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OTT - Oxford Technology 3 Venture Capital Trust News Story

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Last Trade - 30/11/20

Micro Cap
Market Cap £2.37m
Enterprise Value £2.30m
Revenue £-3.15m
Position in Universe 1772nd / 1821

Half-year report

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Oxford Technology 3 VCT Plc
Unaudited Half-Yearly Report
For the period 1 March 2020 to 31 August 2020

                                         6 Months Ended 31 August 2020  Year Ended 29 February 2020  
 Net Assets At Period End                £3.37m                         £4.72m                       
 Net Asset Value (NAV) Per Share         49.7p                          69.6p                        
 Cumulative Dividend Per Share           36.0p                          36.0p                        
 Total NAV Return Per Share              85.7p                          105.6p                       
 Share Price At Period End (Mid-Market)  35.0p                          55.0p                        
 Earnings Per Share                      (19.9)p                        (19.9)p                      

Statement on behalf of the Board

I am pleased to present the unaudited results for the six month period ended
31 August 2020.  The period under review continues to be dominated by the
implications of the Covid-19 pandemic and the subsequent actions of the UK
government. Your Investment Adviser and the Directors have continued to manage
the VCT and its portfolio effectively together via remote working during

The six months to 31 August 2020 have been a volatile and uncertain period for
the economy and for businesses operating within this environment. During this
period, your Board has kept the impact of the pandemic on your Company’s
investments closely under review as part of our regular Board agenda.

On 19 May 2020, when we issued our annual report, we reviewed the portfolio
valuation since the year ended 29 February 2020 and this led to us announce a
reduction in the NAV per share from 69.6p to an unaudited 56.6p. Since then,
the pandemic along with the lockdown has continued to impose great uncertainty
for UK companies. However while most of our overall technology portfolio has
remained relatively stable, Ixaris has faced strong headwinds from the
continuing severe downturn in the airline and travel sector.

Results and Dividend

The Company’s net asset value (NAV) per ordinary share has decreased by
19.9p per share from 69.6p at 29 February 2020 to 49.7p per share as at 31
August 2020.  Compared to 29 February 2020, operating costs reduced the NAV
per share by 0.8p during the period, with the remaining 19.1p reduction being
due to movements in the portfolio, the most significant of which relate to
Ixaris, and are explained in the Portfolio Review section below.

As noted above, the NAV as at 31 August 2020 of 49.7p per ordinary share is a
reduction 6.9p since the mid-May update of 56.6p per share primarily as result
of longer than expected travel restrictions.

The Directors are not recommending the payment of a dividend at this time. 

Portfolio Review

The majority of the portfolio which contains 13 investments in total (one of
which is quoted on AIM) continues to develop. None have sought funding from
the VCT during this period, although Scancell Holdings Plc (“Scancell”)
did raise £15m in a round that was not VCT qualifying. 

Ixaris still dominates the portfolio at over 50%. The company provides a
payment service to the international travel sector.  It had been doing very
well and had accepted an offer for sale of more than £100m at the end of
2019,  (and which had the deal concluded would have enabled OT3 to pay the
largest single dividend ever paid by a VCT).  It  has been very badly
affected by Covid-19 with sales falling by 95%, as air travel collapsed. So
the focus is now on survival.  The company has made widespread redundancies
and pay cuts for those staff that remain.  In recent months, there has been
some improvement as the holiday air travel business has revived somewhat, but
it has been a case of 3 steps forward, 2 steps backwards as restrictions on
travel to different parts of the world have come and gone and then come
again.  If Ixaris can survive, it is likely to require some further
investment and then the hope and expectation is that it will again become
valuable as the travel business returns to normal. However the risks remain

Arecor now represents over 20% of the portfolio. It has published excellent
phase 1 clinical data for its ultra-rapid insulin.  The trial was only sized
to demonstrate equivalence, which it did, and on average the Arecor insulin
delivered twice the early glucose lowering effect of the fastest insulin on
the market. The hope is that this will prove to be fast enough to respond to
glucose levels as they occur, instead of a patient having to predict their
insulin requirement.  Arecor will be continuing its clinical insulin
programme and is expected to raise further funds soon to progress this.

Scancell continues to develop its multiple technologies. The SCIB1 Phase 2
clinical trial programme will continue with further sites later this year and
the Modi-1 Phase1/2 trial is progressing for regulatory submission with a
planned study start in the UK in 1H21. In August, Scancell announced it had
been awarded a grant to develop its COVIDITY Covid-19 vaccine based on its
Immunobody platform into a Phase1 clinical trial. In August, it also completed
a fundraising to raise £15 million at a price of 5.5p per share, and which
included a significant new US institutional investor (Redmile Group LLC). This
funding will allow planned trials to continue while partnering discussions are
pursued. As a result of all this news, the Scancell share price has seen much
volatility, both during the period to 31 August 2020 and later. Its share
price was 8p as at 31 August 2020 (on which these valuations are based) and
has subsequently doubled to 16p in early October. 

The VCT sold £10k worth of Scancell shares prior to 31 August 2020, another
£30k during the middle of September 2020, and a further £20k during October,
thereby crystallising some of the gain on the VCT’s investment in Scancell
and for liquidity purposes.   

ImmBio - formally known as ImmunoBiology Ltd has licensed its pneumococcal
vaccine to China National Biotech Group. It has completed certain parts of its
technology transfer and is now seeking to start a phase 2 study of the same
vaccine. To do this it has been applying for grants. It was turned down for
several grants but has two more grant applications pending. Coronavirus has
again highlighted the importance of vaccines to the world and in recent years
pneumococcal disease has claimed a similar number of deaths as Covid-19 in
2020. An existing vaccine has reduced the death rate, but the existing
vaccines only protect against fewer than 20 of the 90 or so existing strains.
As ImmBio’s ImmBioVax technology utilises heat shock proteins to activate
T-cell responses, it is hoped that it can be used to create vaccines for a
wide range of currently poorly served infectious diseases.

Select Technology distributes high quality document management software via
its global channel partners while adding significant further value through its
development team by providing integrations and bespoke solutions.  Sales have
been significantly affected by Covid-19 with sales from February to July,
being about 50% down on the previous six months. However, the greatest impact
was in April and May: sales have revived somewhat in the most recent months
and the hope is that this continues.

Insense is developing a treatment for fungal nail disease. Work is continuing
with formulation and stability testing.  The hope is that a clinical trial
may start in late 2022, or possibly in 2023.  It is not anticipated that
Covid-19 will have any significant impact on these timescales.

Overall, as seen in the Income Statement, the net impact of valuation changes
across the portfolio during the first half of the 2020/2021 year was a loss of

The Directors, along with the Investment Adviser, continue to take an active
interest in the companies within the portfolio, both to support their
management teams to achieve company development, but also to prepare companies
for realisation at the appropriate time. It should however be noted that
approaches do occur at other times, and the ability of the Directors and
Investment Adviser to be able to provide support when such approaches occur is
essential for maximising value.

VCT qualifying status

As I have previously flagged, the small size of the VCT means significant
focus is required to ensure we retain sufficient working capital to manage the
Company whilst meeting all the conditions laid down by HMRC for maintaining
approval as a VCT. The Board has procedures in place to ensure that the
Company continues to comply with these conditions, in particular the new 80%
qualifying holding limit which has been in place since 1 March 2020. As noted
earlier the top slicing of Scancell will assist working capital management.

Presentation of half-yearly report

In order to reduce the length of this report, we have omitted details of the
Company’s objectives and investment strategy, its Advisers and Registrar and
how to buy and sell shares in the Company. These details are all included in
the Annual Reports, which together with previous half-yearly reports, are
available for viewing on the Oxford Technology website.


Nothing has changed in our plans for your Company. We continue to believe your
VCT is an appropriate structure to hold your Company’s investments, but it
would be preferable to have a larger asset base to share the operating costs.
I have reported previously of our efforts to seek prospective parties who are
potentially interested in entering the VCT industry. This initiative is
currently on hold whilst any such possible organisations are entirely focussed
on more immediate actions within their own businesses as a result of the
Covid-19 pandemic. We have always made clear that there is no certainty such a
route can be achieved, but the Directors will continue seeking such
opportunities when the future outlook has become clearer.  Directors are also
revisiting the economics of a merger with some or all of the other Oxford
Technology VCTs. Such a transaction is not without risk and it is by no means
clear that it would be in your Company’s best interests to participate. We
will update shareholders if and when these discussions reach a conclusion, and
in any event, shareholder approval will be required before any transaction
could proceed.

Apart from the change to investment qualifying levels, there have been no
recent changes to VCT legislation, or their potential impact on both the VCT
and its investee companies. It is still too early to fully assess the impact
of Covid-19, and the resulting government interventions. Whilst the impact of
Brexit remains unclear, your Directors do not expect its eventual outcome to
have a material impact on portfolio valuations.

Your Board and Investment Adviser continue to work so as to best position your
VCT such that, when valuations and liquidity allow, holdings can be exited and
proceeds distributed to shareholders, whilst keeping a keen eye on maintaining
costs as low as possible in the interim.

Finally, I would like to take this opportunity to thank shareholders for their
continued support. We were delighted a significant number of you managed to
attend our zoom AGM, and we will consider the merits of future online forums
in due course which allow a greater number of shareholders to attend. We hope
our shareholders have not been too personally affected by the difficulties
this year and look forward to a return to an ‘old normal’ as soon as

Robin Goodfellow 
8 October 2020

Investment Portfolio as at 31 August 2020

 Company                        Description                         Net Cost of investment £’000     Carrying value at 31/08/20 £’000     Change in value for the 6 month period £’000     % Equity held OT3  % Equity held All OTVCTs  % Net assets  
 Ixaris Group Holdings          Internet payments                   535                              1,849                                (1,233)                                          6.2                6.2                       54.9          
 Arecor                         Protein stabilisation               443                              712                                  -                                                3.1                10.5                      21.1          
 Scancell                       Antibody based cancer therapeutics  399                              401                                  72                                               0.8                2.0                       11.9          
 ImmBio                         Novel vaccines                      483                              148                                  (100)                                            6.5                22.6                      4.4           
 Select – STL Management Ltd    Specialist Photocopier interfaces   47                               108                                  (48)                                             2.8                58.6                      3.2           
 Insense                        Wound healing dressings             333                              60                                   -                                                2.3                6.8                       1.8           
 Invro                          Low power electronics               40                               10                                   -                                                33.1               33.1                      0.3           
 Plasma Antennas                Solid state directional antennas    358                              4                                    1                                                12.4               48.8                      0.1           
 Inaplex                        Data integration software           58                               1                                    -                                                13.3               34.8                      -             
 Metal Nanopowders              Production of metal powders         153                              -                                    -                                                20.0               36.7                      -             
 Superhard Materials            Production of hard materials        11                               -                                    -                                                21.8               40.0                      -             
 Microarray                     Insense spinout                     2                                -                                    -                                                0.2                0.2                       -             
 Total Investments                                                  2,862                            3,294                                (1,308)                                                                                       97.7          
 Other Net Assets                                                                                    78                                                                                                                                 2.3           
 Net Assets                                                                                          3,372                                                                                                                              100.0         

Responsibility Statement of the Directors in respect of the half-yearly report

We confirm that to the best of our knowledge:
* the half-yearly financial statements have been prepared in accordance with
the statement “Interim Financial Reporting” issued by the Financial
Reporting Council; 
   * the half-yearly report includes a fair review of the information required
by the Financial Services Authority Disclosure and Transparency Rules, being:
   * an indication of the important events that have occurred during the first
six months of the financial year and their impact on the condensed set of
financial statements.
* a description of the principal risks and uncertainties for the remaining six
months of the year.
* a description of related party transactions that have taken place in the
first six months of the current financial year that may have materially
affected the financial position or performance of the Company during that
period and any changes in the related party transactions described in the last
annual report that could do so.
  * The assets of the Company include cash and shares in an AIM quoted company
which is quite liquid and readily accessible. After reviewing the forecast
for the Company, 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 the half year accounts.
On behalf of the Board:

Robin Goodfellow 
8 October 2020

Income Statement

                                                                 Six months to 31 Aug 2020        Six months to 31 Aug 2019        Year to 29 Feb 2020           
                                                                 Revenue    Capital    Total      Revenue    Capital    Total      Revenue   Capital   Total     
                                                                 £'000      £’000      £’000      £’000      £’000      £’000      £’000     £’000     £’000     
 Gain/(loss) on disposal of fixed asset investments              -          2          2          -          -          -          -         (239)     (239)     
 Unrealised (loss)/gain on valuation of fixed asset investments  -          (1300)     (1300)     -          620        620        -         (997)     (997)     
 Investment income                                               -          -          -          -          -          -          1         -         1         
 Investment management fees                                      (24)       -          (24)       (7)        (23)       (30)       (61)      -         (61)      
 Other expenses                                                  (28)       -          (28)       (26)       -          (26)       (54)      -         (54)      
 Return on ordinary activities before tax                        (52)       (1298)     (1350)     (33)       597        564        (114)     (1,236)   (1,350)   
 Taxation on ordinary activities                                 -          -          -          -          -          -          -         -         -         
 Return on ordinary activities after tax                         (52)       (1298)     (1350)     (33)       597        564        (114)     (1,236)   (1,350)   
 Earnings per share – basic and diluted                          (0.8)p     (19.1)p    (19.9)p    (0.5)p     8.8p       8.3p       (1.7)p    (18.2)p   (19.9)p   

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

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

 Balance Sheet

                                         As at 31 Aug 2020     As at 31 Aug 2019     As at 29 Feb 2020     
                                         £’000      £’000      £’000      £’000      £'000      £'000      
 Fixed asset investments at fair value              3,294                 6,457                 4,601      
 Debtors                                 13                    18                    21                    
 Cash at Bank                            74                    167                   121                   
 Creditors: falling due within one year  (9)                   (6)                   (21)                  
 Net current assets                                 78                    179                   121        
 Net assets                                         3,372                 6,636                 4,722      
 Called up share capital                            679                   679                   679        
 Share premium reserve                              718                   718                   718        
 Unrealised capital reserve                         432                   3,269                 1,730      
 Profit and Loss account                            1,543                 1,970                 1,595      
 Total equity shareholders' funds                   3,372                 6,636                 4,722      
 Net asset value per share                          49.7p                 97.8p                 69.6p      

  Statement of Changes in Equity

                                                     Share Capital £’000     Share Premium £’000     Unrealised Capital Reserve £’000     Profit & Loss Reserve £’000     Total £’000     
 As at 1 March 2019                                  679                     718                     2,649                                2,026                           6,072           
 Revenue return on ordinary activities after tax     -                       -                       -                                    (56)                            (56)            
 Current period gains on fair value of investments   -                       -                       620                                  -                               620             
 Balance as at 31 August 2019                        679                     718                     3,269                                2,342                           6,636           
 As at 1 March 2019                                  679                     718                     2,649                                2,026                           6,072           
 Revenue return on ordinary activities after tax     -                       -                       -                                    (114)                           (114)           
 Current period loss on disposal                     -                       -                       -                                    (239)                           (239)           
 Current period losses on fair value of investments  -                       -                       (997)                                -                               (997)           
 Prior period unrealised losses now realised         -                       -                       78                                   (78)                            -               
 Balance as at 29 February 2020                      679                     718                     1,730                                1,595                           4,722           
 As at 1 March 2020                                  679                     718                     1,730                                1,595                           4,722           
 Revenue return on ordinary activities after tax     -                       -                       -                                    (52)                            (52)            
 Current period gains on disposal                    -                       -                       -                                    2                               2               
 Current period losses on fair value of investments  -                       -                       (1,300)                              -                               (1,300)         
 Prior years’ unrealised losses now realised         -                       -                       2                                    (2)                             -               
 Balance as at 31 August 2020                        679                     718                     431                                  1,543                           3,372           

 Statement of Cash Flows

                                                      Six months to 31 Aug 2020  Six months to 31 Aug 2019  Year to 29 Feb 2020  
                                                      £'000                      £’000                      £'000                
 Cash flows from operating activities                                                                                            
 Return on ordinary activities before tax             (1,350)                    564                        (1,350)              
 Adjustments for:                                                                                                                
 (Gain)/loss on disposal of fixed asset investments   (2)                        -                          239                  
 Loss/(gain) on valuation of fixed asset investments  1,300                      (620)                      997                  
 (Decrease)/increase in creditors                     (12)                       (6)                        9                    
 Decrease/(increase) in debtors                       7                          (16)                       (19)                 
 Outflow from operating activities                    (57)                       (78)                       (124)                
 Cash flows from investing activities                                                                                            
 Purchase of fixed asset investments                  -                          (21)                       (21)                 
 Sale of fixed asset investments                      10                         -                          -                    
 Inflow/(outflow) from investing activities           10                         (21)                       (21)                 
 Cash flows from financing activities                 -                          -                          -                    
 Total cash flows from financing activities           -                          -                          -                    
 Decrease in cash and cash equivalents                (47)                       (99)                       (145)                
 Opening cash and cash equivalents                    121                        266                        266                  
 Closing cash and cash equivalents                    74                         167                        121                  

Notes to the Half-Yearly Report

1.         Basis of preparation

The unaudited half-yearly results which cover the six months to 31 August 2020
have been prepared in accordance with the Financial Reporting Council’s
(FRC) Financial Reporting Standard 104 Interim Financial Reporting (‘FRS
104’) and the Statement of Recommended Practice (SORP) for Investment
Companies re-issued by the Association of Investment Companies in November
2014. Details of the accounting policies and valuation methodologies are
included in the Annual Report.

2.         Publication of non-statutory accounts

The unaudited half-yearly results for the six months ended 31 August 2020 do
not constitute statutory accounts within the meaning of Section 415 of the
Companies Act 2006. The comparative figures for the year ended 29 February
2020 have been extracted from the audited financial statements for that year,
which have been delivered to the Registrar of Companies. The independent
auditor’s report on those financial statements, in accordance with chapter
3, part 16 of the Companies Act 2006, was unqualified. This half-yearly report
has not been reviewed by the Company’s auditor.

3.         Earnings per share

The calculation of earnings per share for the period is based on the return
attributable to shareholders divided by the weighted average number of shares
in issue during the period. There are no potentially dilutive capital
instruments in issue and, therefore, no diluted returns per share figures are

4.         Net asset value per share

The net asset value per share is based on the net assets at the period end
divided by the number of shares in issue at that date (6,785,233 in each

5.         Principal risks and uncertainties

The Company’s assets consist of equity and fixed interest investments, cash
and liquid resources. Its principal risks are therefore market risk, credit
risk and liquidity risk. Other risks faced by the Company include economic,
loss of approval as a Venture Capital Trust, investment and strategic,
regulatory, reputational, operational and financial risks. These risks, and
the way in which they are managed, are described in more detail in the
Company’s Annual Report and Accounts for the year ended 29 February 2020.
The Company’s principal risks and uncertainties have not changed materially
since the date of that report.

6.         Related party transactions

OT3 Managers Ltd, a wholly owned subsidiary, provides investment management
services to the Company for a fee of 1% of net assets per annum.

7.         Events after the balance sheet date
On 14 September 2020, following the period end, the Company sold 202,027
Scancell shares at a price of 15.0p following the sharp share price rise on
AIM surrounding news about the novel DNA vaccine against Covid-19 being worked
on by Scancell.  On 2 October 2020 the Company sold a further 101,016
Scancell shares at a price of 20.0p.  The bid price used for valuation at the
period end was 8.0p.

8.         Copies of this statement are available from Oxford
Technology Management, Magdalen Centre, Oxford Science Park, Oxford OX4 4GA
and on the Company’s website.

Board Directors: Robin Goodfellow, Richard Roth, Alex Starling and David

Investment Manager: OT3 Managers Ltd with services contracted to Oxford
Technology Management Ltd

Website: www.oxfordtechnology.comvct/vct3.html

The information above is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU No.
596/2014). Upon the publication of this announcement via a Regulatory
Information Service this inside information is now considered to be in the
public domain.

Enquiries – Lucius Cary
Oxford Technology Management
01865 784466

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