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RNS Number:3375N eTechnology VCT 09 July 2003 THIS IS FOR ANNOUNCEMENT PURPOSES ONLY AND CONTAINS THE FULL TEXT OF THE ANNUAL REPORT AND ACCOUNTS. Financial Summary Year ended Year ended 31 March 2003 31 March 2002 per ordinary share per ordinary share Net asset value before distributions 56.54p 67.69p Net asset value after distributions 56.54p 67.69p Total return for the period (11.16)p (9.9)p Chairman's Statement We are pleased to report the third annual results for your Company for the year ended 31 March 2003. The Company was launched to invest specifically in venture capital opportunities within the technology sector and to provide further exposure to the technology sector by also investing in listed technology markets until such time as the funds were required for venture capital investment. Throughout the year your Board, working closely with its adviser Cavendish Asset Management Limited ("CAM"), has remained cautious amid the continuing pessimism worldwide in the technology and telecommunications marketplace. The position in respect of our view across the wider technology sector is more fully set out in the Investment Manager's Report on pages 6-9. The results for the year show an operating return of #40,000 (2002 loss of #48,000). The year shows an overall loss before taxation of #1,518,000 (2002 loss #1,344,000) including #19,000 of realised capital losses and #1,427,000 of unrealised losses. The net assets at the year end were #7,693,000 representing 56.54p per share (2002 #9,211,000 representing 67.69p per share). Our activities in direct investments in qualifying companies have continued with mixed results. The ongoing difficulties in internet related businesses led us to provide fully for our investment in CableNet International, a provider of supply chain synchronisation software and services to manufacturers. Industry is not yet ready to take such large steps in changing its traditional working patterns. We have decided to reduce the carrying value of the investment in Jacobs Rimell to reflect more realistically its value as a business. We have taken the opportunity to provide in full against the original cost of our investment in Boxmind Ltd as the company is facing ongoing difficulties. The balance of the portfolio is in various stages of development but undoubtedly progress has been hampered by the continuing lack of confidence and opportunities in the markets in which the technology and telecommunications businesses operate. More detail of the ten largest investments can be found on pages 11 and 12. Your Board has continued to retain PricewaterhouseCoopers to advise, monitor and report on the Company's progress in meeting the qualifying investment requirements laid down in the VCT legislation. We remain confident that all the relevant conditions were met as required by 31 March 2003, and continue to be met on an ongoing basis. In order to ensure compliance with the legislation, out of the total cash balance of #1,709,000, funds amounting to #1,684,000 have been placed in a non-interest bearing account pending utilisation of the majority of the funds in qualifying direct investments. We reported in December 2002 that the Board had decided to take steps to commence a process of application to the Court to cancel the Company's share premium account with a view to restructuring the reserves. This process has for the time being been put on hold and will be revisited in the light of the performance of the underlying investment portfolio and achievement of exits. The Company has continued to comply as far as practicable with current published guidance on best practice in corporate governance. A statement covering the key matters relevant to the Company is set out on pages 15 and 16. The Annual General Meeting of the Company is to be held at the Company's offices at 10.00am on 9 September 2003, and attached to the Report and Accounts is the Notice convening the meeting. Shareholders should note that Grant Thornton were appointed auditors of the Company during the year and a resolution is proposed at the AGM to appoint them for the coming year. Your Board are still of the view that over the longer term the portfolio of investments will start to bear fruit for the future and deliver growth in value. We are determined to make the most of the investments in what continues to be a difficult sector. Michael Teacher CHAIRMAN 8 July 2003 Directors Michael Teacher (Aged 56) Michael is Chief Executive of Unipoly Holdings Ltd, a diversified industrial group with an annual turnover of approximately #400 million. He was formerly Chief Executive of Hillsdown Holdings PLC, a #3 billion turnover listed UK company with in excess of 20,000 employees working at over 100 sites throughout the UK and Europe. He had five years venture capital experience as Chief Executive, founder and minority shareholder of Hillsdown Investment Trust, the venture capital arm of Hillsdown Holdings PLC. He is currently executive in Residence at Cass Business School, advising the Dean and academic staff on general business matters and is a director of Networks by Wireless Ltd. David Svendsen (Aged 54) David was Managing Director of Microsoft Ltd from 1987 to 1998 and Chairman until his retirement in February 2000. During this time he developed the business in the UK and Ireland from a small start up company to be a leader in its sector today. He has over 25 years of business management experience in a wide range of companies in both the UK and Australia. He is a director of a number of private companies and a member of the Advisory Board of GSC Partners New York LLP, and was a member of the Investment Committee and Advisory Board of E-Tec India. Neil Metcalfe (Aged 40) Neil has been involved in e-commerce since the early days of the internet. He is fully conversant with such issues as ADSL, WAP, video conferencing, Interactive Digital T.V., Intranet and Supply chain developments. He was Business Systems Manager for John Brown Engineering between 1989 and 1994 and Group IT Manager for Hillsdown Holdings PLC from 1994 to 1999 where he worked closely with Michael Teacher. He is currently Managing Director of Data Information Advisory Services Ltd, Commercial Director of Networks by Wireless Ltd (formerly Wireless Lans Ltd) and a director of Cryotherapy International Ltd. Graham Woolfman (Aged 46) Graham is the Managing Director for Investment Banking at Cavendish Asset Management Limited, which is an investment management and corporate advisory company regulated by the FSA. For 15 years he was a partner and Head of the Corporate Finance division within Levy Gee, which then became part of the Numerica Group plc. He has over 17 years experience in corporate finance and working with companies backed by private equity finance. Over the last five years he has developed a speciality in technology related businesses. He is a Director of LTG Development Capital Limited, a UK based venture capital management company, and was until recently a director of Sadot Research and Development Ltd, a venture capital company listed on the Tel Aviv and London Stock Exchanges. He is a non-executive director of a number of unquoted companies, representing shareholder interests and in an advisory capacity. Directors and Advisers DIRECTORS AUDITORS M J Teacher Grant Thornton D E Svendsen 1 Westminster Way G J Woolfman Oxford N M Metcalfe OX2 0PZ All directors are non-executive COMPANY SECRETARY INVESTMENT MANAGER M A Lassman LLB FCA Cavendish Asset Management Limited Chelsea House Westgate London W5 1DR Tel: 020 7467 4577 Email: info@etechvct.com REGISTERED OFFICE REGISTRARS 19 Cavendish Square Northern Registrars Limited London Northern House W1A 2AW Woodsome Park Fenay Bridge Huddersfield HD8 0LA Tel: 01484 600 900 SOLICITORS VCT TAXATION ADVISERS Howard Kennedy PricewaterhouseCoopers 19 Cavendish Square 1 London Bridge London London W1A 2AW SE1 9QL Registered in England, Company No. 03930317 Investment Manager's Report Investment Policy Cavendish Asset Management Limited ("CAM") advises the Board on qualifying venture capital investments, and has the discretion to manage the portfolio of non-qualifying listed technology investments in line with policies set by the Board, such policies also being varied based upon advice provided by CAM. The objective for eTechnology VCT plc is to invest over the medium term in technology companies which meet the Venture Capital Trust criteria. Investment has not been restricted to any particular sector of the technology market, and has included internet and e-commerce related opportunities. eTechnology undertook to give exposure to the technology markets from the outset, by investing in shares in non-qualifying listed technology companies and unit trusts listed on the world's major stock markets. This policy was maintained throughout the year ended 31 March 2003 although caution was exercised in not increasing the proportion of funds invested in the quoted technology sector beyond that held in the previous period. Some investments were sold as and when necessary in order to finance the qualifying venture capital investments. Performance The eTechnology portfolio managed by CAM declined 4.16% over the 12 month period ended 31 March 2003. This is calculated on a time weighted basis and includes the effect of cash movements over the reporting period. Over that same period, NASDAQ fell 27.9%, the FTSE 100 fell by 31.5% and the FTSE Techmark fell by 45.5%. It should be pointed out that for most of the year only a small portion of the eTechnology portfolio has been invested in equities. This is a product of the consistently downbeat view held by CAM and the Board of eTechnology VCT plc. Consequently the high preponderance of cash and gilts has shielded the Technology portfolio from the worst of the decline in stock markets, though the small element that remains in equities declined broadly in line with the three indices quoted above. The last twelve months have been a difficult and volatile period for equities in general. Markets recovered sharply after the sell-off following 11 September 2001. This was sustained beyond March 2002 but was followed by a very sharp decline between May and August of last year as it became apparent to investors that the much mooted second half recovery was not going to materialise. The volatile downtrend continued during the summer until both the FTSE and NASDAQ indices reached new lows in October during the aftermath of the Bali bombing. There was a further rally in the run up to Christmas, but the new year ushered in a renewed bout of serious weakness as the escalating situation in Iraq in combination with ongoing economic concerns caused a major sell-off. The FTSE index reached a new low in March just before the commencement of the invasion of Iraq, NASDAQ was also weak but did not breach its October low. After the year end, there was a strong rally in the wake of the swift victory by coalition forces. Since the sale of the technology Unit Trust holdings over a year ago, the equity element of the portfolio is now small, consisting of about a dozen individual small equity investments. These have been monitored throughout the year, and some small adjustments were made, largely for technical reasons. CAM and the Board of eTechnology considered the possibility of increasing exposure to technology shares again as the market fell further, but in the event concluded that the outlook was still too uncertain and decided not to do so. Throughout the year a number of sales were made from eTechnology's fixed interest investments in order to fund VCT qualifying investments. At this stage in eTechnology's development the priority is now very much monitoring qualifying investments and ensuring that there is sufficient income to operate the VCT. Although it is unlikely that any major further cash calls will be needed from the non-qualifying portfolio, short of a compelling improvement in technology industry fundamentals it is unlikely that exposure to shares will be significantly increased in the near term. Future Outlook In the absence of new revolutionary technology, the prospects for technology shares are strongly correlated to that of the economy. The macro-economic data from the UK and United States since 31 March has been very mixed, provoking both alarm and optimism. The equity markets have rallied strongly since the year end, largely out of relief over the rapid conclusion of the Iraqi conflict. This may indeed act as a positive economic catalyst as falling oil prices and improved sentiment act as a spur to business investment and consumer spending, but if equities are to continue their rally there needs to be more evidence of an improvement in fundamentals. At the moment the signals are still mixed, both from the economy and individual companies, tech and non tech alike. CAM will continue to manage actively the remaining individual equity investments but remains cautious in its general outlook. Venture Capital Investments The venture capital investment portfolio at 31 March 2003 comprised 13 active holdings, with an aggregate value of #4.0 million (cost #5.7 million.) The investments held or completed during the year were as follows:- Jacobs Rimell (cost #850,000) - a provider of service creation, delivery and management software for next generation networking service providers. Co-investors are Advent International Fidelity Ventures and Digital Networks. BioFocus (cost #127,200) - a company providing integrated chemistry services to pharmaceutical and biotechnology companies. Listed on AIM. Networks by Wireless (formerly Wireless Lans Holdings) (cost #700,000) - a company providing installation and maintenance of wireless networks, offering wireless networking solutions to businesses and local government agencies. This was a co-investment with a syndicate of private investors who together invested a further #2 million. Boxmind (cost #150,000) - an early stage internet company, providing internet and multimedia technology, and electronic publishing to the university sector. Co-investors are Scottish Value Asset Management, Eurovestech Plc and private investors. Heritage Image Partnership ("HIP") (cost #500,000) - originally an online image library selling directly to business customers specialising in images drawn from unique collections of leading heritage institutions. Co-investors include Foresight VCT, MTI Partnerships and BNY. HIP entered into an agreement with Image Select International Ltd ("Image") on 11 December 2002 licensing its technology for a maximum sum of #275,000. On 10 February 2003 the shareholders of HIP agreed to exchange their shares for shares in Sarantel equivalent to the cash held and the value attributable to the Image agreement with HIP. The transaction with Sarantel was to be on the same terms as the first round Sarantel investment (see page 8). OMG (cost #175,000) - an AIM listed company with advanced technology to promote automatic digital capture of 3D motion. Applications include the medical, entertainment and property sectors. Burgundy Global (cost #750,000) - a land transportation and management software services business operating in the international travel market - specifically chauffeur driven cars, taxis and mini-coaches. Co-investors included Pi Capital, Fortknox Ventures AG, and a number of private investors. Deltex (cost #200,000) - a company that develops, assembles and markets a non-invasive cardiac function monitor and therapy guidance device. Listed on AIM. CableNet (cost #344,828) - a leading provider of supply chain synchronisation software and services to the global cable manufacturing industry. Co-investors were Amadeus Capital Partners, Veritas Venture Partners, and Kiwi II. The co-investors sold their interest to management on 12 February 2003 and the Company converted its shareholding to ordinary stock on similar terms on 17 June 2003. Pilat Media (cost #300,000) - a company providing software that promotes efficient management of programme content and television channel administration from content acquisition to transmission. Listed on AIM. Avidex (cost #500,000) - a biotechnology company specialising in T-cell receptor research and development. Co-investors include Questor, Advent, Oxford Technology and Sitka Healthcare VCTs. The syndicate invested approximately #20 million. Vectura (cost #500,000) - a proprietary pharmaceutical and drug delivery company. Co-investors include Isis, Merlin, West LB and Sitka Healthcare VCT. The syndicate invested #10 million. Sarantel (cost #600,000) - a company developing antenna technology for the GSM/ GPS mobile telephony markets. Co-investors include MTI Partnerships, Foresight VCT and TriVest VCT. Three follow-on venture capital investments have been made since the Company's year end: Jacobs Rimell (#94,000 at cost) - follow on investment alongside existing investors, Advent, Fidelity and Digital Networks, as part of a #1.5 million further staged funding round completed subject to certain conditions in March. Since that date the company's trading has suffered significantly and as a result a provision against original cost has been made. Burgundy Global (#500,000 at cost) - follow on investment entered into in July with completion subject to certain conditions. The Company led a maximum investment of #1.5 million alongside Pi Capital in order to fund expansion. Sarantel (#125,000 at valuation) - follow on investment alongside MTI Partnerships, Foresight VCT, TriVest VCT and other investors as a result of Heritage Image Partnerships being acquired by Sarantel in a share exchange. The portfolio continues to develop although in venture capital terms many of the investee companies are still at an early stage in their development. The Board would normally expect the Company to hold an investment for between three and seven years. A number of the companies in the portfolio are continuing to make satisfactory progress. Pilat Media Global won a significant contract with a major digital broadcaster and increased its revenues. Burgundy Global has shown good revenue growth over the last twelve months and is anticipating satisfactory profits in the current year. Networks by Wireless delivered significant revenue growth in the last financial year and achieved its first year of profitability. Deltex Medical has shown sales growth. Avidex continues to develop its cutting edge scientific programmes with encouraging results. Vectura has increased revenues and the product development and drug delivery platforms continue to make progress. Valuation Policy Unlisted investments are valued in accordance with the accounting policy set out on page 24, which follows the guidelines laid down by the British Venture Capital Association. As well as requiring appropriate provision where an investment is under-performing significantly, the guidelines stipulate that no investment should be revalued upwards within twelve months of its acquisition unless a significant transaction occurs involving an independent third party at arms-length which places a materially different value on the investment. VCT Qualifying Status The Company's progress towards meeting the Inland Revenue's condition of VCT approval is carefully monitored by CAM and the directors. The Directors have also retained PricewaterhouseCoopers to advise them in this matter. One of the principal requirements is that by the end of the Company's third accounting period, as at 31 March 2003, not less than 70% of the value of the Company's investments should comprise qualifying holdings. The Board is confident that the required level of qualifying investments was achieved and that this remains the case. The Investment Process Until 30 June 2002 CAM used the services of HLB AV Audit plc who had provided services in sourcing, appraising and executing the venture capital investments, together with administration services for eTechnology VCT plc. Until that date Graham Woolfman was a Director of HLB AV Audit plc and head of the team undertaking these activities. He joined CAM on 1 September 2002 and has remained closely involved with the investment process throughout the year, and is a director of eTechnology VCT plc. The other members of the Board - Michael Teacher, David Svendsen and Neil Metcalfe - also provide significant input to the investment process on a part-time basis, and therefore usually have considerable familiarity with an investment proposal by the time it comes to the Board for discussion and decision. 'Due diligence', investigation and investment appraisal are therefore undertaken by a combination of Board members and CAM personnel, often in conjunction with co-investors whom the Company actively seeks in most transactions. Depending on the nature of a transaction, the process can take between a few weeks and a number of months. Post Investment Monitoring Within an investment agreement, eTechnology would usually have the right to appoint a director to the board, or alternatively have board attendance rights or monitoring information. If appropriate, one of eTechnology's directors will become a non-executive director on the board of an investee company, or alternatively a suitable external non-executive director may be brought in. eTechnology seeks to work closely with co-investment partners in the monitoring of investments, and in contributing to the strategic development of investee companies. Investment Portfolio at 31 March 2003 Balance Sheet Cost Valuation % of fund Profit / (Loss) Qualifying Holding # # # Investments AIM Biofocus plc 43,862 127,200 35,747 0.46 (91,453) OMG plc 233,333 175,000 25,667 0.33 (149,333) Pilat Media 1,500,000 300,000 243,750 3.17 (56,250) Global plc Deltex Medical 800,000 200,000 60,000 0.78 (140,000) plc Unlisted Jacobs Rimell 203,136 850,000 425,000 5.52 (425,000) Ltd Burgundy Global 147,058 750,000 750,000 9.75 - Ltd Networks by 700,000 700,000 700,000 9.10 - Wireless iDesk plc 126,582 500,000 - - (500,000) Boxmind Ltd 816 150,000 - - (150,000) Heritage Image 36,262 500,000 170,000 2.21 (330,000) Partnership Ltd CableNet 1,785,714 344,828 - - (344,828) International Ltd Avidex Limited 1,251 500,000 500,000 6.50 - Vectura Limited 25,974 500,000 500,000 6.50 - Sarantel 1,818,182 600,000 600,000 7.80 - Limited Qualifying 6,197,028 4,010,164 52.12 (2,186,864) Investments Sub Total Non-Qualifying Investments Listed AEA Technology 25,000 106,617 32,125 0.42 (74,492) Antigenics 4,455 35,437 23,357 0.30 (12,080) Colt Telecom 147,000 50,279 49,061 0.64 (1,218) Group Kewill Systems 65,000 113,837 17,875 0.23 (95,962) Medical 115,000 85,681 20,988 0.28 (64,693) Solutions M L 55,000 89,394 7,700 0.10 (81,694) Laboratories Profile 55,000 89,485 16,225 0.21 (73,260) Therapeutics Samsung 1,048 89,794 74,895 0.98 (14,899) Electronics Gdr Shire 13,000 88,856 50,082 0.65 (38,774) Pharmaceuticals Skyepharma 59,999 32,578 29,250 0.38 (3,328) Taiwan 53,900 97,255 41,461 0.54 (55,794) Semiconductor Yeoman Group 25,000 103,265 11,875 0.15 (91,390) Listed -Non 982,478 374,894 4.88 (607,584) Qualifying Subtotal Fixed Interest Stock Treasury 10% Stk 1,620,000 1,660,961 1,665,846 21.65 4,885 2003 Fixed Interest 1,660,961 1,665,846 21.65 4,885 Sub Total Non Qualifying 2,643,439 2,040,740 26.53 (602,699) Investment Sub Total TOTAL INVESTMENT 8,840,467 6,050,904 78.65 (2,789,563) PORTFOLIO Net Current 1,642,669 1,642,669 21.35 - Assets, including Cash Total per Balance 10,483,136 7,693,573 100 (2,789,563) Sheet Notes: 1. Balance sheet values were calculated using mid-market prices at 31 March 2003 in respect of listed investments and shares traded on AIM. Unlisted investments were valued at cost, less provision for diminution in value. In respect of iDesk plc, the provision has been considered as giving rise to a realised loss in the year ended 31 March 2003. 2. Shares are non-qualifying if they have been acquired in the market rather than as a result of a new issue. The non-qualifying investments are listed on the main list of the London Stock Exchange, AIM or a recognised overseas stock exchange. 3. Qualifying investments carry full voting rights. 4. Out of the total cash balance of #1,709,000, cash of #1,684,000 was held in a non-interest bearing reserve at Barclays Bank plc. These funds were principally reserved for qualifying investments earmarked for completion and to meet certain working capital requirements of the Company. Ten Largest Investments Disclosed below are the Company's 10 largest investments as at 31 March 2003, split between qualifying and non-qualifying. Qualifying Investments Jacobs Rimell Ltd First Investment September 2000 Equity Held 4.2% undiluted Valuation #425,000 at valuation A company that has developed provisioning software for use by next generation network service providers eg. Broadband and interactive TV companies. Draft audited accounts have been prepared for the year ended 31 December 2002. Turnover for the year was #5,686,316 with a resultant retained loss after tax of #6,440,254. The net liabilities at that date were #(719,224). Burgundy Global Ltd First Investment December 2000 Equity Held 3.6% undiluted Valuation #750,000 at cost A land transportation and management software services business operating in the international travel market - specifically chauffeur driven cars, taxis and mini coaches Audited accounts have been prepared for the year ended 31 December 2002. Turnover for the period was #9,194,000 with a retained loss for the period of #1,168,000. The net assets at that date were #4,440,000. Networks by Wireless (formerly Wireless Lans Holdings) Ltd First Investment September 2000 Equity Held 13.2% undiluted Valuation #700,000 at cost A company providing the installation and maintenance of wireless networks to businesses and local government agencies. Audited accounts have been prepared for the year ended 31 January 2003. Turnover for the period was #3,707,188 with a resultant profit of #261,456. The net assets at that date were #651,003. Sarantel Limited First Investment February 2003 Equity Held 9.4% undiluted Valuation #600,000 at cost A company developing antenna technology for the GSM/GPS mobile telephony markets. Audited accounts have been prepared for the year ended 30 September 2002. Turnover for the period was #106,000 with a resultant loss of #2,621,417. The net assets at that date were #3,027,023. Avidex Limited First Investment August 2002 Equity Held 0.44% undiluted ordinary shares/2.31% preference shares Valuation #500,000 at cost A biotechnology company specialising in T-cell receptor research and development. Audited accounts have been prepared for the year ended 31 March 2002. Turnover for the period was #Nil with a resultant loss of #6,000,000. The net assets at that date were #4.5m. Vectura Limited First Investment November 2002 Equity Held 0.2% undiluted ordinary shares/preference shares Valuation #500,000 at cost A proprietary pharmaceutical and drug delivery company. Audited accounts have been prepared for the year ended 31 March 2002. Turnover for the period was #3,175,000 with a resultant loss of #2,675,000. Net assets at that date were #12.8m. Pilat Media Global Plc First Investment February 2002 Equity Held 3.46% undiluted Cost #300,000 Valuation #243,750 Mid-market price A company providing software that promotes efficient management of programme content and television channel administration from content acquisition to transmission. Demerged from parent company Pilat Technologies Ltd and subsequently listed on AIM. Audited accounts have been prepared for the year ended 31 December 2002. Turnover for the year was #7,346,969 with a resultant profit of #37,417. Net assets at that date were #4,241,123. Heritage Image Partnership Ltd First Investment March 2001 Equity Held 13.36% undiluted Cost #500,000 Valuation #170,000 An online image library originally providing access to previously non-digitised heritage images. In the light of difficulties in building its image library, together with difficulties in the marketplace, the company entered into an agreement with Image Select International Ltd on 11 December 2002 to exploit its assets. Accounts have been prepared for the year ended 31 December 2002. Turnover for the year was #58,556 with a retained loss after tax of #241,196. Net assets at that date were #1,015,781. Non Qualifying Investments (listed) Cost Mid Market Value # # Treasury 10% STK 2003 1,660,961 1,665,846 Samsung Electronics Gdr 89,794 74,895 Directors' Report The Directors present their report and audited financial statements for the year ended 31 March 2003. Activities and status The principal activity of the Company during the period was the making of long-term equity and loan investments, mainly in unlisted companies. The Company is an investment company as defined by Section 266 of the Companies Act 1985. It has been listed on the London Stock Exchange since 30 June 2000 and has been granted provisional approval by the Inland Revenue as a Venture Capital Trust. The Chairman's Statement on page 3 includes a review of developments during the year and of future prospects. The directors have managed the affairs of the Company with the intention that it qualifies for approval of the Inland Revenue as a Venture Capital Trust for the purposes of Section 842AA of the Income and Corporation Taxes Act 1988, and they have no reason to believe that approval will not be confirmed for the year ended 31 March 2003. The Directors consider that the Company was not at any time up to the date of this report a close company within the meaning of Section 414 of the Income and Corporation Taxes Act 1988. The Directors are required by the Articles of Association to put an Ordinary Resolution to the members at the Annual General Meeting in 2007 that the Company should continue to operate as a Venture Capital Trust for a further three years, and, if the Company has not been liquidated, reorganised or reconstructed, a similar resolution is to be put to the members at each third Annual General Meeting thereafter. If any such resolution is not passed, the Directors shall convene an Extraordinary General Meeting within nine months to consider proposals for the reorganisation or winding-up of the Company. Results and dividend The results for the year are dealt with fully in the financial statements on pages 21 to 30. Net assets attributable to shareholders at the end of the period were #7.69m. The Directors do not recommend the payment of any dividend. Directors The Directors of the Company during the year and their interests in the issued Ordinary Shares of 5p of the Company at 31 March 2002 and 2003 are as follows: As at 31 March 2003 As at 31 March 2002 Number of Shares Number of Shares Michael Teacher 30,000 30,000 David Svendsen 25,000 25,000 Neil Metcalfe 10,000 10,000 Graham Woolfman 10,000 10,000 All of the Directors' share interests, amounting to 0.55% of the shares in issue, were held beneficially. None of the Directors has options to subscribe for any further shares or debentures in the Company. There were no changes in the Directors' interests between 31 March 2003 and the date of this report. Directors' and officers' liability insurance As permitted by Section 310(3) of the Companies Act 1985, the Company has maintained insurance cover on behalf of the Directors and secretary indemnifying them against certain liabilities that may be incurred by them in relation to the Company. Management CAM has acted as investment adviser and manager to the Company since April 2000. The principal terms of the Company's management agreement with CAM are set out in Note 2 to the financial statements. The Company has no employees. Creditor payment policy The Company does not follow any formal code or standard for dealing specifically with the payment of creditors. The Company's payment policy is to agree terms of payment before business is transacted and to settle accounts in accordance with those terms. There were no amounts owing to trade creditors at 31 March 2003. Substantial shareholdings So far as the Directors are aware, there were no individual shareholdings representing 3% or more of the Company's issued share capital at the date of this report. Annual General Meeting Resolutions will be proposed as special business at the Annual General Meeting to: * renew the authority of the Directors, within limits, to allot equity shares otherwise than pro rata to existing shareholders, and * renew the authority of the Directors to make market purchases of the Company's shares for cancellation. It is the intention of the Directors to seek to renew these authorities at each subsequent Annual General Meeting. Whilst the Directors have no present intention of allotting any shares under the first above authority, they seek shareholder consent for it now, as in previous years, in order to avoid the necessity of convening during the year an Extraordinary General Meeting to obtain such consent should it be required, in particular for a special share issue other than pro rata to existing shareholders. Such a share allotment would be limited to 5% of the nominal value of the current share capital in issue, as recommended by the Association of British Insurers. Auditors Grant Thornton were appointed auditors on 6 June 2003 to fill a casual vacancy in accordance with section 388(1) of the Companies Act 1985. Special notice pursuant to section 388(3) having been given, a resolution to re-appoint Grant Thornton as auditors and to authorise the Directors to fix their remuneration will be proposed at the forthcoming Annual General Meeting. Statement of Directors' responsibilities Company law in the United Kingdom requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit and loss of the Company for that period. In preparing those financial statements, the Directors are required to: * select suitable accounting policies and apply them consistently; * make judgments and estimates that are reasonable and prudent; * state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; and * prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for ensuring that proper accounting records are kept, which disclose with reasonable accuracy at any time the financial position of the Company, enabling them to ensure that the financial statements comply with the Companies Act. They are also responsible for the Company's system of internal financial control, safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. Corporate Governance The Directors support the relevant principles of the Combined Code, being the principles of good governance and the code of best practice formulated by the Committee on Corporate Governance. As a Venture Capital Trust with no executive directors, the Company is not required to give the disclosures in relation to directors' remuneration and details of compliance with the Combined Code provisions in that respect as otherwise required by the Stock Exchange Listing Rules 12.43A(a), (b) and (c). The Board The Company has a Board of four directors, all of whom are non-executive. Three of the Directors are independent of the Company's investment manager. The non-executive Chairman, Michael Teacher, has a casting vote, and is the senior independent non-executive Director. Two of the Directors are offering themselves for re-election at this year's AGM, in accordance with the Combined Code. Biographical details of all Board members are shown on page 4. The full Board meets formally at least four times a year, and on other occasions as required to review the results of the Company and consider any appropriate recommendations by the investment manager. The Board also meets frequently to make investment decisions. The Board as a whole is responsible for the procedure of agreeing to the appointment of its own members and of its professional advisers. Other matters specifically reserved to the Board include banking arrangements, related party transactions and review of investments made. The Board receives detailed management accounting information on a quarterly basis, including an investment management report. Any additional information is supplied on request. The Board has established procedures whereby directors, wishing to do so in the furtherance of their duties, may take independent professional advice at the Company's expense. The Board has not appointed either a nominations or remuneration committee as they consider the Board to be small. Appointments of new directors and changes in remuneration will be referred to the full Board. Michael Teacher is the Chairman. Relations with Shareholders This year's AGM will be held on 9 September 2003. The Notice of Annual General Meeting is circulated within this Report more than 20 working days before the AGM. Shareholders have the opportunity to meet the Board at the AGM. Separate resolutions are proposed at the AGM on each separate issue. Proxy votes are counted. In order to comply with the Combined Code, proxy votes will be announced at the AGM, following each vote on a show of hands, except in the event of a poll being called. 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. Going Concern The Directors are of the opinion that, at the time of approving the financial statements, the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Internal Control The Board has established an ongoing process for identifying, evaluating and managing those risks faced by the Company which are considered to be significant. The Board is responsible for the Company's system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risks of failure to achieve the Company's business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The effectiveness of the system of internal control has been reviewed by the Board in accordance with the Internal Control Guidance for Directors on the Combined Code. The Board undertakes an ongoing review of the Company's business risks. This includes reviewing the system of internal control and risk management over the operations and culture of the Company, and to deal with areas of improvement which come to the Board's attention. Statement of Compliance The Listing Rules require the Board to report on compliance with the Combined Code provisions throughout the accounting period. Save for the limited exceptions outlined below, the Company has complied throughout the accounting period ended 31 March 2003 with the provisions set out in Section 1 of the Combined Code. The exceptions to the Combined Code were as follows: a) Non-executive directors' contracts after the first year are on three months' rolling notice, whereas the Cadbury recommendation is for fixed term renewable contracts. In the Directors' opinion this does not make a substantive difference to the circumstances of the Company since all directors are required to submit themselves for re-election at least once in every three years. (A.6.1.) b) There is as yet no formal procedure for the appointment of non-executive directors. The existing four Directors were each appointed at the time of the original share issue and the directors would not expect any change in Board composition for the foreseeable future. Should a change be necessitated, the Board would expect to implement formal procedures as appropriate. (A.5.1.) c) There is no separate audit committee. Audit matters are dealt with by the full Board. The Directors consider this appropriate, as they are all non-executives. (D.3.1.) d) The Company does not conduct a formal review as to whether there is a need for an internal audit function. The Directors do not consider that internal audit would be an appropriate control for a venture capital trust of this size. (D.2.2.) By order of the Board M A Lassman SECRETARY 8 July 2003 Directors' Remuneration Report The Company presents the Directors' Remuneration Report for the year ended 31 March 2003. Remuneration committee There is no separate remuneration committee and the Board performs the duties of a remuneration committee assisted by the Company Secretary. The Company has no employees other than its directors, all of whom are non-executive. Performance graph The following graph compares the change in the Company's share price with that of the FTSE Investment Companies sector over the period from the launch of the Company to 31 March 2003. No element of the current directors' remuneration is performance related. The Company has not granted any share options or long-term performance incentives to any of the Directors. Directors' remuneration (audited) 2003 2002 # # G J Woolfman 11,750 11,750 D E Svendsen 11,750 11,750 M J Teacher 11,750 11,750 N M Metcalfe 11,750 11,750 ------- ------- 47,000 47,000 ------- ------- None of the Directors received any non-cash benefits or pension entitlements during the year (2002: Nil). Indirect benefits through investee companies are set out in Note 16 to the Accounts. In addition to the above fees, each director, except Graham Woolfman, is entitled to receive 6% of performance fees based on certain excess profits as defined, and 6% of a termination performance fee as defined. There is no entitlement to any performance fees for the year (2002: Nil). Remuneration policy The Board consists solely of four non-executive Directors. Graham Woolfman represents the Investment Manager and the remaining three Directors are independent. A comparison of the Directors' remuneration with other venture capital trusts of similar size is provided. This comparison, together with consideration of any alteration in non-executive directors' responsibilities, is used to review whether any change in remuneration is necessary. The Board's policy is that the remuneration of non-executive directors should be sufficient to reflect the duties and responsibilities of the Directors and the amount of time committed to the Company's affairs. Compensation for loss of office No director would be entitled to more than his contractual notice period. Retirement of directors The Directors are subject to retirement by rotation in accordance with the Company's Articles of Association. Appointment of directors None of the Directors has a service contract with the Company. All of the Directors have letters of appointment, which are not for specific terms, and are all subject to 3 months notice. By order of the Board M A Lassman SECRETARY 8 July 2003 Report of the Independent Auditors to the Members of eTechnology VCT plc We have audited the financial statements of eTechnology VCT plc for the year ended 31 March 2003 which comprise the statement of total return, the balance sheet, the cash flow statement, the principal accounting policies and notes 1 to 16. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the directors' remuneration report that is described as having been audited. This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The directors' responsibilities for preparing the annual report, the directors' remuneration report and the financial statements in accordance with United Kingdom law and accounting standards are set out in the statement of directors' responsibilities. Our responsibility is to audit the financial statements and the part of the directors' remuneration report to be audited in accordance with relevant legal and regulatory requirements and United Kingdom auditing standards. We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the directors' remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors' report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and transactions with the company is not disclosed. We review whether the corporate governance statement reflects the company's compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the company's corporate governance procedures or its risk and control procedures. We read other information contained in the annual report, and consider whether it is consistent with the audited financial statements. This other information comprises only the chairman's statement, the investment manager's report, the investment portfolio report, the ten largest investments, the directors' report, the unaudited part of the directors' remuneration report, and the corporate governance statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. BASIS OF OPINION We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the directors' remuneration report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the directors' remuneration report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the directors' remuneration report to be audited. OPINION In our opinion: (S) the financial statements give a true and fair view of the state of affairs of the company at 31 March 2003 and of the revenue return, capital return and total return of the company for the year then ended; and (S) the financial statements and the part of the directors' remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. GRANT THORNTON REGISTERED AUDITORS CHARTERED ACCOUNTANTS OXFORD 8 July 2003 Statement of Total Return (incorporating the Revenue Account) For the year ended 31 March 2003 Year ended 31 March 2003 Year ended 31 March 2002 Notes Revenue Capital Total Revenue Capital Total #000 #000 #000 #000 #000 #000 Gains / (losses) on investments - Realised 6 (19) (19) (18) (18) - Unrealised 6 (1,427) (1,427) (1,214) (1,214) Income 1 208 208 208 208 Investment 2 (97) (64) (161) (160) (40) (200) management fee Other expenses 3 (71) (48) (119) (96) (24) (120) ------- ------- ------- ------- ------- ------ Return on ordinary activities before taxation 40 (1,558) (1,518) (48) (1,296) (1,344) ------- ------- ------- ------- ------- ----- Tax on return on ordinary activities 4 - - - - - - ------- ------- ------- ------- ------- ----- Return attributable to equity shareholders 40 (1,558) (1,518) (48) (1,296) (1,344) ------- ------- ------- ------- ------- ------- Transfer to 10 40 (1,558) (1,518) (48) (1,296) 1,344) reserves ------- ------- ------- ------- ------- ------ Return per ordinary share (basic & diluted) 5 0.29p (11.45)p (11.16)p (0.4)p (9.5)p (9.9)p * The revenue column of this statement is the profit and loss account of the Company * All revenue and capital items in the above statement derive from continuing operations The accounting policies and notes form an integral part of these financial statements. Balance Sheet As at 31 March 2003 Notes 2003 2002 #000 #000 Fixed assets Investments 6 6,051 8,914 -------- -------- Current assets Debtors 7 50 84 Cash at bank 1,709 309 -------- -------- 1,759 393 Creditors (amounts falling due within one year) 8 (117) (96) Net current assets 1,642 297 -------- -------- Net assets 7,693 9,211 -------- -------- Capital and reserves Called-up share capital 9 680 680 Share premium 10 12,115 12,115 Capital reserve - realised 10 (2,801) (1,915) Capital reserve - unrealised 10 (2,289) (1,617) Revenue reserve 10 (12) (52) -------- -------- Total shareholders' funds 7,693 9,211 -------- -------- Net asset value per ordinary share 11 56.54p 67.69p The financial statements on pages 21 to 30 were approved by the directors on 8 July 2003 and are signed on their behalf by: Michael Teacher Graham Woolfman Chairman Director The accounting policies and notes form an integral part of these financial statements. Cash Flow Statement For the year ended 31 March 2003 Year Ended Year Ended 31 March 2003 31 March 2002 #000 #000 #000 #000 Reconciliation of operating profit to net cash inflow/(outflow) from operating activities Net return from ordinary activities before 40 (48) tax Amortisation of book cost 31 - Decrease /(increase) in debtors 34 (21) Increase in creditors 21 35 Management fees and other expenses charged (112) (64) to capital ------- ------- Net cash inflow/(outflow) from operating 14 (98) activities Cash flow statement Net cash inflow/(outflow) from operating 14 (98) activities Capital expenditure and financial investments Purchase of investments (2,079) (5,609) Sale of investments 3,465 4,828 ------- ------- Net cash inflow/(outflow) from financial 1,386 (781) investment ------- ------- Increase/(decrease) in cash for the year 1,400 (879) ------- ------- Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash for the year 1,400 (879) Net funds at 31 March 2002 309 1,188 ------- ------- Net funds at 31 March 2003 1,709 309 ------- ------- The accounting policies and notes form an integral part of these financial statements. Principal Accounting Policies A summary of the principal accounting polices, all of which have been applied consistently throughout the period, is set out below. a. Basis of accounting The financial statements have been prepared under the historical cost convention as modified to include the revaluation of investments, and on the assumption that approval as a venture capital trust is forthcoming. The financial statements have been prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (issued 1995). b. Investments Listed investments, and those quoted on the Alternative Investment Market, are valued at middle market prices. In the event that the shares held by the Company are subject to certain restrictions, or the holding is significant in relation to the traded issued share capital of the relevant company, then the Directors may apply a discount to the relevant middle market price. Realised surpluses and deficits on the disposal of investments are taken to capital reserve-realised and unrealised surpluses and deficits on the revaluation of investments are taken to capital reserve-unrealised. Investments in unlisted companies are valued in accordance with British Venture Capital Association (BVCA) guidelines. The Directors' policy in valuing unlisted investments is to carry them at cost except in the following circumstances: * Where the company's performance against plan indicates a diminution in the value of the investment * Where a company is well established with a record of profitability, the share may be valued by applying a suitable price earnings ratio to the company's historic post-tax earnings. When applying such ratios, the Directors will take into account comparable listed companies or sectors and will reflect the lack of marketability * Where a significant transaction occurs involving an independent third party at arms-length who values the investment at a materially different value. c. Income Dividends receivable on equity securities are brought into account on the ex-dividend date. Fixed returns on non-equity shares and on debt securities are recognised on a time apportionment basis so as to reflect the effective yield. d. Foreign Currency Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. All exchange differences are dealt with in the profit and loss account e. Expenses All expenses are accounted for on an accruals basis. Expenses are charged 60% to revenue and 40% to capital to reflect an appropriate allocation of resources, taking into account the change in the investment portfolio. Previously, this allocation was 80% to revenue and 20% to capital. f. Going Concern The financial statements have been prepared on the going concern basis. Notes to the Financial Statements For the year ended 31 March 2003 1. Investment Income 2003 2002 #000 #000 Dividends received 15 9 Interest on government stocks 188 175 Bank interest 5 24 ------- ------- 208 208 ------- ------- 2. Investment Management Fee The Investment Manager to the Company is Cavendish Asset Management Limited. CAM is entitled to receive an annual fee of up to 2.5% (net of VAT) of the net assets of the Company payable quarterly in advance, on 30 June, 30 September, 31 December and 31 March in each year. The fee is charged 60% to revenue and 40% to capital. The termination notice period of this contract is 6 months. 3. Other Expenses 2003 2002 #000 #000 Secretarial services 8 8 Directors' Remuneration 47 47 Auditors' Remuneration - Audit Services 8 12 Legal and Professional services 6 16 Other Expenses 50 37 ------- ------- 119 120 ------- ------- 4. Tax on Return on Ordinary Activities No taxation arises for the year due to the availability of revenue losses brought forward. No deferred tax asset has been recognised in relation to excess management expenses carried forward estimated at #287,000 (2002: #251,000) due to uncertainty as to their recoverability. 5. Return per Share The revenue return per share is based on net return from ordinary activities after tax of #40,000 and on 13,606,734 shares, being the weighted average number of shares in issue during the year. The capital return per share is based on net realised and unrealised losses for the period of #1,558,000 and on 13,606,734 shares, being the weighted average number of shares in issue during the year. 6. Investments 2003 2002 #000 #000 Investments listed on a recognised investment exchange 740 1,306 Unlisted stocks 3,645 2,615 UK fixed interest stocks 1,666 4,993 ------- -------- 6,051 8,914 ------- -------- Movements in investments during the year are summarised as follows: Listed Unlisted UK fixed Total interest #000 #000 #000 #000 Valuation at 31 March 2002 1,306 2,615 4,993 8,914 Purchases at cost 108 1,950 21 2,079 Disposals: - proceeds (106) - (3,359) (3,465) - realised gains/(losses) on (371) - 97 (274) disposals - previous unrealised (gains)/losses 363 - (108) 255 on disposals Unrealised depreciation and amortisation of book cost (560) (920) 22 (1,458) ------- -------- ------- -------- Valuation at 31 March 2003 740 3,645 1,666 6,051 ------- -------- ------- -------- Book cost at 31 March 2003 1,784 5,395 1,661 8,840 Unrealised gains/(losses) at 31 (1,044) (1,750) 5 (2,789) March 2003 ------- -------- ------- -------- 740 3,645 1,666 6,051 ------- -------- ------- -------- The overall loss on investments for the period shown in the statement of total return is analysed as follows: 2003 2002 #000 #000 Net realised losses on disposal (19) (18) Increase in unrealised depreciation (1,427) (1,214) --------- -------- (1,446) (1,232) --------- -------- Details of the 10 largest investments are disclosed within the Investment Manager's Report on pages 11 and 12. Details of shareholdings in those companies where the Company's holding at 31 March 2003 represents (1) more than 10% of the allotted equity share capital of any class, (2) more than 10% of the total allotted share capital, or (3) more than 10% of the assets of the Company itself, are given below. All companies named are incorporated in England and Wales. Company Class of Number Proportion of Share Share Held Capital Held Networks by Wireless Ordinary 700,000 13.2% Limited Shares Heritage Image Partnership Ordinary 36,262 13.4% Limited Shares 7. Debtors 2003 2002 #000 #000 Prepayments and accrued income 32 68 Income tax recoverable on unfranked investment income 18 16 -------- ------- 50 84 -------- ------- 8. Creditors (amounts falling due within one year) 2003 2002 #000 #000 Amounts accrued due to Investment Manager 36 48 Accruals and deferred income 81 48 -------- ------- 117 96 -------- ------- 9. Share Capital 2003 2002 #000 #000 Authorised: 16,000,000 ordinary shares of 5p each 800 800 ------------ ------- Allotted, issued and fully paid 13,606,734 ordinary shares of 5p each 680 680 ------------ ------- 10. Reserves Share Capital Capital reserve - Revenue Premium reserve unrealised reserve - realised #000 #000 #000 #000 At 31 March 2002 12,115 (1,915) (1,617) (52) Realised loss on disposal (19) - - of investments - Previous unrealised losses - (255) 255 - realised in year - disposals - (500) 500 - - other Apportioned capital - (112) - - expenditure Net decrease in unrealised - - (1,427) - appreciation Net return for the year - - - 40 ------- ---------- ---------- ------- At 31 March 2003 12,115 (2,801) (2,289) (12) ------- ---------- ---------- ------- 11. Net asset value per share The calculation of net asset value per share as at 31 March 2003 is based on net assets of #7,693,000 divided by the 13,606,734 ordinary shares in issue. 12. Reconciliation of movements in equity shareholders' funds 2003 2002 #000 #000 Return on ordinary activities after tax (1,518) (1,344) ---------- ------- Net movement in Shareholders' funds (1,518) (1,344) Opening Shareholders' funds 9,211 10,555 ---------- ------- Closing Shareholders' funds 7,693 9,211 ---------- ------- 13. Analysis of changes in net funds At 1 April 2002 Cash flow in the year At 31 March 2003 #000 #000 #000 Cash at bank 309 1,400 1,709 ----------- ------------- ----------- 14. Analysis of Financial Assets and Liabilities Objectives, policies and strategies As a venture capital trust, the Company's objective is to provide shareholders with an attractive income and capital return by investing its funds in a broad spread of listed and unlisted UK companies which meet the relevant criteria for venture capital trusts. The Company's financial investments comprise: * Shares in unlisted and listed companies. * Cash, liquid resources and short-term debtors and creditors that arise directly from the Company's operations. The main risks arising from the Company's financial instruments are fluctuations in market price for listed investments and fluctuations in valuations, including the issue of going concern, for unlisted investments. Market price risk Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions by way of price movements. These risks are monitored by the Investment Manager on a regular basis and by the Board. Liquidity risk Many of the Company's investments are in listed securities, which can be sold to meet funding commitments if necessary. Furthermore, at the Balance Sheet date #1.7m was held in cash. Interest Rate risk The Company finances its operations through share capital raised and retained profits including both realised and unrealised capital profits. At the year end and throughout the year, the Company had no liabilities that were subject to interest rate risk. The Company has no committed borrowing facilities as at 31 March 2003. The Company had a holding of 1,620,000 units of 10% 2003 Treasury Stock which were stated at mid-market value at the balance sheet date. Foreign Currency Risk The functional currency of the Company is sterling. The Company does however have some cash balances denominated in foreign currencies. The Company does not hedge against the effects of movements in exchange rates. The risks are monitored by the Investment Manager and the Board on a regular basis. Fair Value of financial assets and financial liabilities There is no material difference between the fair values of financial assets and liabilities and their book value at the balance sheet date. 15. Post Balance Sheet Events Since 31 March 2003, eTechnology VCT plc has made the following qualifying investments: #'000 Jacobs Rimell 94 Burgundy Global 500 Sarantel 120 ------ 714 ------ The Company has contracted to invest in Burgundy Global subject to the fulfilment of conditions attaching to completion. The Company has contracted to invest further in Sarantel by way of exchange of shares held in Heritage Image Partnership, subject to certain conditions and the completion of formalities. 16. Related Party Transactions The following directors hold shares and options in eTechnology VCT plc investee companies as listed below: Director Company Shares Options Michael Teacher Networks by Wireless Ltd 200,000 662,500 Neil Metcalfe Networks by Wireless Ltd - 150,000 As described in the Investment Manager's report, CAM has used the services of HLB AV Audit plc. Graham Woolfman is a director of eTechnology VCT plc, but resigned as a director of HLB AV Audit plc on 28 June 2002. During the year to 31 March 2003, HLB AV Audit plc received fees of #30,000 net of VAT from CAM in respect of the above services. Notice of Annual General Meeting Notice is hereby given that the third Annual General Meeting of eTechnology VCT plc is to be held on Tuesday 9 September 2003 at West World, West Gate, London W5 1DT, commencing at 10.00 a.m., for the purposes detailed below. Ordinary Business To consider and, if thought fit, pass the following resolutions, which will be proposed as Ordinary Resolutions: 1) To receive and adopt the Directors' Report and Accounts of the Company for the year ended 31 March 2003, together with the report of the auditors thereon. 2) To re-elect as Director Mr M Teacher, who retires under Article 117 of the Articles of Association of the Company and, being eligible, offers himself for re-election. 3) To re-elect as Director Mr G Woolfman, who retires under Article 117 of the Articles of Association of the Company and, being eligible, offers himself for re-election. 4) To appoint Grant Thornton to hold office as auditors of the Company until the conclusion of the next Annual General Meeting at which accounts for the Company are presented and to authorise the Directors to determine the auditors' remuneration. 5) In accordance with the Companies Act 1985 S241A(3), to approve on an advisory only basis the Directors' Remuneration Report contained in the Annual Report. Special Business To consider and, if thought fit, pass the following resolutions, Resolution No 6 being an Ordinary Resolution and Resolutions No 7 and 8 being Special Resolutions: 6) (1) That, in accordance with Section 80 of the Companies Act 1985, the Directors be and are hereby generally and unconditionally authorised to exercise all the powers of the Company to allot relevant securities of the Company to such persons at such times and on generally upon such terms and conditions as the Directors may determine and subject to the following provisions : (a) this authority shall (unless previously revoked, varied or renewed) be for a period expiring on the later of fifteen months from the date hereof and the conclusion of the Annual General Meeting of the Company next following the passing of this Resolution; (b) this authority shall be limited to the allotment of relevant securities up to an aggregate nominal value of #120,000. (2) For the purpose of sub-paragraph 6(1) above: (a) the said authority shall allow and enable the Company to make an offer or agreement at any time prior to the expiry of that authority which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities in pursuance of such an offer or such agreement notwithstanding the expiry of such power; and (b) words or expressions defined in or for the purpose of Part IV of the Companies Act 1985 shall bear the same meaning herein. (3) The authority conferred by sub-paragraph 6(1) above shall be in substitution for all previous authorities conferred upon the Directors to allot relevant securities. 7) (1) That, in accordance with Section 95 of the Companies Act 1985 ("the Act"), the Directors be and are hereby given power to allot equity securities, as defined in Section 94(4) of the Act, for cash pursuant to the general authority conferred upon the Directors by Resolution 6 above as if sub-section (1) of Section 89 of the Act did not apply to any such allotment, provided that the power hereby granted: (a) shall be limited to: (i) the allotment of equity securities in connection with or pursuant to an offer by way of rights to the holders of ordinary shares in the capital of the Company and other persons entitled to participate therein for cash in proportion (as nearly as may be) to the holdings of ordinary shares of such holders (or, as appropriate, to the numbers of ordinary shares which such other persons are for these purposes deemed to hold), subject only to such exclusions or other arrangements as the Directors may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of, or the requirements of, any recognised regulatory body in any territory; (ii) the allotment (other than pursuant to sub-paragraph (a)(i) of this proviso) of equity securities up to an aggregate nominal amount equal to five per cent of the aggregate nominal value of the ordinary shares in the Company then in issue; (b) shall (unless previously revoked, varied or renewed) expire at the later of fifteen months from the date hereof and the conclusion of the Annual General Meeting of the Company next following the passing of this Resolution. (2) The said power shall allow and enable the Company to make an offer or agreement before the expiry of that power which would or might require equity securities to be allotted after such expiry, and the Directors may allot equity securities in pursuance of such an offer or such agreement notwithstanding the expiry of such power. (3) Words and expressions defined in or for the purposes of Part IV of the Companies Act 1985 shall bear the same meaning herein. 8) That the Company be and is hereby unconditionally authorised, as permitted by Section 162 of the Companies Act 1985, to make market purchases (within the meaning of Section 163(3) of that Act) of Ordinary Shares of 5p each in the capital of the Company ('Ordinary Shares') provided that: (i) the maximum number of Ordinary Shares hereby authorised to be purchased shall be 500,000; (ii) the minimum price to be paid for an Ordinary Share is 5p exclusive of all expenses; (iii) the maximum price that may be paid for an Ordinary Share is an amount, exclusive of all expenses, equal to 105 per cent of the average of the middle market quotations for the Ordinary Shares as derived from the Daily Official list of the London Stock Exchange for each of the ten business days immediately preceding the day on which the Ordinary Share is contracted to be purchased; (iv) the authority hereby conferred shall expire on the later of fifteen months from the date hereof and the next Annual General Meeting of the Company except to the extent that the same may have been renewed or extended prior to that date; (v) the Company may however, whilst this authority continues to run, validly make a contract to purchase Ordinary Shares under the authority hereby conferred which will or may be completed after its expiry, and any such completion will accordingly be valid. By order of the Board Registered Office: M A Lassman 19 Cavendish Square Secretary London W1A 2AW 8 July 2003 Notes: (i) A Member entitled to attend and vote at the Meeting convened by this Notice is entitled to appoint one or more proxies to attend and, on a poll, to vote in his or her stead. A proxy need not be a member of the Company. The appointment of a proxy will not preclude a member from being present at the Meeting and voting in person if he or she should subsequently decide to do so. (ii) To be valid, forms of proxy must be lodged with the Company's registrars at: Northern Registrars Limited Northern House Woodsome Park Fenay Bridge Huddersfield HD8 OLA not later than 48 hours before the time appointed for the holding of the Meeting. (iii) The following documents will be available for inspection at the Company's Registered Office at 19 Cavendish Square London W1A 2AW during normal business hours on any weekday (public holidays excepted) from the date of this Notice until the date of the Annual General Meeting and at the Annual General Meeting, for 15 minutes prior to and during the Meeting: (a) the register of Directors' interests in the ordinary shares of the Company kept in accordance with Section 325 of the Companies Act 1985; (b) copies of the service contracts and letter of appointment of all Directors of the Company; and (c) a copy of the Memorandum and Articles of Association of the Company. This information is provided by RNS The company news service from the London Stock Exchange END FR UKRRRORRBRAR
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