For RNS Release
30th June 2015
Oxford Technology 4 Venture Capital Trust Plc
Announcement for the year ended 28 February 2015
Headlines for the Year
- The net assets at 28 Feb 2015 were £7.63m, compared to £7.98m on 29 Feb 2014
- After the year end, Impact Applications was sold to AIM-listed Castelton Technologies.
- OT4 received £1.585m in Cash and 48m shares in Castleton valued at 2.25p at £1.09m (the share price has since increased)
- The Directors are pleased to announce an interim dividend of 10p per share, to be paid on 7 August.
- New Common Board Structure announced
- Manager's fee reduced to 1%
________________________________________________________
Financial Headlines
| Year Ended 28 February 2015 | Year Ended 28 February 2014 | ||
| Net Assets at Year End | £7.63m | £7.98m | |
| Net Asset Value per Share | 66p | 69p | |
| Cumulative Dividend | 17p | 17p | |
| NAV + Cumulative Dividend Paid from Incorporation | 83p | 86p | |
| Share Price at Year End | 36.5p | 40p | |
| Earnings Per Share (Basic & Diluted) | (3.1)p | (0.4)p | |
Chairman's Statement
I am pleased to present to shareholders the annual report for the year to 28 February 2015.
Portfolio Review
The net asset value per share on 28 February 2015 was 66p compared to 69p on 28 February 2014. Dividends paid to date are 17p. The earnings per share in the year to 28 February 2015 were a loss of (3.1)p.
In March, so after the year end, Impact Applications approached Castleton Technologies plc, which is quoted on AIM, which operates in the same sector, and which is expanding by acquisition. This led to Impact Applications being sold to Castleton on 29 May 2015. Oxford Technology 4 VCT Plc ("OT4") received £1.585m in cash and 48,446,978 shares in Castleton, which, at 2.25p were valued at £1.09m at the time. Impact had 22 customers; Castleton sells to c500, so there are significant opportunities for cross-selling. At the date of writing the Castleton's share price had risen to 2.91p, valuing OT4's shares at just over £1.4m. OT4 may also receive a small extra payment, (likely to be less than £100,000) depending of Impact's financial performance in the next few months. This transaction is referred to in the note to the accounts - Post Balance Sheet events.
Most companies within the portfolio continue to develop. Telegesis has done well with sales continuing to grow strongly. Plasma Antennas is receiving growing interest from telecommunication companies in using its antennas to improve the performance of their networks. Its antennas are now being tested by several global telecommunications companies in their networks in several different parts of the world. Others have struggled, including Historic Futures who continue to refine their business model to achieve a sustainable market position. Imagineer Systems was sold in January 2015 and OT4 has received £405,333 to date with earn-outs to follow.
On 10 April 2015, Mirriad informed us that it was unable to obtain investor consent to complete an investment it had organised. It filed a notice of intention to appoint an administrator and on 22 of May sold its assets to Broadwall Acquisitions (Now Mirriad Advertising) in exchange for which investors in were given a shareholding in Broadwall Acquisitions.
OT4's shareholding is of 49,964 shares. The company raised money at a shareprice of 30p valuing OT4's shareholding at £15k.
Further details on our investments are contained within the Investment Manager's Report.
Dividends
The ongoing strategy is to seek to crystallise value from the portfolio and distribute cash to shareholders via dividend payments. The directors are delighted to announce that an interim dividend of 10p per share is declared.
The Ex-Dividend date is 9 July 2015, the Record date 10 July and payment will be made on 7 August 2015.
Management Fees
In the light of the fully invested nature of OT4, your Directors have considered the ongoing management fees. The existing fee arrangement covered a range of responsibilities, some of which are no longer applicable, such as regularly considering and reviewing new investment opportunities.
In conjunction with further changes outlined below that optimise the board structure and improve the Company's corporate governance, the Board has renegotiated the ongoing management fees to a reduced rate of 1.0% per annum and confirmed that the overall fee cap of 3% (excluding directors' fees) covers all of the costs incurred by the VCT. Under the new arrangement, the fees previously deferred will be repaid over a three year period. This will take effect from 1 March 2015.
Performance Fees
The existing performance fee structure sees Oxford Technology Management, past and current directors sharing in 20% of the returns achieved beyond 100p taking into account dividends paid to date of 17.0p, this is a net target as at 28 February 2015 of 83.0p. As this net target is above NAV, no performance fee has yet been accrued or paid. As at 28 February 2015 the Company's total return was 83.0p per share.
As outlined elsewhere in this statement, the Board is pleased with the portfolio and optimistic about the potential for increasing shareholder value. Directors are of the view that it would, however, be inappropriate for the existing performance fee structure to remain, as it would reward performance that, in terms of annual return on investment, is actually relatively low. The Board has therefore negotiated with relevant parties and agreed that a compound annual 6% increase shall be applied retrospectively to the performance threshold from the 10 year anniversary of the VCT, namely 1 March 2015. In recognition of dividends paid, actual returns to shareholders will be subtracted from the compounding threshold in the year these are paid.
This will maintain the purpose of the performance fee as an appropriate - and achievable - incentive for Oxford Technology Management (who would receive approximately three quarters of any performance fee payable) to maximise shareholder value, yet also ensure that the performance threshold cannot be 'inflated away' over time. Note also that your company will only pay out a performance fee after cash returns to shareholders have achieved the performance threshold - many other VCTs pay out performance fees based on growth in asset values before actual cash returns have been made to shareholders.
Your directors believe that the lower level of management fees, together with a performance fee incorporating a challenging hurdle and payable only once shareholders have received back more than their original investment prior to any additional tax reliefs, makes this management arrangement market-leading and continues the principle always adopted by the VCT to keep its costs as low as possible.
Board Structure and Remuneration
Shareholders will be aware that the Company was considering the possibility of a merger with some, or all, of the other Oxford Technology VCTs.
Following discussions with shareholders the directors realised that should they decide to merge the four companies they would still need to maintain separate share pools for each VCT as some shareholders did not wish their holdings in certain specific assets to be diluted by consolidation with the other funds. The board determined that such a structure is not currently in the interest of OT4 or its shareholders.
The directors have therefore considered other methods by which OT4 can benefit from a more robust board structure. At present, your company has a board of just two directors. A similar situation applies to the other three VCTs in the Oxford Technology stable. Whilst directors from the other three VCTs provide ad hoc support, the board believes it is better to formalise this relationship.
It is therefore proposed to form a common board across each Company, each with its own chairman. To achieve this whilst retaining the independence that is required by generally accepted corporate governance (specifically AIC guidelines), the directors have resolved that the Company should be self-managed by its own subsidiary company, OT4 Managers Limited. In turn, this subsidiary will sub-contract in services from Oxford Technology Management ensuring continuity of service by the team led by Lucius Cary. This type of self-managed format has been adopted very successfully by a number of other VCTs that are keen to maintain good and cost-effective corporate governance.
To further formalise the independence of the board from the manager, three new directors have therefore been appointed to the board of OT4: Robin Goodfellow, Alex Starling and Richard Roth. Lucius Cary will not stand for re-election as a director at the AGM. Shareholders will be asked to ratify these appointments at the forthcoming AGM.
Shareholders should also note that the remuneration committee has proposed a different structure to directors' fees. Fees are still much lower than those earned by directors of many other VCTs but do represent an increase from that paid in recent years by any of the Oxford Technology funds.
Reducing Share Premium Account
In line with normal market practice, the company is planning to clear the remaining balance on its share premium account. This has been approved by shareholders in the past, but the Board wishes to clear the amount that accrued from the share issues since that date. Once the process has been completed, this will increase the reserves ultimately available for distribution to shareholders.
Shareholder Approvals
Shareholders are invited to approve the appointment of the new directors, the revised remuneration structure and the reduction in the share premium account at the AGM on 26 August 2015, and the Board encourages you to vote in favour of all the resolutions.
Results
There was a net loss for the period after taxation amounting to £352,000 (2014: loss of £46,000). The profit and loss account includes unrealised gains on fair value of investments of £118,000 (2014: £377,000), less £273,000 loss on disposal (2014: £237,000) and management and other expenses of £205,000 (2014: £200,000).
Share Buy Backs
The Company has the ability to buy back shares but the Directors do not think that is the best use of money, preferring to reserve resources to support our investees. To date this authority has never been exercised and the Directors have no current intention to do so. It is however a useful facility to have and the Company wishes to maintain this policy.
AGM
Shareholders should note that the AGM for the Company will be held on Wednesday 26th August 2015, at the Magdalen Centre, Oxford Science Park, starting at 11am and will include presentations by some of the companies in which the Oxford Technology VCTs have invested. A formal Notice of the AGM has been included at the back of 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
The company is now fully invested, with a diverse portfolio of investees. Investments like those made this year into Plasma Antennas and Diamond Hard Surfaces will continue to be made to support developing portfolio companies. However, the focus is now on realising investments at appropriate times and returning proceeds to shareholders by way of dividends. As the portfolio diminishes, attention will remain on managing the company's cost base in line with the size of the portfolio to maximise returns to shareholders.
David Livesley
Chairman
29 June 2015
Table of Investments held by Company at 28 February 2015
| Company | Description | Date of initial investment | Net cost of investment £'000 | Carrying value at 28/02/15 £'000 | Change in value for the year £'000 | % equity held by OT4 |
| Glide Technologies | Needle free injectors | Feb 2005 | 975 | 1,439 | - | 5.8 |
| Impact Applications | Mobile software for contractors | Oct 2005 | 486 | 1,029 | 294 | 49.2 |
| Telegesis | Zigbee technology | Dec 2005 | 231 | 974 | 207 | 13.3 |
| Select Technology | Photocopier Interfaces | Aug 2006 | 237 | 587 | 129 | 18.4 |
| Plasma Antennas | Solid state antennas | Mar 2005 | 448 | 577 | 100 | 24.9 |
| Arecor | Protein stabilization | Jul 2007 | 291 | 446 | - | 6.4 |
| Diamond Hard Surfaces | Diamond coatings | Jan 2005 | 640 | 385 | 112 | 49.9 |
| OxTox | Rapid drug testing | Dec 2006 | 262 | 318 | - | 4.9 |
| MirriAd | Virtual product placement | Feb 2007 | 770 | 304 | (395) | 2.4 |
| Oxis Energy | Rechargeable batteries | Nov 2005 | 305 | 152 | - | 0.3 |
| Immunobiology | Novel vaccines | Oct 2005 | 375 | 150 | - | 3.9 |
| Dynamic Extractions | Separation technology | Aug 2005 | 177 | 113 | - | 23.2 |
| Abzena Quoted on AIM | Protein based peptide drugs | Jan 2012 | 42 | 100 | 58 | 0.1 |
| Biosyntha | Microbial technology | Feb 2012 | 88 | 98 | - | 21.4 |
| Novacta | Bioengineering and antibiotics | Apr 2005 | 347 | 63 | (63) | 2.4 |
| Insense | Active wound healing dressings | Apr 2005 | 476 | 48 | (48) | 4.5 |
| Historic Futures | Traceability software | Aug 2005 | 420 | 32 | (55) | 6.2 |
| Orthogem | Bone graft material | May 2007 | 110 | 15 | 3 | 1.7 |
| Naked Objects | Business software | Mar 2006 | 200 | 11 | - | 22.2 |
| Metal Nanopowders | Production of nanopowders | Aug 2006 | 52 | 10 | - | 16.7 |
| Superhard Materials | Very hard materials | Feb 2012 | 9 | 9 | - | 1.2 |
| Totals | 6,941 | 6,860 | 342 | |||
| Other Net Assets | 771 | |||||
| NET ASSETS | 7,631 | |||||
| Shares in Issue | 11,516 | |||||
| Net Assets Per Share | 66p | |||||
| Dividends to date | 17p | |||||
| TOTAL RETURN | 83p |
Directors' Remuneration Report
Introduction
This report has been prepared by the Directors in accordance with the requirements of the Companies Act 2006. The Company's independent auditor, James Cowper Kreston, is required to give its opinion on certain information included in this report. This report includes a statement regarding the Directors' remuneration policy. Resolutions to approve the Directors' remuneration report and policy will be proposed at the Annual General Meeting on 26 August 2015.
A policy was approved at the AGM on 27 August 2014, together with the resolution regarding the directors' remuneration report for the year ended 28 February 2014 on a show of hands, which reflected overwhelming support amongst proxies submitted.
This report sets out the Company's forward looking Directors' Remuneration Policy, and the Annual Remuneration Report which describes how this policy has been applied during the year.
Directors' Terms of Appointment
The Board consists entirely of non-executive Directors who meet at least 4 times a year and on other occasions as necessary to deal with important aspects of the Company's affairs. Directors are appointed with the expectation that they will serve for at least three years, and are expected to devote the time necessary to perform their duties. All Directors retire at the first general meeting after election and thereafter every third year, with at least one director standing for election or re-election each year. Re-election will be recommended by the Board but is dependent upon shareholder vote. Directors who have been in office for more than 9 years will stand for annual re-election in line with the AIC Code. There are no service contracts in place, but Directors have a letter of appointment.
Directors' Fees
The Board acts as the Remuneration Committee and meets annually to review Directors' pay to ensure it remains appropriate given the need to attract and retain candidates of sufficient calibre and ensure they are able to devote the time necessary to lead the Company in achieving its strategy. The Board has not engaged any third party consultancy services but carefully considers the opinions of other Oxford Technology VCT fund directors.
Given the proposed introduction of a common board across the four Oxford Technology VCTs, the additional focus on effective corporate governance (as outlined in the Chairman's statement) and the greater involvement of the Directors in the day-to-day running of the VCT, the Remuneration Committee has proposed a revised fee structure. This new fee structure also takes into account the additional responsibilities and workload for the Company Chairman and responsibilities within the Audit Committee.
In proposing the revised levels to the Board, the Remuneration Committee took note of a report providing an extensive analysis of fees paid by the rest of the VCT industry, with particular focus on other VCTs managed in a similar manner to the Company, and other relevant information. They were also mindful of the low cost philosophy of the Oxford Technology VCTs and fund affordability. Fees continue to be amongst the lowest in the industry. During the process a range of stakeholders including retiring board members from several of the Oxford Technology VCTs were consulted to provide expertise and input to reach a balanced recommendation.
As the levels and structure of remuneration have been modified, the Directors consider that this once again requires shareholder approval, as Shareholders must now vote on the remuneration policy every three years, or sooner if the Company wants to make changes to it.
The Articles of Association of the company state that the aggregate of the remuneration (by way of fee) of all the Directors shall not exceed £50,000 per annum unless otherwise approved by ordinary resolution of the Company. Following the changes outlined above, the following Directors' fees will be payable by the Company with effect from 1 July 2015, the date of the proposed implementation of the Common Board:
per annum
Director Base Fee £3,500
Chairman's Supplement £2,000
Audit Committee Chairman £3,000
Audit Committee Member £1,500
David Livesley will continue to chair the Company. Richard Roth will chair the Audit Committee, with Robin Goodfellow as a member of the Committee. As the VCT will be self-managed after implementation of the new structure, the Audit Committee will be carrying out a particularly important role for the VCT and will play a greater part in the production of the annual accounts compared to recent years.
These figures compare to the previous individual fee of £7,500 per annum for each director independent of the manager and £2,500 per annum for Lucius Cary, who was a director of the Company up until 26 August 2014.
The directors may at their discretion pay additional sums in respect of specific tasks carried out by individual Directors on behalf of the Company.
Fees are currently paid annually. The fees are not specifically related to the Directors' performance, either individually or collectively. No expenses are paid to the Directors. There are no share option schemes or pension schemes in place but Directors are entitled to a share of the carried interest as detailed below.
The performance incentive fee is described in the Chairman's Statement. As mentioned there, current directors are entitled to benefit from any payment made, subject to a formula driven by relative lengths of service. The performance fee becomes payable if a certain cash return hurdle to shareholders is exceeded - the excess is then subject to a 20% carry that is distributed to Oxford Technology Management, past directors and current directors; the remaining 80% is returned to shareholders. At 28 February 2015 the cash return to shareholders would have had to have been in excess of 100.0p for a performance fee to have been payable. If a performance fee is not triggered (as it was not in this financial year) the hurdle, net of dividends paid, increments by a compound annual growth rate of 6%, applied quarterly.
Should the new director appointments as outlined in the Chairman's Statement go ahead as planned and any fee be payable at the end of the year to 29 February 2016, Alex Starling, Richard Roth and Robin Goodfellow would each receive 0.11% of any amount over the hurdle, whilst David Livesley would be entitled to 1.16%. No performance fee is payable for the year ending 28 February 2016 unless original shareholders have received back at least £1.05 in cash for each £1 (gross) invested; no forecast is implied that the hurdle will be reached in the year to 29 February 2016.
Relative Spend on Directors' Fees
The Company has no employees, so no consultation with employees or comparison measurements with employee remuneration are appropriate.
Loss of Office
In the event of anyone ceasing to be a Director, for any reason, no loss of office payments will be made. There are no contractual arrangements entitling any Director to any such payment.
Directors' Emoluments
As outlined in the Chairman's statement, it is proposed to appoint Alex Starling, Richard Roth and Robin Goodfellow to the Board of OT4 on 1 July 2015. Lucius Cary is not expecting to stand for re-election at this year's AGM. The Directors consider it helpful to shareholders to therefore set out the full expected cost for Director's emoluments for the year to 29/2/16. Given the partial year timing for the creation of the Common Board, they have also set out the expected remuneration for each director for the year ended 28/2/17, all other things being equal.
| Directors' Fees | Year End 28/02/17 (unaudited) | Year End 29/02/16 (unaudited) | Year End 28/02/15 (audited) | Year End 28/02/14 (audited) |
| Alex Starling | £3,500 | £2,333 | - | - |
| Richard Roth | £6,500 | £4,333 | - | - |
| Lucius Cary | - | £1,250 | £2,500 | £2,500 |
| Robin Goodfellow | £5,000 | £3,333 | - | - |
| David Livesley | £5,500 | £6,167 | £7,500 | £7,500 |
| Total | £20,500 | £17,416 | £10,000 | £10,000 |
Prior to his appointment as an OT4 director Richard Roth received a one off payment of £2,000 as compensation for executive work undertaken in relation to setting up of the common board structure.
Income Statement
Year to 28 February 2015 Year to 28 February 2014
| Notes | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | |
| (Loss) on disposal of investments | - | (273) | (273) | - | (237) | (237) | |
| Unrealised gain on fair value | - | 118 | 118 | - | 377 | 377 | |
| Other income | 2 | 8 | - | 8 | 14 | - | 14 |
| Investment management fees | 3 | - | (159) | (159) | - | (161) | (161) |
| Other expenses | 4 | (46) | - | (46) | (39) | - | (39) |
| Return on ordinary activities before tax | (38) | (314) | (352) | (25) | (21) | (46) | |
| Taxation on return on ordinary activities | 5 | - | - | - | - | - | - |
| Return on ordinary activities after tax | (38) | (314) | (352) | (25) | (21) | (46) | |
| Earnings per share - basic and diluted | 6 | (0.4)p | (2.7)p | (3.1)p | (0.2)p | (0.2)p | (0.4)p |
The 'Total' column of this statement is the profit and loss account of the Company, the supplementary revenue and capital columns have been prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
Reconciliation of Movement in Shareholders' Funds
| Year Ended 28 February 2015 £'000 | Year Ended 28 February 2014 £'000 | |
| Shareholders' funds at start of year | 7,983 | 8,029 |
| Return on ordinary activities after tax | (352) | (46) |
| Dividends paid | - | - |
| Shareholders' funds at end of year | 7,631 | 7,983 |
Balance Sheet
Year to 28 February 2015 Year to 28 February 2014
| £'000 | £'000 | £'000 | £'000 | |||||
| Fixed Asset Investments at fair value (Note 7) | 6,860 | 7,096 | ||||||
| Current Assets | ||||||||
| Debtors | 158 | 468 | ||||||
| Cash at Bank | 709 | 472 | ||||||
| Total | 867 | 940 | ||||||
| Creditors: amounts falling due in less than 1 year | (43) | (53) | ||||||
| Net Current Assets | 824 | 887 | ||||||
| Creditors: amounts falling due after more than 1 year | (53) | - | ||||||
| Net Assets | 7,631 | 7,983 | ||||||
| Called up equity share capital | 1,152 | 1,152 | ||||||
| Share Premium | 813 | 813 | ||||||
| Unrealised Capital Reserve | 255 | 496 | ||||||
| Profit and Loss Account Reserve | 5,411 | 5,522 | ||||||
| Total Equity Shareholders' Funds | 7,631 | 7,983 | ||||||
| Net Asset Value Per Share | 66p | 69p | ||||||
The accompanying notes are an integral part of the financial statements.
The statements were approved by the Directors and authorised for issue on 29 June 2015 and are signed on their behalf by:
David Livesley
Director
Cash Flow Statement
| Year Ended 28 February 2015 £'000 | Year Ended 28 February 2014 £'000 | |
| Net cash outflow from operating activities | (12) | (137) |
| Financial investment | ||
| Purchase of investments | (209) | (105) |
| Disposal of investments | 458 | 308 |
| Dividends paid | - | - |
| Increase in cash at bank | 237 | 66 |
Reconciliation of Net Cash Flow
to Movement in Net Funds
| Year Ended 28 February 2015 £'000 | Year Ended 28 February 2014 £'000 | |
| Increase/decrease in cash at bank | 237 | 66 |
| Opening net funds | 472 | 406 |
| Net funds at 28 February 2015 | 709 | 472 |
Reconciliation of Operating Profit/(Loss) before Taxation to Cash Flow from Operating Activities
| Year Ended 28 February 2015 £'000 | Year Ended 28 February 2014 £'000 | |
| Return on ordinary activities before tax | (352) | (46) |
| Loss on disposal of investments | 273 | 237 |
| (Gain) on valuation of investments | (118) | (377) |
| Decrease in debtors | 309 | 207 |
| Increase in creditors | 43 | 36 |
| Movement in investment debtors and creditors | (167) | (194) |
| Outflow from operating activities | (12) | (137) |
Notes to the Financial Statements
1. Principal Accounting Policies
These schedules and notes have been extracted from the Financial Statements prepared to Year End 28 February 2015.
Basis of Accounting
The financial statements have been prepared under the historical cost convention except for the measurement at fair value of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice (SORP) 'Financial Statements of Investment Trust Companies' (revised 2009).
Investments
The company invests in financial assets with a view to profiting from their total return through income and capital growth. These investments are managed and their performance is evaluated on a fair value basis. Accordingly as permitted by Financial Reporting Standard 26 (FRS 26) the investments are designated as fair value through profit and loss. Unrealised gains or losses on valuation are recognised through the income statement.
Valuation of Investments
Quoted investments are stated at the bid price. Unquoted investments are stated at fair value, where fair value is estimated after following the guidelines laid down by the International Private Equity and Venture Capital Guidelines. The Directors' policy is to initially state investments at cost and then to review the valuation every three months. The Directors may then apply an appropriate methodology which, as far as possible, draws on external, objective market data such as where fair value is indicated by:
· a material arms length transaction by a third party in the shares of the company, with discounting for more junior asset classes, and reviewed for impairment; or
· a suitable revenue or earnings multiple where the company is well established and generating maintainable profits. The multiple will be based on comparable listed companies but may be discounted to reflect a lack of marketability; or
· the net assets of the business.
Where such objective data is not available the Directors may choose to maintain the value of the company as previously stated or to discount this where indicated by underperformance against plan.
The Directors consider that this basis of valuation of unquoted investments is consistent with the International Private Equity and Venture Capital Guidelines.
The preparation of the financial statements requires the Board to make judgments and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Estimates and assumptions mainly relate to the fair valuation of the fixed asset investments particularly unquoted investments. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. The estimates and the assumptions are under continuous review with particular attention paid to the carrying value of the investments.
Deferred Tax
Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the company was approved as a Venture Capital Trust during the current year. HMRC has approved the company as a Venture Capital Trust for the purpose of Section 259 of the Income Tax Act 2007. The approval was given in the financial period ended 28 February 2004 and the company has subsequently directed its affairs so as to enable it to continue to be approved.
2. Income
Income represents realised gains on the disposal of investments along with dividends and interest receivable on cash deposits and loans. Dividends receivable on unquoted equity shares are brought into account when the company's right to receive payment is established and there is no significant doubt that payment will be received. Dividends receivable on quoted equity shares are brought into account on the ex-dividend date.
Fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities and shares, provided there is no significant doubt that payment will be received in due course. Interest receivable from cash and short term deposits are accrued to the end of the year.
| Year Ended 28 February 2015 £'000 | Year Ended 28 February 2014 £'000 | |
| Interest receivable | 1 | 1 |
| Loan note interest receivable | 7 | 13 |
| Total | 8 | 14 |
3. Investment Management Fees
Expenses are charged wholly to revenue with the exception of the investment management (including any performance fee) which has been charged 100% to the capital return.
| Year Ended 28 February 2015 £'000 | Year Ended 28 February 2014 £'000 | |
| Investment management fee | 159 | 161 |
| Total | 159 | 161 |
In the year to 28 February 2015 (and previous financial years), the manager received a fee of 2% of the net asset value as at the previous year end. As indicated in the Chairman's statement, the Board have agreed with Oxford Technology Management that as from 1 March 2015, this will be reduced to 1.0% of net asset value as at the previous year end.
The Manager had agreed to defer 25% of the management fee to which he was contractually entitled (ie 0.5% of net assets) until such a time when the finances of the Company made this payment more affordable. As part of the revised agreement with effect from 1 March 2015 (where the ongoing management fee with OTM has been halved), the Board have agreed to pay over the deferred balance over a 36 month period.
In all previous years to 28 February 2015, a performance incentive has been payable to the Investment Manager once the original shareholders have received back £1.00 in cash for each £1 (gross) invested. Each extra £1 distributed goes 80p to the shareholder and 20p to the beneficiaries of the performance incentive fee, of which Oxford Technology Management receives 15p. As reported in the Chairman's statement, the hurdle of £1.00 will now been increased, by compounding that portion that remains to be paid to shareholders by 6% per annum. with effect from 1 March 2015.
Expenses are, and remain, capped at 3%, including the management fee but excluding Directors' fees and any performance fee.
4. Other Expenses
All expenses are accounted for on an accruals basis. All expenses are charged through the profit and loss account except as follows:
· those expenses which are incidental to the acquisition of an investment are included within the cost of the investment
· expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment.
| Year Ended 28 February 2015 £'000 | Year Ended 28 February 2014 £'000 | |
| Directors' remuneration | 10 | 10 |
| Auditors' remuneration | 7 | 5 |
| Legal and professional expenses | 10 | 6 |
| Accounting and admin expenses | 4 | 1 |
| Other expenses | 15 | 17 |
| Total | 46 | 39 |
5. Tax on Ordinary Activities
Corporation tax payable is applied to profits chargeable to corporation tax, if any, at the current rate. The corporation tax charge for the period was £nil (2014: nil)
| Year Ended 28 February 2015 | Year Ended 28 February 2014 | |
| Return on ordinary activities before tax | (352) | (46) |
| Current tax at standard rate of taxation | (74) | (9) |
| Unrecognised tax losses | 74 | 9 |
| Total current tax charge | - | - |
Unrelieved management expenses of £1,760,814 (2014: £1,562,940) 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 £352,000 (2014: loss of £46,000) attributable to shareholders divided by the weighted average number of shares 11,516,946 (2014: 11,516,946) in issue during the period.
There are no potentially dilutive capital instruments in issue and, therefore, no diluted returns per share figures are relevant. The basic and diluted earnings per share are therefore identical.
7. Investments
Fixed asset investments are valued at fair value. Unquoted investments are carried at fair value as determined by the Directors in accordance with current venture capital industry guidelines. Purchases and sales of investments are recognised in the financial statements at the date of the transaction.
Where financial instruments are measured in the balance sheet at fair value, FRS 29 requires disclosure of the fair value measurements by level based on the following fair value investment hierarchy.
Level 1: quoted prices in active markets for identical assets and liabilities. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held is the current bid price. These instruments are included in level 1 and comprise AIM quoted investments classified as held at fair value through profit or loss.
Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable data where it is available and rely as little as possible on entity-specific estimates.
Level 3: the fair value of financial instruments that are not traded in an active market (for example investments in unquoted companies) is determined by using valuation techniques such as earnings or sales multiples. Level 3 valuations include assumptions based on non-observable market data, such as discounts applied either to reflect fair value of financial assets held at the price of recent investment, or, in the case of unquoted investments to adjust earnings or sales multiples.
| AIM quoted investments Level 1 £'000 | Unquoted investments Level 3 £'000 | Total investments £'000 | |
| Valuation and net book amount: | |||
| Book cost as at 28 February 2014 | - | 6,956 | 6,956 |
| Cumulative revaluation | - | 140 | 140 |
| Valuation at 28 February 2014 | - | 7,096 | 7,096 |
| Movement in the year: | |||
| Purchases at cost | - | 209 | 209 |
| Redeemed/Disposed | - | (204) | (204) |
| IPO during year at 28/2 valuation | 44 | (44) | - |
| Revaluation in year | 56 | (297) | (241) |
| Valuation at 28 February 2015 | 100 | 6,760 | 6,860 |
| Book cost at 28 February 2015 | 42 | 6,919 | 6,961 |
| Revaluation to 28 February 2015 | 58 | (159) | (101) |
| Valuation at 28 February 2015 | 100 | 6,760 | 6,860 |
8. Events after the Balance Sheet Date
Discussions commenced after the financial year end have resulted in the sale of Impact Applications to Castleton Technologies Plc in a £5m deal as per the announcement made to the London Stock Exchange on 1 June 2015. OT4's investment, which had a residual cost of £486k yielded an immediate cash payment of £1.6m to the fund and shares in AIM listed Castleton Technologies Plc worth an additional £1.1m at the time of the transaction which may be sold after 6 months and subject to an orderly market.
An additional investment of £200k was made in May to Biosyntha which has now changed its name to ZuvaSyntha. BioSyntha started off as a company providing biotechnology services for large companies. It is continuing to carry out some contract work but is now focussing on the technical development. One of the contracts is for a company called Acidophil. Acidophil has a holding in Zuvachem which was running a contract with Michelin to develop a biosynthetic route to isoprene (a component of rubber). Zuvachem realised that Biosyntha's technology was likely to be a better solution for Michelin and Biosyntha are interested in Zuvachem's commercial ties to Michelin and their BD links in the states, in particular to Dupont so the companies have decided to merge and will now be known as ZuvaSyntha Ltd.
OT4 sold 26,466 shares in Abzena Plc in May 2014 at a price of 81.83p. The company retains 91,484 shares.
The assets of MirriAd have been acquired in a business transfer agreement by Broadwall Acquisitions as the recent fundraising round, which was assumed would proceed when the valuations for 28 February 2015 were determined was not successful. This will lead to a reduction in the value of OT4's holding from £304k to £15k.
9. Notes
The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 28 February 2015 in terms of section 434 of the Companies Act 2006 but is derived from those accounts.
Statutory accounts for the year ended 28 February 2015 will be delivered to Companies House following the Company's Annual General Meeting. The auditors have reported on those accounts: their report was unqualified and did not contain a statement under Section 489 of the Companies Act 2006.
The Annual Report for the year ended 28 February 2015 will shortly be made available on the Company's website www.oxfordtechnology.com. Shareholders will be notified of this by email or post or sent a hard copy in the post in accordance with their instructions.