Oxford Technology 4 VCT plc : Annual Financial Report

10 May 2017
Oxford Technology 4 VCT plc ("the Company" or "OT4")
Annual Report and Accounts for the year ended 28 February 2017

The Directors are pleased to announce the audited results of the Company for the year ended 28 February 2017 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 Wednesday 5 July 2017, 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   28 February 2017	Year Ended   29 February 2016
Net Assets at Year End	£5.98m	£7.69m
Net Asset Value per Share   Dividend per Share paid in year	51.9p   -	66.8p   20.0p
Cumulative Dividend per Share	37.0p	37.0p
NAV + Cumulative Dividend Paid per Share from Incorporation	88.9p	103.8p
Share Price at Year End	40.0p	52.0p
Earnings Per Share (Basic & Diluted)	(14.9)p	20.6p

Chairman's Statement

I am pleased to present my annual report for the year to 28 February 2017 to fellow shareholders.

Overview

Whilst last year, I was pleased to be able to report significant realisations from the portfolio, this year has been a year of portfolio growth, with several portfolio companies raising additional capital during the year, with your company supporting most of them. Whilst most fundraisings were successful, confirming the company valuation, not all were as successful as might have been hoped, and as a result some significant reductions in valuation have been recorded.

Follow on investments were made into five portfolio companies:  Arecor (£200k), Immbio (£98k), Orthogem (£100k), Plasma Antennas (£202k) and Zuvasyntha (£30k).  Glide also raised money during the year but on unattractive terms. Whilst your company only holds two AIM stocks, both showed significant falls in share price during the year. Largely because of Glide and AIM movements, net asset value per share fell by 14.9p during the year.

Portfolio Review

The net asset value per share on 28 February 2017 was 51.9p compared to 66.8p on 29 February 2016.  No dividend was paid during the year.

The Company's portfolio still contains 18 holdings, at different stages of development.  The directors continue to monitor all companies, looking for the optimum time to realise your investment.

Your company continues to invest in support of its portfolio as investee companies develop.

£200k was invested in Arecor to support its transition from a research-led company to a product-led company including an initiative with the US Juvenile Diabetes Research Foundation for the delivery of ultra-concentrated rapid acting insulin. In February 2017, Arecor was awarded a £1m grant from Innovate UK towards clinical trials.

£98k was invested into ImmBio to support the completion of their First-in-Human study of its novel vaccine, PnuBioVax(TM), against the bacterial pathogen Streptococcus pneumoniae.  PnuBioVax was found to be safe and well tolerated, and capable of producing antibody responses against key S. pneumoniae antigens broadly conserved across strains.  The company is now in detailed discussions with larger organisations regarding commercialisation.

A further £100k was invested in Orthogem to enable it to register its new product TriPore Putty.  The synthetic bone market has moved significantly towards putties, and the commercial launch of their new product is expected to have a significant impact on sales.

Plasma Antennas received a further investment of £200k, with an additional £2k being used to exercise warrants.  Plasma continues in discussion with several large players particularly around 4G and 5G telecommunications.

£30k was invested into ZuvaSyntha who continue to progress towards commercialisation of their products with potential customers identified.

Select Technology remains profitable and cash generative, paying another dividend in January, and further dividends are expected in future.  The company has continued to grow, though profits have been slightly impacted as Select Technology transitions its business model to ensure long term growth.  However, the lower reported profits have caused a reduction in our valuation (by £96K).

Glide Pharmaceuticals was anticipating an AIM flotation, but needed to raise pre-IPO funding.  Despite considerable interest, the eventual offer that the company accepted was at an extremely high discount to previous rounds, and has a significant preference ahead of ordinary shareholders.  Combined with existing preferences from earlier funding rounds, this has resulted in a significant write down in valuation. This is highly disappointing for the Oxford VCTs as the initial investors in the company.   OT4 chose not to invest as the advantageous terms were not available to OT4.

The share price of Castleton Technology plc fell from 79.0p on 29 February 2016 to 56.8p on 28 February 2017.  The share price of Abzena fell from 49.5p to 36.8p over the same period.  Whilst disappointing, your board continues to believe both shares have potential for increased value and remain sensible holds as part of managing the company's cash reserves.

Further details on the other major investments are contained within the Investment Manager's Report, and on our website.

We continue to seek opportune moments to maximise value from our portfolio, but we do not currently foresee any further major liquidity events in the near future.

Continued Improvements to Cost Effectiveness and VCT Market Changes.

Following the reduction of fees announced last year, your Board continues to look at methods of reducing running costs as well as improving liquidity for shareholders who wish to realise their holdings. Your VCT does not have shareholders sheltering Capital Gains, so has options available which might not be possible for older VCTs.

Shareholders may be aware of some significant changes to the VCT market in recent years.  Current fund raisings into VCTs are at a record high, as changes to pension tax reliefs are driving investors to look for alternative tax efficient investments.  Combined with changes to VCT legislation designed to target more VCT money towards the types of companies that OT4 has always invested in may present an opportunity for your VCT to exploit.

Several options are being explored, and your Board is hoping to bring forward proposals later in the year which will increase options for shareholders.

In the interim the Board would like to have the flexibility to buy back shares and is therefore proposing a buyback resolution at the AGM. This will be proposed as an Ordinary Resolution in accordance with the Companies Act 2006 (Amendment of Part 18) Regulations 2013.

Audit Tender

New legislation has been introduced in the UK on audit firm rotation, resulting from the new European Audit Regulation Directive, making it mandatory for listed companies to undergo a tender process for the audit of their company at least every ten years. An audit firm can, however, be appointed for up to twenty years provided a public tender process has been carried out after ten years. The Company has therefore recently conducted an audit tender process. The Board, on the recommendation of the Audit Committee, has decided to recommend the re-appointment of James Cowper Kreston as the Company's external auditor.

For further information on the audit tender, please see the Audit Committee section of the Corporate Governance Statement on page 34 of this Annual Report.

AGM

Shareholders should note that the AGM for the Company will be held on Wednesday 5 July 2017 at the Magdalen Centre, Oxford Science Park, starting at 11am and will include presentations by Oxford Technology Management and some of the companies that the Oxford Technology VCTs have invested in.

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

The year under review was dominated by two major political events, the UK's vote to leave the European Union and the election of Donald Trump to the office of US President. In the case of the EU referendum, the leave result triggered a significant fall in the value of sterling, and it has so far remained weak. This in turn led to the increase in valuation of UK larger companies, which have a bias towards overseas earnings.

The more immediate impact on our own UK smaller investees has been to improve those with overseas revenues in sterling terms while increasing the costs for those with foreign activities or imports. These impacts are not yet material. The longer term UK/EU trading issues will take time to emerge but clearly one impact is that our investee company sterling valuations now look more attractive to overseas buyers.
Post referendum the new Theresa May government has retained the VCT model although we anticipate it will continue to be kept under review to ensure that it delivers value to the taxpayer. The Oxford Technology VCTs have operated and continue to operate very much in the spirit of the VCT legislation by investing in and subsequently supporting early stage technology companies. Unfortunately the current VCT rules sometimes limit the amount of follow on investment that we are able to make.

Whilst this year has contained some disappointing news, the Board's outlook has not changed from a year ago. The portfolio remains diversified, with investees at different stages of development.  Your Board monitors each investee, with clear views as to the value milestones which will allow investments to be realised.  We continue to work to maximise value for shareholders and will, as per our stated strategy, seek to crystallise this value and distribute to shareholders via dividend payments when valuations and liquidity allow. 

David Livesley
Chairman
10 May 2017

Investment Portfolio Review

OT4 was formed in 2004 and has invested in 35 companies which were 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.  The table on page 14 and 15 shows the companies remaining in the portfolio.  A more detailed analysis is given of the major investments on the following pages.  Several still have the potential to deliver significant returns.

OT4 received shares in AIM-listed Castleton Technology as part of the proceeds of sale when Castleton purchased Impact Applications in 2015. Castleton is a provider of software, services and IT infrastructure to the social, public and commercial housing sector.  During the year Castleton posted its first profits and had several major contract wins including first contracts in Australia.  The effective price of acquisition of these shares for OT4 was 45p.   As at 28 February 2017, the bid price for the shares was 56.5p.   

Select Technology specialises in software for photocopiers - now known as MFDs - Multi-Function Devices.  Over the last decade Select has built up a global network of distributors and dealers through which it sells both products which it has developed itself and products which have been produced by others.  These products now include PaperCut, Kpax, Foldr and Drivve Image. Select has made steady financial progress.  Sales have increased from £210k in the year to July 2010 to £5.2m in the year to July 2016.  Select is profitable and cash generative and is likely to be a position to pay regular dividends in future.  It is a modern company in the sense that it has employees all over the world, and usually only one person in the office in Basingstoke: everyone works remotely.

Arecor is making encouraging progress.  In particular it is developing its own products for the better treatment of diabetes.  In February 2017, Arecor won a grant of just over £1m to help with this programme.  Arecor has signed a £45m headline license deal regarding insulin glargine with India's largest privately held pharmaceutical company, Cadila.  Details of the deal have not been disclosed.

Plasma Antennas has developed a range of next generation smart selectable antenna technologies and has a prototype of a true plasma antenna, which it is hoped may be at the centre of tomorrow's communications systems.  Plasma Antennas is currently in discussions with three large electronics companies.  It is hoped that a partnership deal can be concluded with one or more of them.

£98,000 was invested in March 2016 into ImmBio to help support the commercialisation of the Pneumonia vaccine which had a successful phase 1 clinical trial in spring 2016.  Discussions with potential licensees are progressing satisfactorily, but of course nothing will be certain until deals are actually signed.

Dynamic Extractions was formed as a spin-out from Brunel University in 2005.  The objective of the company was to commercialise a technology developed at Brunel University for high performance counter current chromatography.  Initially the business was based on the trading estate in Slough, and designed and sold HPCCC instruments which were manufactured by subcontract.  The company and its business model have been transformed in the last two years.  The HPCC instruments have been redesigned from scratch and the first of the much improved instruments, manufactured by a subcontractor in Wales which has added a mezzanine floor to its factory specifically for the purpose, emerged in late 2016.  Also, although the sale of HPCCC instruments remains part of the business (these are now in use all over the world) more of the company's effort will be devoted to using its own technology to produce valuable compounds for sale.

OT4 was the first investor in Diamond Hard Surfaces (DHS) when the company was formed and owns just under 50%.   It has taken a long time, but it is good to report that DHS is now making regular sales to a growing number of companies and many of them overseas, and that the company made a small profit for the first time in the year to December 2016.  There are numerous applications in many industries for the DHS coating, and new applications and new customers are being added all the time, many of whom have tried other coatings first. The other remarkable property of the DHS coating is that it is an almost perfect electrical insulator, but has three times the thermal conductivity of copper.  This means the coating is finding increasing applications in microchips and electrical circuits to dissipate heat.

Oxis Energy is developing a Lithium Sulphur rechargeable battery with a significantly higher specific energy (energy storage per unit weight) than the currently available Lithium Ion batteries. OT2 was the first investor in Oxis Energy (then known as Intellikraft) in January 2000. OT4 invested in November 2005. In October 2016 Oxis Energy announced that it had successfully demonstrated that its battery cells now store 400Wh/Kg.  This battery is now planned to be tested in electric vehicles.

Despite having a successful clinical trial in summer 2016, in December Glide raised capital on terms which were very unfavourable to the early shareholders, resulting in a significant reduction in the valuation of OT4's shareholding.

New Investments in the year

There were five follow on investments during the year of £100,000 into Orthogem, £30,000 into ZuvaSyntha, £200,000 into Arecor, £202,000 into Plasma Antennas and a further £98,000 into ImmBio.  All new investments have complied with both EU State Aid rules and HMRC VCT rules.

Disposals during the year

OT4's holding in Naked Objects was sold for £10,000. The remaining payments due from Pharma Engineering were received with OT4 getting £17,000. Further payments were received from Imagineer Systems totalling £19,000.

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 28 February 2017 and for the year then ended is summarised as follows:

Type of Investment By HMRC Valuation Rules	Actual	Target
VCT Qualifying Investments	91%	Minimum obligation of: 70.0%
Non-Qualifying Investments	9%	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. 

Table of Investments held by Company at 28 February 2017

Number of shares in issue:  11,516,946
Net Asset Value per share at 28 February 2017: 51.9p
Dividends paid to date: 37.0p

The table shows the current portfolio holdings.  The investments in Bluewater Bio, Cutting the Wires, Dynamic Discovery, EKB, Ingenious, Inspiration Matters, Kinomi, MirriAd and Water Innovate have been written off.   The investments in Dexela, Imagineer Systems, Impact Applications, Incentec, Mecira, OxTox, Pharma Engineering, Telegesis and Naked Objects have been sold.   Some shares in Abzena and Castleton have also been sold.

Directors' Report

The Directors present their report together with financial statements for the year ended 28 February 2017.
The Directors consider that the Annual Report and Financial Statements, taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

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 2004.  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 and previous membership of the Board and their beneficial interests in the ordinary shares of the company at 28 February 2017 and at 29 February 2016 are set out below:

Name	2017	2016
D Livesley	3,499	3,499
R Goodfellow	20,000	20,000
R Roth	44,310	44,310
A Starling	Nil	Nil

Under the Company's Articles of Association one third of the Directors are required to retire by rotation each year.  Richard Roth and David Livesley 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 David Livesley 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

OT4 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.  David Livesley and Richard Roth, together with Lucius Cary are Directors in OT4 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/vct4).

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 28 February 2017, the Company has been notified by Neville Registrars of two investors whose interest exceeds three percent of the Company's issued share capital (Harewood Nominees Ltd 8.9% (representing the beneficial interest of Oxfordshire County Council Pension Fund); and Hargreaves Lansdown (Nominees) Ltd, 3.4%).  

Auditors

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

On behalf of the Board
David Livesley
Chairman
10 May 2017

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 5 July 2017.

The Directors' Remuneration Policy was approved by shareholders at the AGM on 26 August 2015. The Directors' Remuneration Report for the year ended 29 February 2016 was approved by shareholders at the AGM on 8 July 2016 on a unanimous show of hands and 86% of proxies voted in favour.

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 Chairmen, Michael O'Regan of Oxford Technology 2 VCT and Richard Vessey of Oxford Technology 3 VCT when the current levels were determined in 2015.

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

David Livesley 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 earlier 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. 

David Livesley and Richard Roth receive no remuneration in respect of their directorships of OT4 Managers Ltd, the Company's Investment Manager.

The performance fee is detailed in note 3. 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 28 February 2017 no performance fee was accrued for.

Should any performance fee be payable at the end of the year to 28 February 2018, Alex Starling, Robin Goodfellow, and Richard Roth would each receive 0.19% of any amount over the threshold and David Livesley 1.17%.  No performance fee will be payable for the year ending 28 February 2017 unless original shareholders have received back at least 113.1p 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.

Annual Remuneration Report

               

Directors' Fees	Year End 28/02/18 (unaudited)	Year End 29/02/17 (audited)	Year End 28/02/16 (audited)
David Livesley	£5,500	£5,500	£6,167
Richard Roth	£6,500	£6,500	£4,333
Lucius Cary	-	-	£1,250
Robin Goodfellow	£5,000	£5,000	£3,333
Alex Starling	£3,500	£3,500	£2,333
Total	£20,500	£20,500	£17,416

Prior to his appointment as a director of OT4, Richard Roth received an additional one off payment of £2,000 in the year to 29 February 2016 as compensation for executive work undertaken in relation to the setting up of the Common Board structure.

Income Statement

                                                                       

		Year Ended 28 February 2017			Year Ended 29 February 2016
	Note Ref.	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gain on disposal of  fixed asset investments		-	12	12	-	1,049	1,049
Unrealised (loss)/gain on valuation of fixed asset investments		-	(1,667)	(1,667)	-	1,355	1,355
Investment income	2	68	-	68	94	-	94
Investment management fees	3	(19)	(58)	(77)	(19)	(58)	(77)
Other expenses	4	(54)	-	(54)	(55)	-	(55)
Return on ordinary activities before tax		(5)	(1,713)	(1,718)	20	2,346	2,366
Taxation on return on ordinary activities	5	-	-	-	-	-	-
Return on ordinary activities after tax		(5)	(1,713)	(1,718)	20	2,346	2,366
Return on ordinary activities after tax attributable to equity shareholders		(5)	(1,713)	(1,718)	20	2,346	2,366
Earnings per share - basic and diluted	6	(0.0)p	(14.9)p	(14.9)p	0.2p	20.4p	20.6p

There was no other Comprehensive Income recognised during the year.

The 'Total' column of the Income Statement 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 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.

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

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 2015	1,152	813	255	5,411	7,631
Revenue return on ordinary activities after tax	-	-	-	20	20
Expenses charged to capital	-	-	-	(58)	(58)
Current period gains on disposal	-	-	-	1,049	1,049
Current period gains on fair value of investments	-	-	1,355	-	1,355
Prior years' unrealised gains now realised			(654)	654
Dividends paid				(2,304)	(2,304)
Movement in reserves (Note 11)	-	-	(356)	356	-
Balance as at 29 February 2016	1,152	813	600	5,128	7,693
Revenue return on ordinary activities after tax	-	-	-	(5)	(5)
Expenses charged to capital	-	-	-	(58)	(58)
Current period gains on disposal	-	-	-	12	12
Current period losses on fair value of investments	-	-	(1,667)	-	(1,667)
Prior years' unrealised losses now realised	-	-	189	(189)	-
Balance as at 28 February 2017	1,152	813	(878)	4,888	5,975

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

Balance Sheet

		Year Ended 28 February 2017		Year Ended 29 February 2016
	Note Ref.	£'000	£'000	£'000	£'000
Fixed Asset Investments At Fair Value	7		5,571		6,619
Current Assets
Debtors	8	2		26
Cash At Bank		436		1,111
Creditors: Amounts Falling Due Within 1 Year	9	(34)		(36)
Net Current Assets			404		1,101
Creditors: Amounts Falling Due After 1 Year	9		-		(27)
Net Assets			5,975		7,693
Called Up Equity Share Capital	10		1,152		1,152
Share Premium			813		813
Unrealised Capital Reserve	11		(878)		600
Profit and Loss Account Reserve	11		4,888		5,128
Total Equity Shareholders' Funds	11		5,975		7,693
Net Asset Value Per Share			51.9p			66.8p

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

The statements were approved by the Directors and authorised for issue on 10 May 2017 and are signed on their behalf by
David Livesley
Chairman

Statement of Cash Flows

	Year Ended 28 February 2017 £'000	Year Ended 29 February 2016 £'000
Cash flows from operating activities
Return on ordinary activities before tax	(1,718)	2,366
Adjustments for:
(Gain) on disposal of investments	(12)	(1,049)
Loss/(gain) on valuation of investments	1,667	(1,355)
Decrease in debtors	25	125
(Decrease) in creditors	(29)	(33)
Movement in investment debtors and creditors	(7)	-
(Outflow)/Inflow from operating activities	(74)	54
Cash flows from investing activities
Purchase of investments	(630)	(645)
Disposal of investments	29	3,297
Dividends paid	-	(2,304)
(Decrease)/increase in cash at bank	(675)	402
Opening cash and cash equivalents	1,111	709
Cash and cash equivalents at year end	436	1,111

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

Notes to the Financial Statements

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 accounting policies have not materially changed from last year.

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 2016 Annual Report and financial statements. 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 International Private Equity and Venture Capital Valuation (IPEV) guidelines, which can be found on their website at www.privateequityvaluation.com, 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 IPEV guidelines.

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 (e.g. 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 (2016: Castleton Technology (AIM listed) bought Impact Applications (unquoted)). 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.  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 Account.

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. Investment Income

	Year Ended 28 February 2017 £'000	Year Ended 29 February 2016 £'000
Bank interest received	-	-
Loan note interest received	-	4
Dividends received	68	90
Total	68	94

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. 

	Year Ended 28 February 2017 £'000	Year Ended 29 February 2016 £'000
Investment management fee	77	77
Total	77	77

In the year to 28 February 2017 the manager received a fee of 1% of the net asset value as at the previous year end (2016: 1%). Oxford Technology Management is also entitled to certain monitoring fees from investee companies and the Board reviews the amounts.

Oxford Technology Management had previously agreed to defer 25% of the 2% management fee to which it was contractually entitled (i.e. 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 the Board have agreed to pay the deferred balance over a 36 month period. 

A performance fee is payable to the Investment Manager once original shareholders have received a specified threshold in cash for each 100p (gross) invested.  The original threshold of 100p has been increased by compounding that portion that remains to be paid to shareholders by 6% per annum with effect from 1 March 2015, resulting in the remaining required threshold rising to 71.7p at 28 February 2017, corresponding to a total shareholder return of 108.7p after taking into account the 37p already paid out (37p + 71.7p = 108.7p).  

After this amount has been distributed to shareholders, each extra 100p distributed goes 80p to the shareholders and 20p to the beneficiaries of the performance incentive fee, of which Oxford Technology Management receives 15p. 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 28 February 2017 £'000	Year Ended 29 February 2016 £'000
Directors' remuneration	21	17
Auditors' remuneration	6	6
Other expenses	27	32
Total	54	55

5. Tax on Ordinary Activities

Corporation tax payable at 20% (2016: 20%) is applied to profits chargeable to corporation tax, if any.  The corporation tax charge for the period was £nil (2016: £nil) 

	Year Ended 28 February 2017 £'000	Year Ended 29 February 2016 £'000
Return on ordinary activities before tax	(1,718)	2,366
Current tax at standard rate of taxation	(344)	473
UK dividends not taxable	(14)	(18)
Unrealised losses/(gains) not taxable	333	(271)
Realised gains not taxable	(2)	(210)
Excess management expenses carried forward	27	26
Total current tax charge	-	-

Unrelieved management expenses of £2,023,217 (2016: £1,891,985) 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 £1,718,000 (2016: profit of £2,366,000) attributable to shareholders divided by the weighted average number of shares 11,516,946 (2016: 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

	AIM quoted investments Level a £'000	Unquoted investments Level c(ii) £'000	Total investments £'000
Valuation and net book amount:
Book cost as at 29 February 2016	225	5,794	6,019
Cumulative revaluation	1,634	(1,034)	600
Valuation at 29 February 2016	1,859	4,760	6,619
Movement in the year:
Purchases at cost	-	630	630
Disposals - costs	-	(200)	(200)
Disposals - revaluation	-	189	189
Revaluation in year	(512)	(1,155)	(1,667)
Valuation at 28 February 2017	1,347	4,224	5,571
Book cost at 28 February 2017	225	6,224	6,449
Cumulative revaluation to 28 February 2017	1,122	(2,000)	(878)
Valuation at 28 February 2017	1,347	4,224	5,571

Subsidiary Company
The Company also holds 100% of the issued share capital of OT4 Managers Ltd at a cost of £1.

Results of the subsidiary undertaking for the year ended 28 February 2017 are as follows:

	Country of Registration	Nature of Business	Turnover	Retained profit/loss	Net Assets
OT4 Managers Ltd	England and Wales	Investment Manager	£76,934	£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 4 VCT plc, which the Directors also consider is the most useful presentation for Shareholders.

8.  Debtors

	28 February 2017 £'000	29 February 2016 £'000
Prepayments, accrued income & other debtors	2	2
Deferred consideration from sale of investments	-	24
Total	2	26

9. Creditors - amounts falling due in less than 1 year

	28 February 2017 £'000	29 February 2016 £'000
Other creditors	7	9
Investment management fee accrual	27	27
Total	34	36

Creditors - amounts falling due in more than 1 year

	28 February 2017 £'000	29 February 2016 £'000
Investment management fee accrual	-	27
Total	-	27

The Investment Manager has previously deferred 25% of fees, as detailed in Note 3.  These are now being paid between March 2015 and February 2018.

10. Share Capital

	28 February 2017 £'000	29 February 2016 £'000
Authorised:
15,000,000 ordinary shares of 10p each	1,500	1,500
Total Authorised	1,500	1,500
Allotted, called up and fully paid:
11,516,946 (2016: 11,516,946) ordinary shares of 10p each	1,152	1,152

 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 in 2016 was the result of the correction of historic misclassifications between the two reserves.  The historic misclassifications were immaterial as they had no impact on reported returns or net assets and had no bearing on any distributions.

Distributable reserves are £4,010,000 at 28 February 2017 (2016: £5,128,000).

Reconciliation of Movement in Shareholders' Funds

	28 February 2017 £'000	29 February 2016 £'000
Shareholders' funds at start of year	7,693	7,631
Return on ordinary activities after tax	(1,718)	2,366
Dividends paid	-	(2,304)
Shareholders' funds at end of year	5,975	7,693

The Company paid two dividends in 2016. 10p per Ordinary share was paid on 7 August 2015 and a further 10p per Ordinary share was paid on 19 February 2016.

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 28 February 2017 or 29 February 2016.

14.  Related Party Transactions

OT4 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, £76,934 was paid in respect of these fees (2016: £50,871).  No amounts were outstanding at the year end.

15.  Events after the Balance Sheet Date

During March 2017, a further investment of £40,000 was made into ZuvaSyntha and in April 2017 a further investment of £50,000 was made into Plasma Antennas.

Company Number: 5038854
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 28 February 2017, income statement and cash flow statement for the period then ended have been extracted from the Company's 2017 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 28 February 2017 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