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Quester VCT 4 PLC (KAY2)

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Tuesday 13 July, 2004

Quester VCT 4 PLC

Interim Results


                               Quester VCT 4 plc                               

           Interim statement for the six months ended 30 April 2004            

Financial highlights

Per ordinary share (pence)       6 months to         Year to     6 months to
                                                                            
                               30 April 2004 31 October 2003   30 April 2003
                                                                            
Capital values                                                              
                                                                            
Net asset value                         72.4            77.2            75.0
                                                                            
Share price                             82.5            82.5            82.5
                                                                            
Return and dividends                                                        
                                                                            
Dividend                                   -               -               -
                                                                            
Cumulative dividend                      2.9             2.9             2.9
                                                                            
Total return*                           75.3            80.1            77.9

*Net asset value plus cumulative dividend per share

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

  * During the half-year further progress has been made towards completion of
    the initial investment programme. The opportunity has been taken to broaden
    the spread of investment stages represented within the portfolio by
    investing in a number of companies raising capital on AIM.
   
  * Successful trade sales or IPOs of four venture capital investments have
    been achieved (either during the half-year or subsequently), with the sale
    of CDC Solutions Limited and Sterix Limited, the flotation of Amino
    Technologies plc on AIM and the well-publicised acquisition of On Demand
    Distribution Limited ('OD2') by the NASDAQ-quoted company Loudeye
    Corporation.
   
  * Changes in certain unquoted investment valuations resulted in a decline in
    the net asset value of 4.8p per share over the half-year to 72.4p at 30
    April 2004.
   
  * Since 30 April 2004, however, realised and unrealised gains on the
    transactions involving Amino Technologies plc and the acquisition of OD2 by
    Loudeye Corporation are equivalent - on the basis of the relevant share
    prices as at 9 July 2004 - to 2.0p per share.
   
  * The terms of the trade sales of CDC Solutions Limited and OD2 offer scope
    for further
   
upside in the future, depending on entitlements under earn-out arrangements
and, in the

case of OD2, on the share price performance of the acquirer.

Chairman's statement

INTRODUCTION

During the six months ended 30 April 2004 further progress has been made
towards completion

of the initial phase of the Company's investment programme. The opportunity has
also been taken to broaden the spread of investment stages represented within
the portfolio by investing in

a number of companies raising capital on the Alternative Investment Market
(AIM).

We are pleased to be able to report that successful trade sales or IPOs of four
venture capital investments have been achieved, either during the half year or
subsequently.

INVESTMENT PROGRESS AND PORTFOLIO PERFORMANCE

Eight new investments were completed during the period at an initial cost of £
3.1 million. These

included four investments in unquoted companies, Mesophotonics Limited, Amino
Technologies

plc, Digital Union Limited and HTC Healthcare Limited (all referred to in the
last Annual Report as having been completed since the year-end) and a total of
£818,000 invested in four AIM companies. Since the period end, the shares of
AminoTechnologies plc have been admitted to trading on AIM.

The percentage of the Company's assets at 30 April 2004 represented by unquoted
venture capital investments is 46.2% (with further amounts reserved for
follow-on investment) alongside

8.0% in companies whose shares are now traded on AIM.

Successful trade sales or IPOs of four venture capital investments have been
achieved, either during

the half-year or subsequently, with the sale of CDC Solutions Limited and
Sterix Limited, the flotation of Amino Technologies plc ('Amino') on AIM and
the well-publicised acquisition of On

Demand Distribution Limited ('OD2') by the NASDAQ-quoted company Loudeye
Corporation.

A realised gain has been recognised in the half-year to 30 April 2004 in
respect of the sale of

Sterix Limited, while the sale of CDC Solutions Limited has been accounted for
at this stage on a

no profit/no loss basis.The transactions involving Amino and OD2 have resulted
in realised and

unrealised gains for Quester VCT 4 since the end of the half-year.

In the cases of CDC Solutions Limited and OD2, the terms of the above-mentioned
transactions

offer scope for further upside in the future, depending on entitlements under
earn-out arrangements and, in the case of OD2, on the share price performance
of the acquirer Loudeye Corporation.

During the half year a number of key companies in Quester VCT 4's portfolio
have been successful in raising new funding rounds. In certain cases, however,
current conditions in the investment market have meant that the new round has
been priced at a lower level than previously, thus resulting in a downward
valuation movement. Provisions have also been made in a number of cases where
business performance has fallen behind plan. The net effect of valuation
changes has been a reduction in the carrying value of the ongoing portfolio of
venture capital investments of £2.7 million.

NET ASSETS, REVENUE AND DIVIDENDS

In revenue account terms, the statement of total return for the six months
ended 30 April 2004

shows a deficiency of income over management fees and other expenses charged to
revenue of

£336,000 (0.6p per share).

The reduction in the level of interest income in the half-year results from the
switch of assets out

of bonds into cash in order to comply with theVCT rules.

Valuation changes in respect of unquoted venture capital investments, other
capital account items

(including the realised gain on the sale of Sterix Limited) and expenses
charged to capital,

amounted to a net loss of £2,216,000.

The overall result amounted to a decline in the net asset value of 4.8p per
share over the half-year

to 72.4p at 30 April 2004.The directors are not declaring an interim dividend.

OUTLOOK

It should be appreciated that the unquoted investments held by the Company are,
in most cases,

still at an early stage and will take time to mature.

It has been encouraging to see the re-emergence of M&A activity in the unquoted
company

sector and the revival of new issue activity on AIM. At the date of this
report, the strong early-stage

weighting of the portfolio is beginning to be balanced by a number of
investments in AIM

companies, deferred consideration receivable from quoted acquirers and a
holding of NASDAQ quoted stock.

Realised and unrealised gains on transactions achieved since 30 April 2004 are
equivalent - on the basis of the relevant share prices as at 9 July 2004 - to
2.0p per share.The terms of certain of the trade sale transactions offer scope
for further upside in the future, depending on entitlements under earn-out
arrangements and, in one case, also on the share price performance of the
acquirer.

The Board considers that the ongoing portfolio of unquoted and AIM investments
will provide good opportunities for future capital growth.

Robert Wright

Chairman

13 July 2004

Investment manager's report

OVERVIEW

Quester's position in the venture capital market has continued to attract a
strong flow of

investment opportunities.

With the revival of new issue activity in the Alternative Investment Market
(AIM), the

opportunity has also been taken to broaden the spread of investment stages
represented

within the portfolio by investing in a number of companies raising capital on
that market.

Investments completed during the half year and the transactions detailed below
brought the

total of Quester VCT 4's venture capital investments at 30 April 2004 to £26.6
million at

cost in 35 portfolio companies, including 29 unquoted companies and 6 companies
whose

shares are now traded on AIM. This represents a diversified portfolio of
companies operating

in a wide range of markets with high growth potential.

An encouraging development in recent months has been the re-emergence of M&A
activity

in the unquoted company sector, reflected in the case of Quester VCT 4 by the
trade sales

and IPOs of four investments as detailed below.

PROGRESS WITH VENTURE CAPITAL INVESTMENT

During the six months ended 30 April 2004, eight new investments were completed
at an

initial cost of £3.1 million.These included the four investments in unquoted
companies referred to in the last Annual Report as having been completed since
the year end: two in the electronics sector, Mesophotonics Limited (£893,000)
and Amino Technologies plc (£357,000); one in software, Digital Union Limited
(£536,000); and one in consumer services, HTC Healthcare Limited (£536,000).
Since the half-year end, the shares of Amino Technologies plc have been
admitted to trading on AIM and part of the holding has been sold, realising a
gain of £228,000.

In pursuit of the Company's strategy to invest in attractive companies raising
capital on AIM,

a total of £818,000 has been invested in four companies covering a range of
different sectors: Offshore Hydrocarbon Mapping plc, Polaron plc, Public
Recruitment Group plc and Quadnetics plc.

During the half year £1.8 million was invested in 10 of the existing portfolio
companies,

either as further tranches of originally agreed commitment or as follow-on
investment.The

follow-on investments completed during this period included additional
commitments to

Cyclacel Limited (£500,000), Lorantis Holdings Limited (£650,000) and Teraview

Limited (£125,000).

REALISATION OF VENTURE CAPITAL INVESTMENTS

We are pleased to be able to report that successful trade sales or IPOs of four
venture capital

investments have been achieved, during the half-year to 30 April 2004 and
subsequently:

a) the software company CDC Solutions Limited ('CDC') was sold in December 2003
to Information Holdings Inc., a US-based information services group quoted on
the New

York Stock Exchange and which is the parent company of Liquent, Inc., hitherto
CDC's major competitor.The CDC board and Quester considered that CDC
shareholders would ultimately benefit from a merger of the two companies and
their improved prospects for growth as a combined business. Quester VCT 4's
investment was sold for cash and deferred guaranteed cash equivalents to repay
a substantial part of the original £1.0 million cost. Depending upon the future
performance of the combined business over the coming three years, a good uplift
on cost may ultimately be achieved. At 30 April 2004, this transaction has been
reflected in the accounts on a no profit/no loss basis.

b) the biopharmaceutical company Sterix Limited was sold in February 2004 to
the

European pharmaceutical group Ipsen, Quester VCT 4's investment realising
immediate

cash proceeds of £954,000 and generating a gain of £388,000 on cost of £566,000
(with

further deferred proceeds of £100,000 being contingently receivable).

c) since the end of the half-year, in connection with the admission of the
shares of Amino Technologies plc to trading on AIM, Quester VCT 4 has sold 36%
of its holding, realising proceeds of £357,000 and retaining a holding with a
value - based on the share price on AIM as at 9 July 2004 - of £796,000.This
investment has accordingly produced realised and unrealised gains at this stage
of £795,000 (equivalent to 1.5p per share).

d) most recently, On Demand Distribution Limited ('OD2'), which has
successfully developed as the largest digital music service provider in Europe,
has been acquired by the NASDAQ-quoted company Loudeye Corporation
('Loudeye').The combination of the two businesses creates the largest
business-to-business digital media provider in the world with the largest
licensed digital music catalogue in the industry. For Quester VCT 4, the
initial consideration received in the form of Loudeye shares - based on the
price on NASDAQ as at 9 July 2004 - and the accounting value of the deferred
consideration receivable together amount to £842,000, producing realised and
unrealized gains at this stage of £274,000 (equivalent to 0.5p per share).

The ultimate return to Quester VCT 4 will depend upon movements in Loudeye's
share price, foreign exchange movements and the future performance of the
business itself (under an earn-out entitlement).

A WELL BALANCED PORTFOLIO

The portfolio so far established is balanced by sector and well spread. A
summary of the sectors covered by the portfolio at 30 April 2004 is provided in
the table below:

Sector                     Percentage of venture  Valuation at     Number of
                            capital portfolio at 30 April 2004   investments
                                     valuation %                            
                                                        £ `000              
                                                                            
Software                                    28.5         5,869             8
                                                                            
Healthcare & life                           26.7         5,499             8
sciences                                                                    
                                                                            
Communications                              11.9         2,439             5
                                                                            
Industrial products &                        9.6         1,983             6
services                                                                    
                                                                            
Semiconductors                               8.3         1,716             2
                                                                            
Electronics                                  6.5         1,343             3
                                                                            
Internet                                     5.9         1,210             2
                                                                            
Consumer goods & services                    2.6           536             1
                                                                            
                                           100.0        20,595            35

The Company holds substantial reserves - in the form of listed equities,
short-dated bonds and cash - for follow-on investment in the existing
portfolio, provided the companies concerned continue to make satisfactory
progress.

VALUATION OF THE VENTURE CAPITAL PORTFOLIO

The venture capital investments have been valued in line with the Company's
accounting policies which are based on the valuation guidelines issued by the
British Venture Capital Association (BVCA) in June 2003.

It was encouraging that Anadigm Limited ('Anadigm') closed a $15 million
funding round to which Quester VCT 4 has contributed £278,000 (including a
final tranche of £133,000 invested after 30 April 2004). Anadigm provides
breakthrough technology to the electronics market, its devices enabling
electronic system developers to gain significant improvements in design times,
control and flexibility in the production of analogue circuits. The market for
such products is expected to be in excess of $500 million, with Anadigm having
the potential to dominate the market with its technology. Current conditions in
the private equity market and the stage of development reached by the company
caused the recent round to be priced at a lower level than previous rounds,
necessitating a downward adjustment of £914,000 in the carrying value of this
investment. Despite this, we believe that Anadigm offers strong prospects of
achieving an ultimately attractive return on the investment cost.

Teraview Limited closed a £6 million funding round at a price representing an
uplift to the price at which Quester VCT 4 originally invested, resulting in a
valuation uplift of £108,000.The company, which is focused on imaging and
diagnostic technology, is now implementing its business plan and initial
customer contacts are encouraging.

The performance of First Index Group Limited, which has been pursuing a
strategy to become a leading business-to-business marketplace for industrial
custom-manufactured parts and assemblies, has proved disappointing. Full
provision has now been made against cost of this investment.

Provisions totalling a further £833,000 have been made against four other
unquoted investments, where business performance has fallen behind plan or a
valuation change has been necessary to reflect current conditions in the market
for venture capital finance.

The net effect of valuation changes during the half-year has been a reduction
in the carrying value of the ongoing portfolio of venture capital investments
of £2.7 million.

LISTED EQUITY AND BOND PORTFOLIOS

For the first three years of the Company, funds awaiting investment in venture
capital opportunities were largely invested in short dated bonds. Immediately
prior to 31 October 2003, the bulk of this portfolio was switched into cash in
order to comply with the VCT rules. At the half year the Company retained bonds
to a value of £1.5 million, as well as a portfolio of listed equities of £5.6
million.

CONCLUSION

As at the date of this report, the initial investment phase of the Company is
largely complete with a portfolio of 35 venture capital investments. The total
number of venture capital investments will be kept under review and further
investments will be made if appropriate.

While a number of the companies in which Quester VCT 4 has invested have not
met their objectives during the period, it is pleasing to see a significant
evolution of the portfolio with a

number of trade sales and IPOs having been achieved which will lead in due
course to full

realisation of these investments. Other portfolio companies continue to show
the potential to fulfil expectations. Overall, we are confident that the
portfolio has substantial upside potential.

Quester Capital Management Limited

Manager

13 July 2004

FUND SUMMARY

AS AT 30 APRIL 2004

                                         Cost      Valuation % of fund
                                                                      
                                         £'000         £'000  by value
                                                                      
Ten largest venture capital                                           
investments                                                           
                                                                      
AIT Group plc (investment                1,130         1,870      4.9%
traded on AIM)                                                        
                                                                      
Arithmatica Limited                      1,486         1,486      3.9%
                                                                      
Azea Networks Inc.                       1,332         1,332      3.5%
                                                                      
Lorantis Holdings Limited                1,400         1,025      2.7%
                                                                      
Workshare Limited                        1,000         1,000      2.6%
                                                                      
Footfall Limited                         1,000         1,000      2.6%
                                                                      
Cyclacel Limited                         1,000         1,000      2.6%
                                                                      
Oxxon Therapeutics Limited               987             987      2.6%
                                                                      
Nomad Software Limited                   1,077           977      2.6%
                                                                      
Mesophotonics Limited                    893             893      2.4%
                                                                      
                                         11,305       11,570     30.4%
                                                                      
Other venture capital                                                 
investments                                                           
                                                                      
Unquoted investments                     14,242        7,855     20.7%
                                                                      
AIM investments*                         1,090         1,170      3.1%
                                                                      
Total venture capital                    26,637       20,595     54.2%
investments                                                           
                                                                      
Listed fixed interest                    1,466         1,498      3.9%
investments                                                           
                                                                      
Listed equity investments                5,495         5,571     14.7%
                                                                      
Total investments                        33,598       27,664     72.8%
                                                                      
Cash and other net assets                10,318       10,318     27.2%
                                                                      
Net assets                               43,916       37,982      100%

* including Amino Technologies plc, the shares of which have been admittted to
trading on AIM since 30 April 2004.

UNAUDITED FINANCIAL STATEMENTS

STATEMENT OF TOTAL RETURN

Incorporating the revenue account of the Company

                   Note 6 months ended 30 April 6 months ended 30 April     Year
                                 2004                    2003           ended 31
                                                                         October
                                                                            2003
                                                                                
                        Revenue Capital Total   Revenue Capital Total   Total   
                                                                                
                        £'000    £'000  £'000   £'000   £'000   £'000   £'000   
                                                                                
Losses on               -       (1,962) (1,962) -       (3,450) (3,450) (2,056) 
investments                                                                     
                                                                                
Income                  145        -        145 563     -       563     1,016   
                                                                                
Investment              (254)     (254)   (508) (251)   (251)   (502)   (1,002) 
management fee                                                                  
                                                                                
Other expenses          (227)      -      (227) (209)   -       (209)   (436)   
                                                                                
(Loss)/return on        (336)   (2,216) (2,552) 103     (3,701) (3,598) (2,478) 
ordinary                                                                        
activities before                                                               
taxation                                                                        
                                                                                
Tax on ordinary         -       -       -       -       -       -       4       
activities                                                                      
                                                                                
(Loss)/return on        (336)   (2,216) (2,552) 103     (3,701) (3,598) (2,474) 
ordinary                                                                        
activities after                                                                
taxation                                                                        
                                                                                
Proposed dividend       -       -       -       -       -       -       -       
                                                                                
Transfer (from)/to      (336)   (2,216) (2,552) 103     (3,701) (3,598) (2,474) 
reserves                                                                        
                                                                                
(Loss)/earnngs per 3    (0.6)p   (4.2)p  (4.8)p 0.2p    (7.0)p  (6.8)p  (4.6)p  
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    31 October   30 April   
                                           2004        2003         2003       
                                                                               
                                           £'000       £'000        £'000      
                                                                               
Fixed assets                                                                   
                                                                               
Investments                                27,664      26,687       39,913     
                                                                               
Current assets                                                                 
                                                                               
Debtors                                    720         609          735        
                                                                               
Cash at bank                               9,954       13,809       1,332      
                                                                               
                                           10,674      14,418       2,067      
                                                                               
Creditors (amounts falling due             (256)       (266)        (2,238)    
within one year)                                                               
                                                                               
Net current assets / (liabilities)         10,418      14,152       (171)      
                                                                               
Creditors (amounts falling due             (100)       (100)        (97)       
after more than one year)                                                      
                                                                               
Net assets                                 37,982      40,739       39,645     
                                                                               
Capital and reserves                                                           
                                                                               
Called-up equity share capital             525         528          528        
                                                                               
Share premium account              1       218         218          218        
                                                                               
Special reserve                    1       44,099      49,466       49,496     
                                                                               
Capital reserve - realised         1       (713)       (3,993)      (2,312)    
                                                                               
- unrealised                       1       (5,933)     (5,602)      (8,426)    
                                                                               
Revenue reserve                    1       (214)       122          141        
                                                                               
Total equity shareholders' funds           37,982      40,739       39,645     
                                                                               
Net asset value per share                  72.4p       77.2p        75.0p      

SUMMARISED CASH FLOW STATEMENT

                                        6 months     Year ended    6 months    
                                        ended                      ended       
                                                     31 October                
                                        30 April     2003            30 April  
                                        2004                           2003    
                                                                               
                                        £'000        £'000         £'000       
                                                                               
Net cash (outflow)/inflow from          (695)        327           (108)       
operating activities                                                           
                                                                               
Corporation tax paid                    -            (23)          -           
                                                                               
Net capital expenditure and financial   (2,956)      12,777        682         
investment                                                                     
                                                                               
Dividends paid                          -            (607)         (607)       
                                                                               
Financing                               (204)        15            45          
                                                                               
(Decrease)/increase in cash for the     (3,855)      12,489        12          
period                                                                         
                                                                               
Reconciliation of net cashflow to                                              
movement in net funds                                                          
                                                                               
(Decrease)/increase in cash for the     (3,855)      12,489        12          
period                                                                         
                                                                               
Net funds at the start of the period    13,809       1,320         1,320       
                                                                               
Net funds at the end of the period      9,954        13,809        1,332       

Notes to the unaudited financial statements

1. MOVEMENT IN RESERVES

                              Share    Special Capital  Capital    Revenue
                              premium  reserve reserve  reserve    reserve
                              account  £'000   realised unrealised        
                              £'000                                £'000  
                                               £'000    £'000             
                                                                          
At 1 November 2003            218      49,466  (3,993)  (5,602)    122    
                                                                          
Share buy back and            -        (201)   -        -          -      
cancellation                                                              
                                                                          
Net gain on realisation of    -        -       499      -          -      
investments                                                               
                                                                          
Write off of investments      -        -       (22)     -          -      
                                                                          
Net unrealised depreciation                                               
                                                                          
- venture capital investments -        -       -        (2,668)    -      
                                                                          
- listed investments          -        -       -        228        -      
                                                                          
Transfer from unrealised      -        -       (2,109)  2,109      -      
reserve                                                                   
                                                                          
Transfer from special reserve -        (5,166) 5,166    -          -      
                                                                          
Investment management fee     -        -       (254)    -          -      
charged to capital                                                        
                                                                          
Net loss for the period       -        -       -        -          (336)  
                                                                          
At 30 April 2004              218      44,099  (713)    (5,933)    (214)  

A transfer has been made from the special reserve, created following the
reduction of share premium account, representing the total of realised losses
on investments incurred

to 30 April 2004.

 2. The financial information contained in this report has been prepared on the
    basis of the accounting policies set out in the 2003 Annual Report.
   
 3. The calculation of the revenue loss and capital loss per share for the
    period is based respectively on the net revenue loss after tax of £336,000
    and the net capital loss after tax of £2,216,000 divided by the weighted
    average number of shares in issue during the period of 52,654,371. The net
    asset value per share as at 30 April 2004 is based on the net assets of £
    37,982,000 divided by the 52,483,965 ordinary shares in issue at that date.
   
 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 16 July 2004. Further copies can be obtained from the
    Company's registered office.