Information  X 
Enter a valid email address

Quester VCT 4 PLC (KAY2)

  Print      Mail a friend       Annual reports

Tuesday 01 July, 2003

Quester VCT 4 PLC

Interim Results


                               Quester VCT 4 plc                               

           Interim statement for the six months ended 30 April 2003            

Financial highlights

Per ordinary share (pence)        6 months to          Year to     6 months to
                                                                              
                                30 April 2003  31 October 2002   30 April 2002
                                                                              
Capital values                                                                
                                                                              
Net asset value                          75.0             81.8            91.3
                                                                              
Share price                              82.5             82.5            80.0
                                                                              
Return and dividends                                                          
                                                                              
Dividend                                    -             1.15               -
                                                                              
Cumulative dividend                      2.90             2.90            1.75
                                                                              
Total return*                           77.90            84.70           93.05

*Net asset value plus cumulative dividend per share

Highlights from the Chairman's statement and Investment manager's report

  * Continued progress has been made towards completion of the initial phase of
    the Company's investment programme
   
  * The portfolio so far established is balanced by sector and well spread,
    with investments now completed in 27 companies
   
  * Emphasis is being placed on the need to retain prudent reserves for
    expected follow-on investment, to enable the Company to contribute to the
    further finance required by successful portfolio companies as they grow
   
  * Despite the currently adverse environment, the Board considers that the
    portfolio of investments completed to date is capable of delivering
    attractive returns to shareholders in the longer term
   
Chairman's statement

INTRODUCTION

In the six months ended 30 April 2003 continued progress has been made towards
completion of the initial phase of the Company's investment programme.

INVESTMENTS

We have continued to take a cautious approach to the selection of new
investments, with one new investment being completed in the six months to 30
April 2003, increasing the portfolio to 27 companies, and one further new
investment in course of completion since that date.

Underlying deal flow has been active and a number of other investment
opportunities are currently in due diligence. We expect that the process of
selecting the remaining companies for a portfolio of 30 to 35 investments will
be essentially complete by 31 October 2003.

In view of present conditions in the venture capital market, we are placing
much emphasis on the need for the Company to retain prudent reserves for
expected follow-on investment, to enable it to contribute to the further
finance required by successful portfolio companies as they grow.

The business conditions faced by small companies, particularly in
technology-related sectors, have continued to be very difficult and some of the
companies in which Quester VCT 4 has invested have suffered as a result. In
arriving at a fair valuation of the portfolio, it has been necessary to make
or, in some cases, to increase provisions in respect of certain investments
where the business has fallen behind plan or to reflect current valuation
levels in the venture capital market generally.


NET ASSETS, REVENUE AND DIVIDENDS

Net revenue attributable to shareholders for the half-year was £103,000 (0.2
pence per share), which was derived from dividends on listed equities, interest
on bonds and bank deposit interest, after the deduction of management fees and
other expenses charged to revenue. The directors are not declaring an interim
dividend.

The provisions in respect of venture capital investments, together with
valuation changes in the quoted equity and bond portfolios and expenses charged
to capital, amounted to a loss of 7.0 pence per share, the overall result being
a reduction in the net asset value per share from 81.8 pence at 31 October 2002
to 75.0 pence at 30 April 2003.

OUTLOOK

Adverse underlying conditions for many small companies persist, despite recent
improvements in stock market sentiment, and we have again to report a decline
in the net asset value per share. In view of the planned reduction in the level
of income, the Board does not expect to recommend a final dividend.

Despite the currently adverse environment, the Board considers that the
portfolio of investments completed to date, covering a diverse range of
companies operating in high-growth sectors, is capable of delivering attractive
returns to shareholders in the longer term.

Robert Wright

Chairman

1 July 2003

Investment manager's report

OVERVIEW

During the six months ended 30 April 2003, we have made further progress in the
initial investment phase of the Company. In the current difficult conditions in
the venture capital market, we have continued to take a cautious approach to
the selection of new investments. We have been unwilling to compromise on the
quality of the investment opportunities that we add to the portfolio.

PROGRESS WITH VENTURE CAPITAL INVESTMENT

Quester's position in the venture capital market continues to attract a strong
flow of investment opportunities.

During the six months ended 30 April 2003, one new investment was completed -
in Oxxon Pharmaccines Limited, an early stage company in the healthcare and
life sciences sector - at an initial cost of £1.0 million.This new investment
was made alongside other Quester funds, including one other venture capital
trust and Quester's fund for institutional investors. Follow-on investments
totalling £0.9 million were completed in six existing portfolio companies. This
further investment brought the total of Quester VCT 4's venture capital
investments at 30 April 2003 to £22.1 million in 27 companies at an average
cost of £820,000.

Since the end of the half year, one further new investment is in course of
completion - in an early stage company in the software sector - at an initial
cost of £580,000. A number of other opportunities generated by Quester's deal
flow are currently in due diligence. We expect that the process of selecting
companies for the initial portfolio will be essentially complete by 31 October
2003.

The portfolio that we are building for Quester VCT 4 is an early stage venture
capital portfolio, consisting largely of technology-related companies serving
markets with considerable growth potential over the long term. These young
companies will require further rounds of finance as they grow. It is important
that Quester VCT 4 should be in a position to contribute to this funding
process, provided the companies concerned continue to make satisfactory
progress. Accordingly, Quester VCT 4 holds reserves for further investment in
existing portfolio companies. If the reserves scheduled for investment in the
second half of the current year are taken into account, the total funds
allocated to the current venture capital portfolio (at cost) represent
approximately 63% of net assets at 30 April 2003.

The retention of reserves for follow-on investment is of particular importance
in the current difficult conditions in the venture capital market, and is one
of the reasons why we consider that a venture capital portfolio of about 30 to
35 investments is appropriate.

The VCT legislation requires that by 31 October 2003 at least 70% of the
Company's investments must be represented by qualifying holdings (within the
definitions laid down by the Inland Revenue). As a result of the investment
strategy described above, the rate of growth in the total of qualifying
holdings over the next six months is unlikely to vary significantly from the
average achieved to date.

Accordingly, in order that the 70% requirement is complied with, it is intended
that part of the Company's funds should be switched into types of bank deposit
that do not represent investments within the relevant definition.

This will result in some reduction in the income of the Company but will permit
the venture capital portfolio to be constructed in a manner that is appropriate
to current market conditions and in the interests of long term capital growth.

A WELL BALANCED PORTFOLIO

The portfolio so far established is balanced by sector and well spread. A
summary of the sectors currently covered by the portfolio is provided in the
table below:

Sector                             Existing venture          Cost     Number of
                                            capital                 investments
                                                            £'000              
                                portfolio at cost %                            
                                                                               
Software                                       30.1         6,667             7
                                                                               
Healthcare & life sciences                     19.9         4,406             7
                                                                               
Industrial products &                          10.4         2,291             2
services                                                                       
                                                                               
Communications                                 10.2         2,250             4
                                                                               
Semiconductors                                  9.7         2,154             2
                                                                               
Electronics                                     9.0         1,989             2
                                                                               
Internet                                        6.2         1,375             2
                                                                               
Energy                                          4.5         1,000             1
                                                                               
                                              100.0        22,132            27

VALUATION OF THE VENTURE CAPITAL PORTFOLIO

The unquoted investments have been valued in line with the Company's accounting
policies, which are based on the guidelines issued by the British Venture
Capital Association.

Over the last six months the business conditions faced by small companies,
particularly in technology-related sectors, have remained very difficult. Some
of the companies in which Quester VCT 4 has invested have suffered as a result.
Provisions have been made or, in some cases, increased in respect of certain
investments where the business has fallen behind plan or to reflect current
valuation levels in the venture capital market generally.

Overall, provisions of a further £3.1 million have been made in the half year,
bringing total provisions against cost of the unquoted investments to £7.0
million against 15 investments. One investment, in a company whose shares are
traded on AIM, is carried at mid-market value, which at 30 April 2003
represented a valuation reduction against cost of £589,000 (the market price
has subsequently seen some recovery).The impact of these provisions and
valuation reduction is to bring the unrealised loss on the venture capital
portfolio to £7.6 million.

LISTED EQUITY AND BOND PORTFOLIOS

Approximately £7.6 million, representing 15% of net funds raised, has been set
aside for investment in listed equities, managed by Newton Investment
Management Limited. As at 30 April 2003, a total of £5.2 million at cost was
invested in listed equities, representing some 68% of the funds allocated to
this portfolio, with the balance being held in cash or bonds.As at 30 April
2003, the listed equity portfolio was showing an unrealised loss of £900,000.

Funds awaiting investment in venture capital opportunities are largely invested
in short-dated bonds. At 30 April 2003 the bond portfolio amounted to £21.0
million at cost and was standing at a valuation of an equivalent amount. A
proportion of the bond portfolio will be switched into venture capital
investments during the remainder of the current year and in following years. In
addition, for the reason stated above, part of the bond portfolio will be
switched into bank deposits with effect from 31 October 2003. As a result,
there will be a reduction in the level of interest income of the Company over
the remainder of the current year and in following years.

CONCLUSION

The initial investment phase of the Company is nearing completion with 27
venture capital investments having been completed towards the likely total of
30 to 35 such investments. As has been emphasised earlier, we are building an
early stage venture capital portfolio with a focus largely on
technology-related companies serving markets that have considerable growth
potential over the long term. Despite the very tough current conditions for the
majority of young companies and the uncertainty of current valuation measures,
the portfolio has attractive upside potential.

Quester Capital Management Limited

Manager

1 July 2003

FUND SUMMARY

AS AT 30 APRIL 2003

                                           Cost       Valuation   % of fund
                                                                           
                                           £'000      £'000        by value
                                                                           
10 largest venture capital                                                 
investments                                                                
                                                                           
Automatic Parallel Designs                 1,154      1,154            2.9%
Limited                                                                    
                                                                           
Anadigm Limited                            1,000      1,000            2.5%
                                                                           
CDC Solutions Limited                      1,000      1,000            2.5%
                                                                           
Footfall Limited                           1,000      1,000            2.5%
                                                                           
Workshare Limited                          1,000      1,000            2.5%
                                                                           
Oxxon Pharmaccines Limited                 987        987              2.5%
                                                                           
Bowman Power Limited                       1,000      975              2.5%
                                                                           
First Index Group Lmited                   1,291      969              2.5%
                                                                           
Sift Group Limited                         875        875              2.2%
                                                                           
Avidex Limited                             733        733              1.9%
                                                                           
                                           10,040     9,693           24.5%
                                                                           
Other venture capital                      12,093     4,885           12.3%
investments                                                                
                                                                           
Total venture capital                      22,133     14,578          36.8%
investments                                                                
                                                                           
Listed fixed interest                      20,996     21,029          53.0%
investments                                                                
                                                                           
Listed equity investments                  5,210      4,306           10.9%
                                                                           
Total investments                          48,339     39,913         100.7%
                                                                           
Cash and net liabilities                   (268)      (268)          (0.7)%
                                                                           
Net assets                                 48,071     39,645         100.0%

UNAUDITED FINANCIAL STATEMENTS

STATEMENT OF TOTAL RETURN

Incorporating the revenue account of the Company

                   Note 6 months ended 30 April   6 months ended 30        Year
                                 2003                 April 2002       ended 31
                                                                        October
                                                                           2002
                                                                               
                        Revenue Capital Total   Revenue Capital Total  Total   
                                                                               
                        £'000   £'000   £'000   £'000   £'000   £'000  £'000   
                                                                               
Losses on               -       (3,450) (3,450) -       (465)   (465)  (5,008) 
investments                                                                    
                                                                               
Income                  563     -       563     811     -       811    1,479   
                                                                               
Investment              (251)   (251)   (502)   (240)   (240)   (480)  (962)   
management fee                                                                 
                                                                               
Other expenses          (209)   -       (209)   (181)   -       (181)  (296)   
                                                                               
Return/(loss) on        103     (3,701) (3,598) 390     (705)   (315)  (4,787) 
ordinary                                                                       
activities before                                                              
taxation                                                                       
                                                                               
Tax on ordinary         -       -       -       (102)   72      (30)   (6)     
activities                                                                     
                                                                               
Return/(loss) on        103     (3,701) (3,598) 288     (633)   (345)  (4,793) 
ordinary                                                                       
activities after                                                               
taxation                                                                       
                                                                               
Proposed dividend       -       -       -       -       -       -      (607)   
                                                                               
Transfer to/            103     (3,701) (3,598) 288     (633)   (345)  (5,400) 
(from) reserves                                                                
                                                                               
Earnings/(loss)    3       0.2p  (7.0)p  (6.8)p 0.5p    (1.2)p  (0.7)p (9.0)p  
per share                                                                      

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 Company has only one class of business and derives its income from
investments made in shares and securities and from bank deposits.

UNAUDITED FINANCIAL STATEMENTS

(continued)

BALANCE SHEET

                                   Note   30 April    30 April    31 October   
                                          2003        2002        2002         
                                                                               
                                          £'000       £'000       £'000        
                                                                               
Fixed assets                                                                   
                                                                               
Investments                               39,913      45,839      42,054       
                                                                               
Current assets                                                                 
                                                                               
Debtors                                   735         905         3,099        
                                                                               
Cash at bank                              1,332       7,053       1,320        
                                                                               
                                          2,067       7,958       4,419        
                                                                               
Creditors: amounts falling due            (2,238)     (5,287)     (3,178)      
within one year                                                                
                                                                               
Net current (liabilities)/assets          (171)       2,671       1,241        
                                                                               
Creditors: amounts falling due in                                              
over one year                                                                  
                                                                               
Loan Stock                                (97)        (97)        (97)         
                                                                               
Net assets                                39,645      48,413      43,198       
                                                                               
Capital and reserves                                                           
                                                                               
Called up equity share capital            528         530         528          
                                                                               
Special reserve                    1      49,496      49,702      49,532       
                                                                               
Share premium account              1      218         125         137          
                                                                               
Capital reserve - realised         1      (2,312)     (1,617)     (2,140)      
                                                                               
- unrealised                       1      (8,426)     (650)       (4,897)      
                                                                               
Revenue reserve                    1      141         323         38           
                                                                               
Total equity shareholders' funds          39,645      48,413      43,198       
                                                                               
Net asset value per share                 75.0p       91.3p       81.8p        

SUMMARISED CASH FLOW STATEMENT

                                        6 months     6 months     Year ended   
                                        ended        ended                     
                                                                  31 October   
                                        30 April     30 April     2002         
                                        2003         2002                      
                                                                               
                                        £'000        £'000        £'000        
                                                                               
Net cash inflow from operating          (108)        4,984        926          
activities                                                                     
                                                                               
Corporation tax paid                    -            -            (281)        
                                                                               
Net capital expenditure and financial   682          (1,080)      (2,314)      
investment                                                                     
                                                                               
Dividends paid                          (607)        (925)        (925)        
                                                                               
Financing                               45           127          (33)         
                                                                               
Increase/(decrease) in cash for the     12           3,106        (2,627)      
period                                                                         
                                                                               
Reconciliation of net cashflow to                                              
movement in net funds                                                          
                                                                               
Increase/(decrease) in cash for the     12           3,106        (2,627)      
period                                                                         
                                                                               
Net funds at the start of the period    1,320        3,947        3,947        
                                                                               
Net funds at the end of the period      1,332        7,053        1,320        

Notes to the unaudited financial statements

1. MOVEMENT IN RESERVES

                                Special  Share    Capital  Capital    Revenue
                                reserve  premium  reserve  reserve    reserve
                                £'000    account  realised unrealised        
                                         £'000                        £'000  
                                                  £'000    £'000             
                                                                             
At 1 November 2002              49,532   137      (2,140)  (4,897)    38     
                                                                             
Shares allotted under the       -        81       -        -          -      
dividend reinvestment scheme                                                 
                                                                             
Share buy back and cancellation (36)     -        -        -          -      
                                                                             
Net gain on realisation of      -        -        52       -          -      
investments                                                                  
                                                                             
Net unrealised depreciation of  -        -        -        (3,502)    -      
investments                                                                  
                                                                             
Transfer from unrealised        -        -        27       (27)       -      
reserve                                                                      
                                                                             
Investment management fee       -        -        (251)    -          -      
charged to capital                                                           
                                                                             
Net revenue retained for the    -        -        -        -          103    
period                                                                       
                                                                             
At 30 April 2003                49,496   218      (2,312)  (8,426)    141    

 2. The financial information contained in this report has been prepared on the
    basis of the accounting policies set out in the 2002 Annual Report.
   
 3. The calculation of the revenue earnings and capital loss per share for the
    period is based respectively on the net revenue after tax of £103,000 and
    the net capital loss after tax of £3,701,000 divided by the weighted
    average number of shares in issue during the period of 52,750,906.
   
 4. The unaudited financial statements set out above do not constitute
    statutory accounts within the meaning of Section 240 of the Companies Act
    1985.
   
 5. Copies of the unaudited interim results are expected to be sent to
    shareholders on 1 July 2003. Further copies can be obtained from the
    Company's registered office.