are signed on their behalf by:

Alex Starling
Chairman

Statement of Cash Flows

	Year Ended 29 February 2016 £'000	Year Ended 28 February 2015 £'000
Cash flows from operating activities
Return on ordinary activities before tax	(206)	(1)
Adjustments for:
Gain on disposal of investments	-	-
Loss/(gain) on valuation of investments	265	(139)
(Increase)/decrease in debtors	-	110
Increase/(decrease) in creditors	1	(3)
Inflow/(Outflow) from operating activities	60	(33)
Cash flows from investing activities
Purchase of investments	-	-
Disposal of investments	7	57
Dividends paid	-	-
Increase in cash at bank	67	24
Opening cash and cash equivalents	186	162
Cash and cash equivalents at year end	253	186

The accompanying notes are an integral part of the financial statements.

Notes to the Financial Statements

This is the first year in which the financial statements have been prepared under Financial Reporting Standard 102 - 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland' ('FRS 102').  The main changes are primarily presentational and related to the fixed asset investments' fair value hierarchy, and the primary statements and associated reconciliations. The accounting policies have not materially changed from last year.

A review of any required changes to comparative figures has taken place and it has been deemed that no such restatements are necessary.

1. Principal Accounting Policies

Basis of Preparation
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 ("GAAP"), including FRS 102 and with the Companies Act 2006 and the Statement of Recommended Practice (SORP) 'Financial Statements of Investment Trust Companies and Venture Capital Trusts (revised 2014)' issued by the AIC.

The principal accounting policies have remained materially unchanged from those set out in the Company's 2015 Annual Report and financial statements. There have been no changes to the measurement of the assets and liabilities as a result of the transition to FRS 102.  A summary of the principal accounting policies is set out below.

FRS 102 sections 11 and 12 have been adopted with regard to the Company's financial instruments. The Company held all fixed asset investments at fair value through profit or loss. Accordingly, all interest income, fee income, expenses and gains and losses on investments are attributable to assets held at fair value through profit or loss.

The most important policies affecting the Company's financial position are those related to investment valuation and require the application of subjective and complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. These are discussed in more detail below.

Going Concern
After reviewing the Company's forecasts and expectations, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its financial statements.

Key Judgements and Estimates
The preparation of the financial statements requires the Board to make judgements and estimates regarding the application of policies and affecting the 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.

Investments are regularly reviewed to ensure that the fair values are appropriately stated. Unquoted investments are valued in accordance with current IPEVC valuation guidelines, although this does rely on subjective estimates such as appropriate sector earnings multiples, forecast results of investee companies, asset values of investee companies and liquidity or marketability of the investments held.

Although the Directors believe that the assumptions concerning the business environment and estimate of future cash flows are appropriate, changes in estimates and assumptions could result in changes in the stated values. This could lead to additional changes in fair value in the future.

Functional and Presentational Currency
The financial statements are presented in Sterling (£). The functional currency is also Sterling (£).

Cash and Cash Equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and also include bank overdrafts.

Fixed Asset Investments
The Company's principal financial assets are its investments and the policies in relation to those assets are set out below. 

Purchases and sales of investments are recognised in the financial statements at the date of the transaction (trade date).

These investments will be managed and their performance evaluated on a fair value basis and information about them is provided internally on that basis to the Board.  Accordingly, as permitted by FRS 102, the investments are measured as being fair value through profit or loss on the basis that they qualify as a group of assets managed, and whose performance is evaluated, on a fair value basis in accordance with a documented investment strategy.  The Company's investments are measured at subsequent reporting dates at fair value. 

In the case of investments quoted on a recognised stock exchange, fair value is established by reference to the closing bid price on the relevant date or the last traded price, depending upon convention of the exchange on which the investment is quoted. In the case of AIM quoted investments this is the closing bid price.

In the case of unquoted investments, fair value is established by using measures of value such as the price of recent transactions, earnings multiple, revenue multiple, discounted cash flows and net assets.  These are consistent with the International Private Equity and Venture Capital (IPEVC) guidelines which can be found on their website at www.privateequityvaluation.com .

Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the unrealised capital reserve.

In the preparation of the valuations of assets the Directors are required to make judgements and estimates that are reasonable and incorporate their knowledge of the performance of the investee companies.

Fair Value Hierarchy
Paragraph 34.22 of FRS 102 regarding financial instruments that are measured in the balance sheet at fair value requires disclosure of fair value measurements dependent on whether the stock is quoted and the level of the accuracy in the ability to determine its fair value. The fair value measurement hierarchy is as follows:

For Quoted Investments:
Level a: quoted prices in active markets for an identical asset. 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 bid price at the Balance Sheet date.

Level b: where quoted prices are not available (or where a stock is normally quoted on a recognised stock exchange that no quoted price is available), the price of a recent transaction for an identical asset, providing there has been no significant change in economic circumstances or a significant lapse in time since the transaction took place. The Company holds no such investments in the current or prior year.

For investments not quoted in an active market:
Level c: 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 (eg the price of recent transactions, earnings multiple, discounted cash flows and/or net assets) where it is available and rely as little as possible on entity specific estimates.  If all significant inputs required to fair value an instrument are observable, the instrument is included in level c (i). If one or more of the significant inputs is not based on observable market data, the instrument is included in level c (ii).

There have been no transfers between these classifications in the year (2015: none). The change in fair value for the current and previous year is recognised in the income statement.

Income
Investment income includes interest earned on bank balances and from unquoted loan note securities, and dividends.  Fixed returns on debt are recognised on a time apportionment basis so as to reflect the effective yield, provided it is probable that payment will be received in due course.  Dividend income from investments is recognised when the shareholders' rights to receive payment have been established, normally the ex dividend date.

Expenses
All expenses are accounted for on an accruals basis.  Expenses are charged wholly to revenue with the exception of the investment management fee which has been charged 75% to capital and 25% to revenue.  (In 2015, the investment management fees were all charged to capital.)  Any applicable performance fee will be charged 100% to capital.

Revenue and capital
The revenue column of the Income Statement includes all income and revenue expenses of the Company.  The capital column includes gains and losses on disposal and holding gains and losses on investments.  Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the appropriate capital reserve on the basis of whether they are realised or unrealised at the balance sheet date.

Taxation
Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past reporting periods using the current tax rate. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the "marginal" basis as recommended in the SORP.

Deferred tax is recognised on an undiscounted basis in respect of all timing differences that have originated but not reversed at the balance sheet date, except as otherwise indicated.

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. 

Financial instruments
The Company's principal financial assets are its investments and the policies in relation to those assets are set out above.  Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.

An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument.

The Company does not have any externally imposed capital requirements.

Reserves
Called up equity share capital - represents the nominal value of shares that have been issued.

Share premium account - includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.

Unrealised capital reserve arises when the Company revalues the investments still held during the period and any gains or losses arising are credited/charged to the unrealised capital reserve.  When an investment is sold, any balance held on the unrealised capital reserve is transferred to the Profit and Loss Reserve as a movement in reserves.

The Profit and Loss Reserve represents the aggregate of accumulated realised profits, less losses and dividends.

Dividends Payable
Dividends payable are recognised as distributions in the financial statements when the Company's liability to make payment has been established.  This liability is established for interim dividends when they are declared by the Board, and for final dividends when they are approved by the Shareholders.

2. Income

	Year Ended 29 February 2016 £'000	Year Ended 28 February 2015 £'000
Dividends received	154	-
Total	154	-

3.  Investment Management Fees

Expenses are charged wholly to revenue with the exception of the investment management fee which has been charged 75% to capital in line with industry practice.  In 2015, these fees were allocated all to capital.

	Year Ended 29 February 2016 £'000	Year Ended 28 February 2015 £'000
Investment management fee	35	53
Total	35	53

In the year to 29 February 2016 the manager received a fee of 1% of the net asset value as at the previous year end.  (2015: 1.5%).  Oxford Technology Management is also entitled to certain monitoring fees from investee companies and the board monitors the amounts.

A performance fee is payable to the Investment Manager once original shareholders have received a specified threshold in cash for each 100p (gross) invested.  As reported in last year's accounts, the original threshold of 125p 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, resulting in the remaining required threshold rising to 122.9p at 29 February 2016, corresponding to a total shareholder return of 175.6p after taking into account the 52.7p already paid out (52.7p + 122.9p = 175.6p).  After this amount has been distributed to shareholders, each extra 100p 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 become due or been paid to date. Any applicable performance fee will be charged 100% to capital.

Expenses are 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 income statement 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 29 February 2016 £'000	Year Ended 28 February 2015 £'000
Directors' remuneration	21	14
Auditors' remuneration	5	6
Legal and professional expenses	14	10
Accounting and administration services	6	6
Other expenses	14	16
Total	60	52

5. Tax on Ordinary Activities

Corporation tax payable at 20% (2015: 21%) is applied to profits chargeable to corporation tax, if any.  The corporation tax charge for the period was £nil (2015: £nil). 

	Year Ended 29 February 2016 £'000	Year Ended 28 February 2015 £'000
Return on ordinary activities before tax	(206)	(1)
Current tax at standard rate of taxation	(41)	-
Unrecognised tax losses	41	-
Total current tax charge	-	-

Unrelieved management expenses of £1,218,727 (2015: £1,123,276) 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 £206,000 (2015: loss of £1,000) 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

	AIM quoted investments Level a £'000	Unquoted investments Level c(ii) £'000	Total investments £'000
Valuation and net book amount:
Book cost as at 28 February 2015	344	1,399	1,743
Cumulative revaluation	1,755	(145)	1,610
Valuation at 28 February 2015	2,099	1,254	3,353
Movement in the year:
Purchases at cost	-	-	-
Redeemed/Disposed	-	(7)	(7)
Revaluation in year	(895)	630	(265)
Valuation at 29 February 2016	1,205	1,876	3,081
Book cost at 29 February 2016	344	1,391	1,735
Cumulative revaluation to 29 February 2016	861	485	1,346
Valuation at 29 February 2016	1,205	1,876	3,081

Subsidiary Company
The Company also holds 100% of the issued share capital of OT1 Managers Ltd at a cost of £1.

Results of the subsidiary undertaking for the year ended 29 February 2016 are as follows:

	Country of Registration	Nature of Business	Turnover	Retained profit/loss	Net Assets
OT1 Managers Ltd	England and Wales	Investment Manager	£23,533	£0	£1

Consolidated group financial statements have not been prepared as the subsidiary undertaking is not considered to be material for the purpose of giving a true and fair view.  The Financial Statements therefore present only the results of Oxford Technology VCT plc, which the Directors also consider is the most useful presentation for Shareholders.

8.  Debtors

	29 February 2016 £'000	28 February 2015 £'000
Prepayments, accrued income & other debtors	2	2
Total	2	2

9. Creditors

	29 February 2016 £'000	28 February 2015 £'000
Other creditors and accruals	9	8
Total	9	8

10. Share Capital

	29 February 2016 £'000	28 February 2015 £'000
Authorised:
10,000,000 ordinary shares of 10p each	1,000	1,000
500,000 redeemable preference shares of  10p each	50	50
Total Authorised	1,050	1,050
Allotted, called up and fully paid:
5,431,656 (2015: 5,431,656) ordinary shares of 10p each	543	543

11.   Reserves

When the Company revalues its investments during the period, any gains or losses arising are credited/charged to the Income Statement.  Changes in fair value of investments are then transferred to the unrealised capital reserve.  When an investment is sold any balance held on the unrealised capital reserve is transferred to the Profit and Loss Account Reserve as a movement in reserves.

The transfer between the unrealised capital reserve and the profit and loss reserve is the result of the correction of historic misclassifications between the two reserves.  The historic misclassifications are immaterial as they had no impact on reported returns or net assets and had no bearing on any distributions.

Distributable reserves are £1,262,000 as at 29 February 2016.

Reconciliation of Movement in Shareholders' Funds

	29 February 2016 £'000	28 February 2015 £'000
Shareholders' funds at start of year	3,533	3,534
Return on ordinary activities after tax	(206)	(1)
Shareholders' funds at end of year	3,327	3,533

12.  Financial Instruments and Risk Management

The Company's financial instruments comprise equity and loan note investments, cash balances and debtors and creditors.  The Company holds financial assets in accordance with its investment policy of investing mainly in a portfolio of VCT - qualifying quoted and unquoted securities whilst holding a proportion of its assets in cash or near cash investments in order to provide a reserve of liquidity.  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 fair value.

The Company's strategy for managing investment risk is determined with regard to the Company's investment objective.  The management of market risk is part of the investment management process and is a central feature of venture capital investment.  The Company's portfolio is managed with regard to the possible effects of adverse price movements and with the objective of maximising overall returns to shareholders.   Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies quoted on a recognised stock exchange, though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes.  The overall disposition of the Company's assets is regularly monitored by the Board.

13. Capital Commitments

The company had no commitments at 29 February 2016 or 28 February 2015.

14.  Related Party Transactions

OT1 Managers Ltd, a wholly owned subsidiary, provides investment management services to the Company with effect from 1 July 2015 for a fee of 1% of net assets per annum.  During the year, £23,533 was paid in respect of these fees.  No amounts were outstanding at the year end.

15.  Events after the Balance Sheet Date

On 31 March 2016, after the financial year end, an agreement was reached under which Imaging Equipment Holdings Ltd has bought OT1's shareholding in DHA for £9,715. 

The Directors have declared a final revenue dividend of 1.3p which, subject to shareholder approval at the AGM, will be paid to ordinary shareholders on 20 July 2016.

Company Number: 3276063
Note to the announcement :
The financial information set out in this announcement does not constitute statutory accounts as defined in the Companies Act 2006 ("the Act").  The balance sheet as at 29 February 2016, income statement and cash flow statement for the period then ended have been extracted from the Company's 2016 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under the section 495 of the Act.
The Annual Report and Accounts for the year ended 29 February 2016 will be filed with the Registrar of Companies.
Copies of the documents will be submitted to the National Storage Mechanism and are available for inspection at: http://www.mornningstar.co.uk/uk/NNSM

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