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Quester VCT PLC (KAY)

  Print      Mail a friend       Annual reports

Friday 17 September, 1999

Quester VCT PLC

Interim Results

17 September 1999

                         INTERIM STATEMENT
              FOR THE SIX MONTHS ENDED 31st JULY 1999

FINANCIAL SUMMARY                       6 months  6 months  Year to
                                           to 31     to 31       31
                                            July      July  January
                                            1999      1999     1999
Earnings per share as restated (pence)     (2.5)       0.9      7.0
Dividend per share (pence)                  5.75      1.00     2.36
Cumulative dividend per share (pence)       13.5       6.4      7.7
Net assets before dividends (£000)        33,817    33,215   34,761
Net assets after dividends (£000)         32,039    32,972   34,181
NAV* per share before dividend (pence)     109.4     109.2    111.9
NAV* per share after dividend (pence)      103.6     108.4    110.1
Mid-market price per share (pence)          90.0      90.0     89.0

* Net Asset Value
                       CHAIRMAN'S STATEMENT

This  statement,  which  should be read  in  conjunction  with  the
Investment Manager's Report, covers the six months ended 31st  July
1999  and  is the fourth interim report since Quester VCT commenced
trading in April 1996.

In the 1999 Annual Report, which was sent to shareholders in April,
we explained that whilst Quester VCT remained an investment company
we  could only distribute income as opposed to capital profits.  We
also referred to the fact that capital profits of approximately  £2
million had been realised and that these profits could be available
for  distribution  if the Company adopted trading  company,  rather
than investment company, status. The original prospectus state that
it  was the intention to dispense with investment company status at
such   time  as  sufficient  capital  profits  were  realised   for
distribution in the form of dividends.

Change to trading company status
The Directors believe it is now appropriate to change the status of
the  Company  and  on 15th September 1999 resolved  to  revoke  the
existing investment company status and become a trading company.

It  is  important  to  emphasise that a change to  trading  company
status makes no difference to the position of Quester VCT under the
relevant  tax rules which apply to a venture capital trust  nor  to
the  various tax reliefs and benefits which both investors and  the
Company receive.

Consequences of a change to trading company status
The  decision  to  change the legal status of  Quester  VCT  is  an
important  one and was taken after taking professional  advice  and
careful  consideration of the issues. The change of status  has  an
immediate  short term benefit for shareholders as  it  enables  the
Company to pay a special interim dividend out of capital profits.

However,  as  a  consequence of this change  in  status,  different
accounting policies apply which may lead to a pattern of uneven and
less predictable dividend payments in the future.

As an investment company, Quester VCT was able to pay dividends out
of  the  revenue  return only. The revenue return was  enhanced  by
charging  fifty per cent of the management fee to capital  and  was
unaffected  by  capital  profits or losses.  As  envisaged  in  the
original prospectus, this status initially assisted the payment  of
higher  dividends, but as an increasing level of the  funds  raised
have  been  committed to venture capital investments,  this  is  no
longer  the  case.  Consequently the status has been  reviewed  and
changed,  in  the  knowledge that this decision will  result  in  a
dividend  stream influenced largely by future capital  realisations
including  both gains and losses. The Directors consider that  this
policy  meets  the  original objectives of  Quester  VCT  and  will
enhance overall investment returns for investors who will receive a
return of capital profit tax free.

The effect on the accounts of the change in status
The new trading company status is reflected in the revised form  of
the  financial  statements.  The principal  changes  to  which  are
described in note 3 to the accounts.

In summary, the result of the change in status has been to increase
distributable  reserves  to £1,852,000, prior  to  payment  of  the
interim dividend. This increase reflects the cumulative net capital
profits realised by the Company net of provisions of £1,152,000, as
shown in note 1 to the accounts.

Investment progress and performance
In  the  six  months  ended 31st July 1999, Quester  VCT  completed
twelve  venture capital investments at a total cost of  £4,756,000,
including   six  in  companies  where  we  were  already   existing
investors.  In June 1999 we successfully completed the sale  of  C-
Dilla,  our  fourth  venture capital investment  realisation  since
Quester  VCT  was  founded.  The investment in this  company  which
develops  and supplies encryption software and was made in  October
1996 realised a gain of 3.3 times its original cost as referred  to
in the Investment Manager's Report.

At  31st July 1999 there were net unrealised profits in respect  of
our  FTSE  350  and  AIM  listed stocks of  £637,000  and  £971,000
respectively, reflecting gains of 11.2 per cent and 24.4  per  cent
respectively  on  their original cost. Twenty one unlisted  venture
capital investments remain valued at cost.

The   portfolio's  performance  is  detailed  more  fully  in   the
Investment Manager's Report.

Profit and Loss Account
Previously, our accounts contained a Statement of Total Return.  As
a  trading company, this is now replaced with a standard profit and
loss  account.  This shows that total income from  investments  and
cash  deposits  amounted to £455,000. Of this sum £222,000  was  in
respect of funds awaiting investment and held either as short dated
gilts  or  in  the  form  of bank deposits. The  balance  comprised
£146,000  from FTSE 350 investments and £87,000 from  the  unlisted
and AIM portfolio of investments.

The  profit  and  loss  account for the  half  year  shows  a  loss
resulting  from  specific provisions, totalling  £827,000,  against
three  investments, as shown in note 1 to the accounts. This amount
forms part of the £1,152,000 provision referred to above, with  the
balance  being  a transfer from an unrealised loss reserve  for  an
investment  written down in a prior period. Only  £180,000  of  the
total  profit realised on C-Dilla of £1,159,000 is included in  the
profit and loss account for the six months ended 31st July 1999, as
the  investment had already been revalued in a prior period and the
balance  of  the  profit is reflected in the movement  in  reserves
shown in note 2 to the accounts.

The  payment of the special dividend at this interim stage is based
on the cumulative achievement of Quester VCT, only some of which is
reflected in the profit and loss account for this six month period.

As your Board's policy is to facilitate the distribution of capital
profits to shareholders, your Directors have today resolved to  pay
a  special  interim dividend of 5.75 pence per share at a  cost  of
£1,777,822.  The  dividend will be paid on  22nd  October  1999  to
shareholders  on  the  register at the close  of  business  on  1st
October 1999.

Whilst  it is your Board's intention to distribute capital  profits
to shareholders from time to time as they accrue, the actual timing
and level of future distributions will necessarily be determined by
the  degree of success, or otherwise, achieved by our portfolio  of
venture capital investments. It is too early to consider the  level
of  any  final  dividend payable in respect of  the  current  year.
However,  as  any  future dividends will be increasingly  dependent
upon  the  level of capital gains realised and no such returns  are
predicted  for the remaining period to the year end, it  is  likely
that the amount of the final dividend will be minimal.

Future share buy-ins
In  the  annual  report for the year ended 31st  January  1999,  we
referred  to  the  Board's consideration of the conversion  of  the
share  premium  account so as to allow future share  buy-ins.  This
matter remains under active review.

Your  Board's  decision  to  adopt  trading  company  status  is  a
reflection  of  their  present  view  of  the  longer  term  growth
potential of the venture capital investment portfolio. Whilst it is
inevitable  that  within a portfolio which contains  a  substantial
number  of  relatively young businesses there will  be  some  under
performers, we believe that, overall, we have invested  in  sectors
and management with potential to continue to achieve good returns.

Tom Scruby

17th September 1999

New  investment  activity  by Quester VCT  during  the  period  has
continued   to  be  strong,  with  twelve  investments   completed.
Investments have been made in six companies new to Quester VCT  and
in  six companies where we already had an investment. We have  made
thirty-two  qualifying VCT investments to date, sold four  and  now
hold  a portfolio of twenty-eight qualifying and two non-qualifying
investments. We will be adding further companies in the current six
month period, maintaining the spread of risk and opportunity.

Performance of the Portfolio
We  have  now  achieved  three significant  realisations  from  the
unquoted portfolio together with one other small realisation. These
have  enabled  us to make the switch to ''trading company''  status
and  as  a  result  propose a £1,777,822 distribution  of  realised
capital  profit  to  shareholders, as outlined  in  the  Chairman's

Overall, we see the portfolio moving forward positively and in line
with  our expectations. In assessing the amount of profit available
for   distribution,  we  have  written  down  the  value  of  three
investments,  as  shown  in  note 1 to these  accounts,  reflecting
inevitably  uneven performance within the portfolio, including  the
disappointing   recent  failure  of  Axis  Genetics.  Additionally,
Shalibane  plc,  whose  shares  are  traded  on  AIM,  has  seen  a
significant  fall in its share price, which has been  reflected  in
the  current valuation. This loss has been treated as an unrealised
loss  on  the  balance sheet and offsets, in part,  the  unrealised
profits arising from the other five AIM holdings, which showed a 55
per  cent  increase  in aggregate value at the  period  end,  being
valued at £4,611,566 as against cost of £2,973,200.

It  must  also be noted that some of the companies are still  at  a
very  early  stage  in seeking to realise the  potential  in  their
business plans and achieve the sort of sales and profit performance
which  will  deliver future capital profits. The current  portfolio
valuation  still  includes  twenty-one out  of  thirty  investments
valued  at cost in line with our adopted BVCA valuation principles.
This  underlines  the,  as yet, unproven  nature  of  some  of  the

Andrew Holmes                                  17th September 1999
Managing Director
Quester Capital Management Limited


Profit and loss account

                                6 months      6 months        Year
                                   ended         ended       ended
                               31st July     31st July        31st
                                    1999          1998     January
                                                   (as        1999
                                    £000     restated)         (as
                                                  £000     restated)

Profit on realisation of             169           220         2,016
Income                               455           678         1,316
Investment management fee           (452)        (448)         (892)
Other expenses                      (100)         (87)         (176)
Investments written off             (827)            -            -
(Loss)/profit on ordinary                                          
activities before taxation          (755)          363         2,264
Tax on ordinary activities          (19)          (91)         (133)
(Loss)/profit on ordinary                                          
activities after taxation           (744)          272         2,131
Dividend declared                   (1,778)      (243)         (580)
Retained (loss)/profit              (2,552)         29         1,551
transferred to reserves                                           
Earnings per share                  (2.50)p      0.90p        6.98p  

Statement of total recognised gains and losses

                                6 months      6 months         Year
                                   ended         ended        ended
                               31st July     31st July         31st
                                    1999          1998      January
                                                   (as         1999
                                    £000     restated)          (as
                                                  £000    restated)
(Loss)/profit for the period        (774)          272         2,131
Unrealised (loss)/gain on                                          
revaluation of investments           538           228         (793)
Total recognised gains and                                         
losses relating to the              (236)          500         1,338

All items in the above statement are derived from continuing

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

Balance sheet

                                Note 31st July 31st July       31st
                                          1999      1998    January
                                                     (as       1999
                                          £000 restated)        (as
                                                    £000   restated
Fixed asset investments            1      29,759    31,354     23,006
Current assets                                                     
    Debtors                                735      1,176      1,415
    Cash at bank and in hand              3,630     1,099      10,583
                                          4,365     2,275      11,998
Creditors:  amounts falling due                                    
within one year                           (307)     (414)      (486)
    Other creditors                                               
    Declared dividend                     (1,778)   (243)      (337)
                                          (2,085)   (657)      (823)
Net current assets                        2,280     1,618      11,175
Net assets                                32,039    32,972     34,181
Capital and reserves                                               
Called up share capital                   1,546     1,520      1,553
Share premium account              2      28,833    28,279     28,954
Revaluation reserve                2      1,586     3,199      1,682
Profit and loss account            2        74      (26)       1,992
                                          32,039    32,972     34,181
Net asset value per share                 103.6p    108.4p     110.1p

Summarised Cashflow Statements

                                     6 months   6 months       Year
                                        ended      ended      ended
                                         31st  31st July       31st
                                         July       1998    January
                                         1999        (as       1999
                                               restated)        (as
                                         £000       £000       £000
Net   cash   inflow/(outflow)   from      516       (64)        332
operating activities
Taxation                                 (110)      (92)       (26)
Net    capital    expenditure    and     (6,895)    (1,019)    7,539
financial investment                                               
Equity dividends paid                    (337)      (456)      (699)
Financing                                (127)         -        707
(Decrease)/increase in cash for  the     (6,953)    (1,631)    7,853
Reconciliation of net cash flow to                                 
movement in net funds
(Decrease)/increase in cash for  the     (6,953)    (1,631)    7,853
Net funds at the start of the period     10,583     2,730      2,730
Net funds at the end of the period       3,630      1,099      10,583
Notes to the Unaudited Financial Statements

1.  Fixed asset investments
                                     Cost  Valuation     % of
                                     £000              portfo
                                               £000       lio
Venture capital investments                                  
Acedes Gear Tools Limited             900       900      3.02
Advanced   Valve   Technologies       444       444      1.49
Armagard Limited                      750       750      2.52
Artisan Software Tools Limited       1,040     1,040     3.50
Axis Genetics plc                     250         -  *     - *
Cardionetics Limited                  300       300      1.01
Communication     &     Control       375       375      1.26
Electronics Limited
Cotswold Outdoor Limited              944       944      3.17
Daisy & Tom Limited                  1,153      576  *   1.94 *
Deep Sea Leisure plc1 *               200       319      1.07
Dragons Health Clubs plc*             950      1,772     5.96
Dycem Limited                         650       650      2.19
Elateral Holdings Limited             613       613      2.06
First Fibre Limited                  1,000     1,000     3.36
Harleyco Limited                      685       685      2.30
HMV Media Group plc                   430       430      1.45
HSL Holdings Limited                 1,000     1,000     3.36
                                           plc                          750       750      2.52
International Diagnostics Group       900       900      3.02
International  Resources  Group       403       403      1.35
JSB Software Technologies plc*       1,000     1,526     5.13
Linguaphone Group plc                 250       250      0.84
Methuen Publishing Limited            781       781      2.62
Orchestream Limited                  1,000     1,000     3.36
Pipeline  Engineering &  Supply       499       499      1.68
Co Limited
Policy Master Group plc*              198       286      0.96
Purple Technologies Limited           200       200      0.67
Shalibane plc*                       1,005      337      1.13
The Wentworth Wooden Jigsaw  Co       325         -  *     - *
XKO Group plc*                        625       709      2.38
                                     19,620    19,439    65.32
Listed      fixed      interest      4,222     4,200     14.11
Listed equity investments            5,483     6,120     20.57
Total investments                    29,325    29,759    100.00
Net current assets                             2,280         
Shareholders funds as  at  31st                32,039        
July 1999                                          

The  above  table of fixed asset investments does not  include  the
four  disposals to date.  In total, realised proceeds of £5,956,000
compared to an original cost of £2,572,000 have resulted in profits
of £3,384,000 being realised by the Company.  Additional profits of
£504,000  have been realised on the disposal of listed investments,
bringing the total realised capital profits to £3,888,000.

*  Investments traded on AIM
** Provisions made against diminution in value
Notes to the Unaudited Financial Statements (continued)

2.   Movement in reserves

                                        Share                 Profit
                                      premium   Revaluati        and
                                      account          on       loss
                                         £000     reserve    account
                                                     £000       £000
     At 1st February 1999               28,954      1,682      1,992
     Share bought in                    (121)           -          -
     Transfer of realised profits to        -       (959)        959
     profit and loss account
     Transfer  of  investment  write        -         325      (325)
     Net   increase  in   value   of        -         538          -
     Retained loss for the period           -           -      (2,552)
     At 31st July 1999                  28,833      1,586         74

3.   Changes in the presentation of financial statements

     As  a  result  of the Directors' decision to enable  dividends
    derived  from  capital profits to be paid to  shareholders  the
    Company  applied for its investment company status, as  defined
    under  Section 266 of the Companies Act 1985, to be revoked  on
    15th September 1999.
    Consequently, the financial statements have been  drawn  up  to
    include a statutory profit and loss account and a statement  of
    total  recognised gains and losses in accordance with  Schedule
    4  of the Companies Act 1985 and Financial Reporting Standard 3
    (Reporting  Financial  Performance).  These  statements  differ
    from  the Statement of Total Return presented in prior  periods
    as follows:

    (a)  profit/loss  on realisation of investments  and  permanent
    diminutions  in  value of investments are now included  in  the
    profit and loss account,
    (b) unrealised gains and losses on investments are included  in
    the  statement of total recognised gains and losses and may not
    be distributed,
    (c)  all  investment management fees are charged to the  profit
    and loss account.
    The effect of the restatement has been to reduce the profit  on
    ordinary  activities after taxation, equivalent to the  revenue
    return   on  ordinary  activities  after  taxation  under   the
    previous  presentation, by £880,166 in respect of  the  current
    period  and  £41,563  in respect of the comparative  period  to
    31st  July  1998  reflecting the net  loss  on  realisation  of
    investments  and  investment management  fees  charged  to  the
    profit and loss account.
    In  the balance sheet, the revenue reserve and realised capital
    reserve presented in prior periods have been combined into  the
    profit  and  loss  account.  The  revaluation  reserve  records
    revaluation  amounts  previously  included  in  the  unrealised
    capital reserve, except for any permanent diminutions in  value
    which have been passed through the profit and loss account.

Notes to the Unaudited Financial Statements (continued)

4.   The  financial information contained in this report  has  been
     prepared on the basis of the accounting policies set out in the
     Annual Report, as revised by note 3 above.

5.   The  calculation of earnings per share for the period is based
     on  loss after tax of £774,410 divided by the weighted average
     number of shares in issue during the period of 30,990,643.

6.   The  unaudited  financial statements  set  out  above  do  not
     constitute statutory accounts within the meaning of Section 240 of
     the Companies Act 1985.

7.   Copies  of  the  unaudited interim results are being  sent  to
     shareholders on 17th September 1999. Further copies can be obtained
     from the Company's Registered Office.


a d v e r t i s e m e n t