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Quester VCT 4 PLC (KAY2)

  Print      Mail a friend       Annual reports

Tuesday 10 January, 2006

Quester VCT 4 PLC

Annual Report and Accounts

                               QUESTER VCT 4 PLC                               

                              ANNUAL REPORT 2005                               

Summary of results for the year ended 31 October 2005

Per ordinary share         2005       2004        2003
Capital values                                        
Net asset value            61.3       67.7        77.2
Share price                60.0       62.0        82.5
Return and                                            
Dividend                    1.0          -           -
Cumulative                  3.9        2.9         2.9
Total return*              65.2       70.6        80.1
*Net asset value plus cumulative dividend             


No dividend is proposed in respect of the year ending 31 October 2005.

The directors have resolved to pay an interim dividend of 1p per share in
respect of the year ending 31 October 2006.

Payment date                            1 March 2006        
Ex-dividend date                        1 February 2006     
Associated record date                  3 February 2006     



Quester, the Manager of Quester VCT 4, is one of a small number of venture
capital houses that specialise in high growth early stage venture capital
opportunities. These opportunities are largely found in two areas - information
and communication technologies and healthcare and life sciences - market
sectors offering investors considerable potential. It is also an area dominated
to a significant degree by institutional investors, who are used to taking a
long term view of up to 10 years.

It would be normal to expect net assets to fall in the early years in a fund of
this type, as losses and running costs are incurred, before rising when the
more successful investments begin to increase in value. This traditional
'curve' has been exaggerated by the difficult market conditions in the
technology area since the start of the fund in January 2001.

The current climate is now somewhat more favourable for early stage technology
investment. Pricing is more realistic and M&A activity is at a higher level
than we have seen for a number of years. At the same time, we are entering the
fund's second phase where we can normally expect some of the companies in the
portfolio to begin to show their worth. The next few years will be most
important, as this is when a maturing portfolio should deliver its potential


Net assets have reduced by £4.2million and stand at £31.0million at 31 October
2005. The changes underlying the movement in net assets are as follows:

                                                               £'000  Pence per
Net asset value at 31 October 2004                            35,240       67.7
Income                                                           437        0.9
Operating expenses                                           (1,176)      (2.3)
Realised loss on investments                                   (404)      (0.8)
Unrealised loss on revaluation of investments                (1,737)      (3.4)
Dividend paid                                                  (521)      (1.0)
Dividend reinvestment scheme                                      68          -
Share buy-backs                                                (915)        0.2
Net asset value at 31 October 2005                            30,992       61.3


There has been some good, positive underlying progress made by a number of
companies in the venture capital portfolio in what has been a particularly
active year. Some of these companies, which have significant potential, are at
a critical point in their development in terms of proving their science or
getting their products into the market.

We are seeing an increased level of M&A activity within the portfolio. It is
good to be able to report the sale of Footfall Limited after the year end,
which generated cash proceeds of £3.0million and a profit of £2.0million. This
gain, which is not included in the results for the period to 31 October 2005,
is equivalent to approximately 4p per share or a 6.5% increase in net asset

It has also been a very active period on the investment side; £4.9million has
been invested in 17 existing companies and four new investments have been made
in companies with good potential. We believe that current prices offer the
prospect of attractive returns.


An interim dividend of 1p per share was paid on 1 April 2005. This was paid
from realised gains that arose from the venture capital portfolio, principally
the sale of Sterix Limited.

The sale of Footfall Limited following the year end has generated a sizeable
gain for the Company. The Board has therefore resolved to distribute part of
this gain through an interim dividend of 1p per share, at a cost of
approximately £500,000, payable on 1 March 2006.

We have withdrawn the Company's dividend reinvestment scheme in which a number
of shareholders had participated. This follows a recent change to the
Prospectus Rules that did not provide for the type of scheme operated by the
Company. The Board is considering the creation of a new scheme to comply with
the latest rules.


We have been seeking to add fresh skills to the Board and I am pleased to
report the appointment of Rudy Burger as an additional director. He has over 25
years of international business experience and has held senior positions at
Xerox, NEC, Media Lab Europe and Scipher and has wide experience in the
information technology and digital media sectors.

We would like to thank Rob Barrow for his valuable contribution to the Board up
to his retirement in April 2005.


During the year RSM Robson Rhodes LLP was appointed as auditor of the Company.


The environment for venture capital investment has improved. Pricing of
investments is more realistic and the increased level of M&A activity we are
seeing bodes well for the existing portfolio. As always it is impossible to
predict timing, but we are optimistic that during the next three to four years,
we will see a step up in the level of realisations and an associated increase
in net asset value. We should also start to see an increase in the level of
dividend distributions, as and when gains are realised.

It has been a very tough period and we are grateful to you for your continuing

Robert Wright


10 January 2006



We are currently in a more favourable climate for early stage venture capital
investment than in the Fund's earlier years and the majority of companies in
the portfolio have performed much as expected during what has been a very busy
period. The M&A market has been increasingly active and, following the year
end, we have seen the trade sale of Footfall, which has realised a significant
gain for the Company. We see the possibility of further M&A activity during the
current year.


The year to 31 October 2005 has been a particularly active period for the
venture capital portfolio. This high level of activity has continued after the
year end. We have worked very closely with a large number of portfolio
companies, providing further funding to support the development of their
businesses, where appropriate. Progress has been made by a number of companies
towards public market listings, with one AIM flotation, and others actively
involved in M&A discussions.

• Celoxica Holdings plc achieved an AIM flotation in October 2005 as part of a
£6.1million fundraising. Celoxica is a leading provider of electronic system
level design (ESL) and synthesis solutions used for the design and development
of complex electronic products and embedded systems. Typical applications
include use in high performance missile detection systems and motion picture
image analysis. ESL is set to become a major growth area in the electronics
design automation market and, post flotation, Celoxica is well placed to take
advantage of this.

• Cyclacel plc has recently announced plans to combine with Xcyte Therapies,
Inc. to form a larger international biopharmaceutical company. The transaction
is anticipated to close at the end of the first quarter of 2006 creating
Cyclacel Pharmaceuticals, Inc., a publicly-traded company with approximately
$20million in cash, a franchise in one of the most exciting fields of biology
and a development-stage portfolio of targeted oncology drug candidates
affecting the cancer cell cycle.

• In October, Lorantis Limited was acquired by Celldex Therapeutics, Inc., a US
based biotechnology company focused on the discovery and commercialisation of
products for the treatment of cancer, infectious diseases and immune system
disorders. The effective merger of the two companies improves the prospect of
an IPO.

• The majority of the holding in Loudeye Corp, a NASDAQ traded stock, whose
paper was received on the sale of On Demand Distribution Limited, has been
sold. This investment has now returned cash of £0.8million, which, when taken
with the value of the residual holding, is equivalent to a return of 1.4 times
original cost.

Particular progress has been made by the following portfolio companies in the

• Antenova Limited, a leading developer of advanced antenna technology and
innovative radio solutions used in wireless communications, has signed two
significant contracts in the period. Following the completion of a £12million
funding round in January 2005, the company is well positioned to meet the
demand of the global handset and laptop antenna market, which is predicted to
grow significantly over the next two years.

• Identum Limited, specialists in cryptography and information security,
focusing on the control, authentication and protection of emails and other
digital information, continues to make positive progress following the launch
of Private Post in October. Private Post is a user-friendly, military grade
encryption product, targeted at the business community, which enables emails to
be sent securely. This is a growing market, with regulation and compliance
requirements leading to an increased demand for secure email communication.

• Footfall Limited, the leading provider of customer counting technology and
statistics to both the retail and retail property sectors, continued to make
good progress. Following the year end, the company was sold to Experian, the
information solutions company, giving rise to cash proceeds of £3.0million for
Quester VCT 4 and a profit of £2.0million. The resulting profit and associated
uplift in net asset value will be recognised in the current year ending 31
October 2006.


Three investments have been written off during the year. The largest was
Digital Union UK Limited giving rise to a loss of £679,000. The Quester team
had been closely involved with the business, which designed software enabling
buyers to optimise auction-based purchasing decisions, and a modest amount of
additional capital had been advanced to give management time to achieve certain
business objectives. In the event, these were not achieved and the decision was
taken not to provide further funding. The final balance of the investment in
Anadigm Limited was also written off, resulting in a loss of £223,000. This
investment had been substantially written down over the last two years from its
original cost. This was a great disappointment following the significant
efforts made to develop and support this business, which a widely spread
investment syndicate saw as having considerable potential. The company
developed a product providing added functionality, potential cost savings and
flexibility in design for electronic system companies building flexible analog
circuits. However, it did not achieve fast enough growth in sales to justify
further funding support. Reqio Limited entered into administration during the
period and the final remaining value of £44,000 has been written off.

The valuations of a number of portfolio companies were increased during the
year. There has been a £271,000 uplift in the carrying value of Nexagent
Limited, the provider of centralised management software and hardware for
interconnecting next-generation telecommunication networks, to restate it to
the price of the last round.

Oxford Immunotec Limited has benefited from an uplift of £217,000 reflecting
the pricing of a £7million later stage funding round, which completed in
August. The company, which has developed a new blood test with fewer false
positives and false negatives than the existing 100 year old skin test for
tuberculosis, is well placed to take advantage of a growing recognition that
the existing skin test is no longer adequate. The company's blood test has
European regulatory approval and is being sold to hospitals and clinics across
the European Union and beyond.

The valuation of Xention Discovery Limited, a drug discovery company focusing
on the development of ion channel-acting drugs to address underserved
indications, rose by £75,000. This reflects the pricing of an £11million series
B financing round in July. The funds will be used to progress various programs
in areas such as pain and type II diabetes and also to develop further its
unique approach to ion channel drug discovery.

Workshare Limited is an established company that develops and markets document
integrity software products widely used by professional services firms and
large enterprises. The company's software provides secure and compliant
production and exchange of business documents, enabling users to assemble and
verify document content and record who has viewed documents. The company has
progressed well in the period, closing key sales in new vertical markets and
accelerating business transacted through its website. The carrying value of
this investment was increased by £100,000 to reflect the price of the last

A number of provisions have been made in the year against the previous carrying
value of investments. Firstly, a provision of £60,000 has been made against the
carrying value of Anthropics Limited. We continue to work with this company, a
developer of pioneering visual messaging applications for the mobile
communications market, despite the now very low carrying value, to achieve a
recovery of value. To help achieve this, a modest further investment was made
post year end.

Avidex Limited, a biotechnology company focused on the novel development of
therapeutics involving T-cell receptors leading to the treatment of cancer,
inflammation and autoimmune diseases, has secured further funding via a
significant investment from its new trade partner, Syngenta. This is a positive
advancement for the company and will take it through the next stage of its
development. This further funding demonstrates the progress made with its
science, although our investment valuation has been written down by £330,000 to
reflect the pricing of this third party investment.

A 75% provision totalling £750,000 has been made against the carrying value of
Cyclacel to reflect the initial market valuation of Xcyte Therapies, on the
announcement of the news of its merger with Cyclacel. We expect this valuation
to rise as the market becomes aware of the quality of the Cyclacel technology.

These latter two valuation changes reflect current valuation trends across the
biotechnology sector generally, as opposed to specific performance issues with
the individual businesses themselves.

Provisions totalling £1,457,000 were also made against six other investments in
the portfolio to reflect short term valuation uncertainty.

The quoted venture capital portfolio has fallen in value by a net £782,000.
Approximately 50% of this fall is attributable to Portrait Software plc whose
share price fell to a low of 14p on the release of a trading statement. The
company focuses on the provision of solutions to enable businesses to manage
their customer relationships more effectively. We continue to support the
company's management team and their longer term plans for the company. At 4
January 2006, the mid-market price had risen by 89% to 26.5p.


This has been a very active period for new investment. Four new and 17 further
investments were made.

During the year we actively continued to seek new venture capital opportunities
on behalf of the Company, following the investment policy shared with our
institutional fund. The four new investments are Genosis UK plc, Global Silicon
Limited, Level Four Software Limited and Pelikon Limited and were made at a
total cost of £294,000. These small initial investments will be supplemented by
anticipated further investments from reserves, provided agreed performance
milestones are achieved. These are early stage investments with high potential
that have the capability to develop into significant investments. Global
Silicon, Level Four and Pelikon are revenue generating, albeit at modest

Genosis focuses on developing innovative and unique solutions for the diagnosis
of reproductive disorders. This is a growing market with an estimated 1 in 6
couples globally experiencing fertility issues. Genosis' first product,
Fertell, is a combined male and female home fertility test to be sold by Boots.
Quester VCT 4's initial investment was a pre-AIM investment. The company
subsequently raised £7million on its AIM listing in December, which will enable
manufacturing capabilities to be scaled up and marketing and sales resources to
be enhanced. The share price stands at a modest premium to the flotation price.

Global Silicon, a designer and manufacturer of integrated circuit solutions for
the high growth consumer audio market, raised £6million in a series B funding
round. Jeremy Milne, a Quester director, has joined its board. The company's
lead product, Xin, is currently sold in audio systems such as boom boxes and
MP3 players in the UK and Europe. This is a rapidly growing market, fuelled by
the widespread availability of digital music from download sites. The new funds
will enable Global Silicon to expand its product range and its operations in
Cambridge and China, with high volume production expected to commence in 2006.

Level Four Software is an independent software company, which supplies advanced
software products for the testing and development of 'automated teller machine'
(ATM) services to banks and financial institutions. The ATM industry is
expected to experience an exciting period of change over the next five years.
Level Four Software is managed by an experienced management team and is well
placed to meet the changing market with its innovative technology. Henry
Sallitt, a Quester director, has joined its board. The aggregate £2million
investment made by Quester funds will enable the company to accelerate its

Pelikon is an innovative manufacturer of thin, flexible electro luminescent
displays for consumer electronics, home appliances and industrial applications.
The company has progressed the commercialisation of its display technology and
over one million flexible displays have already been distributed world wide.
The investment, part of a £5million funding round, will allow the company to
accelerate growth.

During a very active period, we have also supported the existing portfolio with
17 further investments totalling £4.9million.

Company                         Industry sector                 £'000          
Advanced Valve Technologies     Industrial products & services  409            
Antenova Limited                Communications                  254            
Avidex Limited                  Healthcare & life sciences      343            
Azea Networks, Inc.             Communications                  432            
Celona Technologies Limited     Software                        345            
Celoxica Holdings plc           Software                        167            
De Novo Pharmaceuticals Limited Healthcare & life sciences      53             
Digital Union UK Limited        Software                        143            
HTC Healthcare Group plc        Consumer goods & services       135            
Identum Limited                 Software                        177            
Nexagent Limited                Software                        1,070          
Nomad Software Limited          Software                        125            
Oxford Immunotec Limited        Healthcare & life sciences      714            
Reqio Limited                   Software                        19             
Teraview Limited                Healthcare & life sciences      125            
Workshare Limited               Software                        139            
Xention Discovery Limited       Healthcare & life sciences      250            

The largest follow-on investment made during the year was Nexagent, a market
leader in centralised management software and hardware for interconnecting next
generation telecom networks. The company's technology enables customers to
accelerate the management of advanced IP services over disparate networks,
resulting in increased operational efficiencies, improved productivity and
service performance. The company continues to make good progress and has been
recognised with key industry awards in the period.


A summary of the spread of sectors covered by the portfolio at 31 October 2005
is provided in the table below:

Industry sector                    Percentage of      Valuation       Number of
                                 venture capital                    investments
                                    at valuation                               
                                               %          £'000                
Healthcare & life sciences                  34.0          6,718              10
Software                                    28.3          5,590              10
Communications                              14.1          2,778               3
Industrial products & services              10.7          2,111               4
Electronics                                  4.4            871               3
Internet                                     3.7            721               2
Semiconductors                               2.5            496               2
Consumer goods & services                    1.9            382               1
Hardware                                     0.4             69               1
                                           100.0         19,736              36


At 31 October 2005, the Company held a portfolio of listed equities valued at £
5.7million (cost: £4.8million). During the year, the opportunity was taken to realise some of the
gains accruing and 23% of the portfolio was sold realising a profit of £
595,000. The listed equity portfolio performed well, generating an IRR of 27.7%
over the 12 months.

At the year end, the cash holdings of the Company amounted to £5.6million.
These, together with the listed equity portfolio, represent the liquid reserves
held to cover follow-on investments. New investments will continue to be made
should surplus liquid resources be available.


Following the end of the technology boom in 2001, the first five years of the
Company's life have been characterised by a difficult environment for young
technology companies. However, conditions generally have improved, as evidenced
by much increased M&A activity and improved sentiment towards AIM.

A number of companies in the portfolio are now at key points in their
development where they are starting to achieve market penetration and prove
their science. Values should increase as these companies achieve important

We anticipate that the rate of realisations from the portfolio will increase as
the portfolio matures and, as with the very positive Footfall realisation,
these future potential realisations should flow through to further dividend

Quester Capital Management Limited


10 January 2006


                          Industry sector    Original Valuation Equity  % of   
                                             Cost     £'000     % held  fund by
Quoted venture capital investments                                             
Allergy Therapeutics    Healthcare & life    500      630       1.1%       2.0%
plc                     sciences                                               
Celoxica Holdings plc   Software             1,315    668       2.7%       2.2%
Loudeye Corp.           Internet             95       64        1.0%       0.2%
Polaron plc             Industrial products  250      125       1.2%       0.4%
                        & services                                             
Portrait Software plc*  Software             1,130    418       5.0%       1.3%
Public Recruitment      Industrial products  250      213       0.8%       0.7%
Group plc               & services                                             
Quadnetics Group plc    Electronics          143      129       0.5%       0.4%
Total quoted venture capital investments     3,683    2,247                7.2%   
Unquoted venture capital investments                                           
Advanced Valve          Industrial products  1,471    773       30.6%      2.5%
Technologies Limited    & services                                             
Antenova Limited        Communications       1,254    1,005     5.4%       3.2%
Anthropics Technology   Communications       1,070    10        7.0%       0.0%
Arithmatica Limited     Semiconductors       1,486    429       13.7%      1.4%
Avidex Limited          Healthcare & life    1,144    815       2.7%       2.6%
Azea Networks, Inc.     Communications       1,764    1,764     7.5%       5.7%
Celona Technologies     Software             666      666       11.0%      2.2%
Cyclacel Group plc      Healthcare & life    1,000    250       1.4%       0.8%
De Novo Pharmaceuticals Healthcare & life    803      176       3.0%       0.6%
Limited                 sciences                                               
Elateral Holdings       Software             1,155    155       13.7%      0.5%
Footfall Limited        Industrial products  1,000    1,000     7.7%       3.2%
                        & services                                             
Genosis UK plc          Healthcare & life    90       90        0.9%       0.3%
Global Silicon Limited  Semiconductors       67       67        0.8%       0.2%
HTC Healthcare Group    Consumer goods &     671      382       8.7%       1.2%
plc                     services                                               
Identum Limited         Software             266      266       12.8%      0.9%
Level Four Software     Software             68       68        1.2%       0.2%
Lorantis Holdings       Healthcare & life    1,400    1,025     2.7%    3.3%   
Limited                 sciences                                               
Mesophotonics Limited   Electronics          893      670       7.2%    2.2%   
Nexagent Limited        Software             1,537    1,458     5.8%    4.7%   
Nomad Software Limited  Software             1,211    651       7.5%    2.1%   
Opsys Management        Electronics          1,038    72        3.5%    0.2%   
Oxford Immunotec        Healthcare & life    1,339    1,556     9.3%    5.0%   
Limited                 sciences                                               
Oxxon Therapeutics      Healthcare & life    987      494       3.5%    1.6%   
Holdings, Inc.          sciences                                               
Pelikon Limited         Hardware             69       69        0.5%    0.2%   
Reqio Limited           Software             644      -         12.2%   0.0%   
Sift Group Limited      Internet             875      656       4.5%    2.1%   
Teraview Limited        Healthcare & life    750      858       4.9%    2.8%   
Workshare Limited       Software             1,139    1,239     6.8%    4.0%   
Xention Discovery       Healthcare & life    750      825       5.1%    2.7%   
Limited                 sciences                                               
Total unquoted venture capital investments   26,607   17,489            56.4%  
Total venture capital                        30,290   19,736            63.6%  
Listed equity investments                    4,767    5,738             18.6%  
Total investments                            35,057   25,474            82.2%  
Cash and other net                           5,518    5,518             17.8%  
current assets                                                                 
Net assets                                   40,575   30,992            100.0% 

* Formerly AIT Group plc

**Formerly Opsys Limited



                                              Notes 2005          2004         
                                                    £'000         £'000        
(Loss)/gain on realisation of                 1     (404)         554          
Income                                        2     437           267          
Investment management fee                     3     (847)         (972)        
Other expenses                                4     (324)         (353)        
Loss on operating activities                        (1,138)       (504)        
Interest payable on loan notes                      (5)           (5)          
Loss on ordinary activities before                  (1,143)       (509)        
Tax on ordinary activities                    6     -             -            
Loss on ordinary activities after                   (1,143)       (509)        
Dividends paid                                7     (521)         -            
Transfer from reserves                              (1,664)       (509)        
Loss per share                                8     (2.2)p        (1.0)p       



                                              Notes       2005             2004
                                                         £'000            £'000
Loss on ordinary activities after taxation             (1,143)            (509)
Net unrealised loss on revaluation of                  (1,737)          (4,500)
Total losses recognised during the period              (2,880)          (5,009)
Total losses per share                        8         (5.6)p           (9.5)p



                                            Notes         2005             2004
                                                         £'000            £'000
Reported loss on ordinary activities before              (1,143)           (509)        
Realisation of prior years' net unrealised               (3,722)         (2,465)      
losses on investments                                                          
Historical cost loss on ordinary activities              (4,865)         (2,974)      
before taxation                                                                

All items in the above statements 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.

The accompanying notes are an integral part of these statements.



                                                    2005                   2004
                                           Note     £'000                 £'000
Fixed assets                                                                   
Investments                                         25,474               25,814
Current assets                                                                 
Debtors                                             337                     578
Cash at bank                                        5,641                 9,185
                                                    5,978                 9,763
Creditors (amounts falling due within               (360)                 (237)
one year)                                                                      
Net current assets                                  5,618                 9,526
Creditors (amounts falling due in over              (100)                 (100)
one year)                                                                      
Net assets                                          30,992               35,240
Capital and reserves                                                           
Called-up equity share capital                      506                     520
Capital redemption reserve                          26                       11
Share premium account                               285                     218
Special reserve                                     34,969               41,964
Revaluation reserve                                 (5,652)             (7,637)
Profit and loss account                             858                     164
Equity shareholders' funds                          30,992               35,240
Net asset value per share                    9      61.3p                 67.7p

The balance sheet as at 31 October 2004 has been restated to reflect the
creation of a capital redemption reserve on the repurchase and cancellation of
shares and also to reflect the revocation of the Company's investment company
status. The impact of this change in status is detailed in the directors'

The financial statements were approved by the directors on 10 January 2006 and
are signed on their behalf by:

Robert Wright


The accompanying notes are an integral part of this statement.



                                               2005           2004        
                                               £'000          £'000       
Cash outflow from operating activities         (494)          (1,030)     
Financial investment                                                      
Purchase of venture capital investments        (5,194)        (6,993)     
Purchase of listed equities and fixed interest (1,044)        (2,557)     
Sale/redemption of venture capital investments 771            3,715       
Sale/redemption of listed equity and fixed     3,643          2,731       
interest investments                                                      
Sale/redemption of venture capital investments 142            -           
previously written off                                                    
Total financial investment                     (1,682)        (3,104)     
Equity dividends paid                          (521)          -           
Issue of shares in accordance with the terms   68             -           
of the dividend reinvestment scheme                                       
Share buy-ins                                  (915)          (490)       
Total financing                                (847)          (490)       
Decrease in cash for the period                (3,544)        (4,624)     
Reconciliation of net cash flow to movement                               
in net funds                                                              
Decrease in cash for the period                (3,544)        (4,624)     
Net funds at the start of the period           9,185          13,809      
Net funds at the end of the period             5,641          9,185       

The accompanying notes are an integral part of this statement.


 1. Loss on realisation of investments
                                                      2005          2004       
                                                      £'000         £'000      
Realised net gains on disposal                        521           1,606      
Write-off of investments                              (946)         (1,052)    
Recoveries made in respect of investments previously  142           -          
written off                                                                    
Write down of debtors                                 (121)         -          
                                                      (404)         554        

 2. Income
                                                   2005          2004                    
                                                   £'000         £'000                   
Dividend income                                                             
Listed companies                                    210           179       
Interest receivable                                                         
Fixed interest securities                           2             39        
Loans to unquoted companies                         19            -         
Bank deposits                                       52            40        
Other income from shares and                        154           -         
Sundry income                                       -             9         
                                                    437           267       

 3. Investment management fee
Quester Capital Management Limited (QCML) provides investment management
services to the Company under an agreement dated 30 October 2000.

QCML is a wholly owned subsidiary of Querist Limited, a company in which APG
Holmes and JA Spooner are beneficial shareholders. APG Holmes and JA Spooner
are executive directors of QCML.

A charge of £847,000 (2004: £972,000) in respect of the management fee payable
to QCML was accrued during the year together with irrecoverable VAT of £127,000
(2004: £181,000). The fee, which is calculated monthly and is payable quarterly
in advance, was levied at a rate of 2.5% (2004: 2.5%) on the Company's net
assets during the financial year ended 31 October 2005.

The manager's appointment is for a fixed term which shall expire on the seventh
anniversary of the commencement of the fund and shall continue until terminated
by either party subject to a notice period. If such notice is given on or after
the seventh anniversary of the commencement of the fund, the notice period
shall be the longer of (i) twelve months and (ii) the period from the date on
which notice is given to the tenth anniversary of the commencement of the fund.
Thereafter the notice period shall be twelve months.

QCML provides administrative and secretarial services to the Company for which
it is entitled to a fee of £54,000 per annum (linked to the movement in the
RPI). This fee is included in other expenses (note 4).

The management fee payable to Newton Investment Management Limited, to the
extent that it is not covered by transaction fees payable by the Company, will
be met by QCML out of the above fee.

 4. Other expenses
                                                   2005            2004        
                                                   £'000           £'000       
Administration and secretarial services            54              53          
Directors' remuneration (note 5)                   33              39          
Auditor's remuneration                                                         
Audit services                                     14              22          
Non audit services                                 6               9           
Legal and professional                             8               21          
Insurance                                          13              11          
FSA, UKLA and registrar's fees                     19              19          
Irrecoverable VAT                                  150             191         
Other expenses                                     27              (12)        
                                                   324             353         

 5. Directors remuneration
                                                   2005            2004        
                                                   £'000           £'000       
Fees paid to directors                             9               15          
Amounts paid to third parties, excluding VAT, in   24              24          
consideration of the services of directors                                     
                                                   33              39          

The total fees paid or payable in respect of individual directors for the
period is detailed in the Directors' Remuneration Report.

 6. Tax on ordinary activities
                                                   2005            2004        
                                                   £'000           £'000       
Corporation tax payable                            -               -           
Reconciliation of loss on ordinary activities to                               
Loss on ordinary activities before tax             (1,143)         (509)       
Tax on profit on ordinary activities at standard   (343)           (153)       
UK corporation tax rate of 30% (2004: 30%)                                     
Effects of:                                                                    
Loss/(gain) on investments                         121             (166)       
Loss on operating activities                       222             319         
Corporation tax payable                            -               -           

The company has excess trading losses of £2,612,000 (2004: £1,732,000) that are
available to offset against future profits. A deferred tax asset of £784,000
(2004: £520,000) has not been recognised in respect of these losses and will be
recoverable only to the extent that the Company has sufficient future taxable

 7. Dividends paid
                                                   2005            2004        
                                                   £'000           £'000       
Interim dividend: 1p per share paid 1 April 2005   521             -           

 8. Return per share
The loss per share of 2.2p (2004: 1.0p) is based on the loss on ordinary
activities after tax of £1,143,000 (2004: £509,000) and on ordinary shares of
51,547,440 (2004: 52,471,757), being the weighted average number of ordinary
shares in issue during the year.

The total recognised loss per share of 5.6p (2004: 9.5p) is based on the total
recognised losses for the period of £2,880,000 (2004: £5,009,000) and on the
weighted average number of ordinary shares in issue during the period of
51,547,440 (2004: 52,471,757).

 9. Net asset value
The net asset value per share as at 31 October 2005 of 61.3p (2004: 67.7p) is
based on net assets of £30,992,000 (2004: £35,240,000) divided by the
50,596,419 (2004: 52,047,965) ordinary shares in issue at that date.

The financial information set out above does not constitute the Company's
statutory accounts for the period ended 31 October 2005. The statutory accounts
for the period ended 31 October 2005 will be finalised on the basis of the
financial information presented by the directors in the preliminary
announcement and will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.

A copy of the above document will be submitted to the UK Listing Authority, and
will shortly be available for inspection at the UK Listing Authority's Document
Viewing Facility, which is situated at:

Financial Services Authority

25 The North Colonnade

Canary Wharf


E14 5HS

Copies of the full financial statements for the period ended 31 October 2005
are expected to be posted to shareholders on 13 January 2006 and will be
available to the public at the registered office of the Company at 29 Queen
Anne's Gate, London, SW1H 9BU.