Quester VCT 5 plc
Interim statement
For the six months ended 30 June 2005
Financial highlights
Per ordinary share (pence) 30 June 31 December 30 June
2005 2004 2004
Capital values
Net asset value 89.2 91.6 92.9
Share price 84.5 85.5 97.5
Return and dividends
Dividend - - -
Cumulative dividend 1.5 1.5 1.5
Total return* 90.7 93.1 94.4
*Net asset value plus cumulative dividend per share
Highlights from the Chairman's statement and Investment manager's report
* The background for the development and financing of young technology
companies has generally become more positive.
* During the six months to 30 June 2005, �0.6 million was committed to 10
existing venture capital investments and one new investment was made,
resulting in a portfolio of 23 investments.
* Since 30 June 2005, the rate of investment has increased. Three new
investments have been made at a total cost of �1.1 million.
* The performance of Quester VCT 5 is within current expectations.
CHAIRMAN'S STATEMENT
INTRODUCTION
The background for the development and financing of young technology companies
has generally become more positive. The Manager has been active during the
period in developing the portfolio, which is reflected by the ten follow-on
investments completed.
NET ASSETS, REVENUE AND DIVIDENDS
The Company's net assets have risen during the half year from �21.9 million as
at 31 December 2004 to �22.1 million as at 30 June 2005, although the net asset
value per share has fallen marginally over the same period from 91.6p to 89.2p
per share. These respective changes arise as follows:
�'000 Pence per
share
Net asset value as at 31 December 21,904 91.6
2004
Net unrealised loss on investments (158) (0.6)
Net realised loss on investments (207) (0.8)
Income 180 0.7
Expenses, including management fee (440) (1.8)
Net funds raised during the period 985 0.1
Share buy-ins* (167) -
Net asset value as at 30 June 2005 22,097 89.2
* Share buy-ins served to increase net asset value by 0.06 pence per share
The increase in net assets primarily results from the fund raising during the
period, which generated net proceeds from the issue of new shares of �985,000
(�1.04 million gross) with the costs of the exercise having been capped by the
Manager at �57,000. This share issue had a very limited impact on net asset
value per share, as shown above. The reduction in net asset value per share
has, therefore, resulted from a combination of net running costs and net losses
on investments.
As at 30 June, the revenue reserve had a deficit of �47,000 and as a result,
and in the absence of realised gains on investments, the directors have not
declared an interim dividend.
INVESTMENT PROGRESS AND PORTFOLIO PERFORMANCE
During the six months to 30 June 2005, �0.6 million was committed to 10
existing venture capital investments and one new investment was made, resulting
in a portfolio of 23 investments (18 unquoted, 5 AIM traded). The investment in
Digital Union Limited was written off.
Net losses of �365,000 arose on the company's investments during the period
under review. The returns are attributable to the respective asset classes as
follows:
Investment class Net realised gains Net unrealised Total
/(losses) gains/(losses)
�'000
�'000 �'000
Quoted venture - (180) (180)
capital
Unquoted venture (189) (212) (401)
capital
Listed equities (8) 230 222
Bonds (10) 4 (6)
Total (207) (158) (365)
Since 30 June 2005, the rate of investment has increased. Three new investments
have been made at a total cost of �1.1 million, together with follow-on
investments totalling �0.6 million. Included within these follow-on investments
were two funding rounds at higher valuations resulting in valuation uplifts for
the two investments concerned.
Further information on the performance of the Company's investments is provided
in the Investment Manager's report.
CHANGE OF AUDITOR
RSM Robson Rhodes LLP have replaced KPMG Audit Plc as auditor of the Company.
OUTLOOK
An attractive venture capital portfolio with good potential has now largely
been built. Its general positive underlying progress, together with an increase
in the rate of investment seen in the current year, gives us increased optimism
for the future performance of the fund.
Bill Passmore
Chairman
21 September 2005
INVESTMENT MANAGER'S REPORT
OVERVIEW
During the period net asset value per share reduced by 2.6%, as summarised in
the Chairman's statement. Generally venture portfolios suffer losses in the
early years before successful investments mature and establish higher values.
The performance of Quester VCT 5 is therefore within current expectations.
PROGRESS WITH THE VENTURE CAPITAL PORTFOLIO
It was an active period with further investment being made in over half of the
unquoted companies in the portfolio.
During the half year �0.6 million was invested in 10 companies from the
existing portfolio, either as further tranches of originally agreed commitment
or as follow-on investment.
Company Sector Cost �
'000
Advanced Valve Technologies Industrial products & 100
Limited services
Identum Limited* Software 36
Avidex Limited Healthcare & life 65
sciences
Azea Networks Inc. Communications 129
Celona Technologies Limited Software 138
Digital Union UK Limited Software 29
HTC Healthcare Group plc Consumer goods & 12
services
Oxford Immunotec Limited Healthcare & life 75
sciences
REQIO Limited Software 8
Workshare Limited Software 56
648
* Formerly Argelcom Limited
In addition, one new investment of �88,000 was made in Nanotecture Limited, a
company that makes nanoscale structures that offer significant advantages to
various market sectors such as supercapacitors, molecular filters and gas
sensors.
A significant level of new investment has also been achieved since 30 June
2005. New investments have been made in Level Four Limited (�414,000), Global
Silicon Limited (�333,000) and Pelikon Limited (�373,000). Level Four provides
software for the configuration and testing of ATM services, Global Silicon
designs and sells audio processors for portable music players and Pelikon
manufactures flexible electronic displays. Seven further follow-on investments
have also been made at a total cost of �0.6 million.
A WELL BALANCED PORTFOLIO
The portfolio contains a number of promising investments with attractive
potential upside. The growing portfolio, with 23 investments at the period end,
spreads the risks inherent in investments made in small young companies. It is
also spread by sector within the broad area of technology as shown in the table
below:
Sector Percentage of Valuation at Number of
venture capital 30 June 2005
portfolio at investments
valuation
% �'000
Healthcare & life sciences 42.0 2,946 7
Software 16.9 1,188 4
Industrial products & 15.0 1,052 4
services
Communications 13.2 929 2
Semiconductors 5.5 383 2
Electronics 4.5 318 2
Consumer goods & services 1.6 110 1
Materials 1.3 88 1
100.0 7,014 23
VALUATION OF THE VENTURE CAPITAL PORTFOLIO
As at 30 June 2005, the venture capital portfolio was valued at �7.0 million,
equivalent to 90% of original cost. During the period, provisions totaling �
258,000 were made against Advanced Valve Technologies and HTC Healthcare. These
were partially offset by an upwards revaluation of �46,000 in the investment in
Workshare, reflecting the positive progress made by this company.
Digital Union failed during the period resulting in a loss of �200,000
(including bridging finance provided during the period). We worked extensively
with its management team to seek a satisfactory solution to the company's
failure to develop sales in line with plan, but ultimately decided not to
continue to support the business further.
The quoted venture capital investments fell in value by �180,000 during the
half year. A small proportion of this results from the impact of new accounting
standards that require listed investments to be valued at bid as opposed to mid
price.
LISTED EQUITY AND BOND PORTFOLIOS
The listed equity portfolio, which forms part of our reserves to cover future
venture capital investment, performed well during the period generating net
gains of �222,000, equivalent to annualised growth of approximately 14%. The
portfolio, which currently comprises 40 stocks at an average cost of �75,000,
also generated a yield of approximately 4.5%.
An amount of �4.6 million is currently invested in short dated, highly rated
bonds, which, as at 30 June, were generating an average effective yield of
4.6%.
These two portfolios are also now valued on the basis of bid price.
CONCLUSION
At this stage we are satisfied with the continuing enlargement of the venture
capital portfolio and with the underlying progress made by a number of the
earlier investments. It is also encouraging that there is a more positive
climate for developing small technology based companies.
Quester Capital Management Limited
Manager
21 September 2005
FUND SUMMARY Cost Valuation % equity % of fund
As at 30 June 2005 �'000 �'000 held by value
Quoted venture capital investments
Allergy Therapeutics plc 500 598 1.1% 2.7%
Polaron plc 250 169 1.2% 0.8%
Portrait Software plc (previously AIT 565 350 1.8% 1.6%
Group plc)
Public Recruitment Group plc 250 241 0.8% 1.1%
Quadnetics Group plc 57 50 0.2% 0.2%
Total quoted venture capital 1,622 1,408 6.4%
investments
Unquoted venture capital investments
Advanced Valve Technologies Limited 513 242 10.3% 1.1%
Anadigm Limited 237 199 1.7% 0.9%
Antenova Limited 402 402 2.2% 1.8%
Arithmatica Limited 287 184 2.5% 0.8%
Avidex Limited 506 506 1.4% 2.3%
Azea Networks Inc. 527 527 2.2% 2.4%
Celona Technologies Limited 266 266 4.4% 1.2%
Cyclacel Limited 500 500 0.6% 2.3%
Footfall Limited 400 400 3.1% 1.8%
HTC Healthcare Group plc 226 110 3.5% 0.5%
Identum Limited (previously Argelcom 71 71 2.5% 0.3%
Limited)
Lorantis Holdings Limited 400 400 0.9% 1.8%
Mesophotonics Limited 357 268 2.4% 1.2%
Nanotecture Limited 88 88 0.8% 0.4%
Oxford Immunotec Limited 325 325 3.7% 1.5%
Oxxon Therapeutics Holdings, Inc. 367 367 1.3% 1.7%
Workshare Limited 456 501 2.7% 2.3%
Xention Discovery Limited 250 250 2.4% 1.1%
Total unquoted venture capital 6,178 5,606 25.4%
investments
Total venture capital investments 7,800 7,014 31.8%
Listed fixed interest investments 4,572 4,575 20.7%
Listed equity investments 3,011 3,582 16.2%
Total investments 15,383 15,171 68.7%
Cash and other net assets 6,926 6,926 31.3%
Net assets 22,309 22,097 100.0%
UNAUDITED FINANCIAL STATEMENTS
STATEMENT OF TOTAL RETURN
Incorporating the revenue account of the Company
6 months ended 30 June 6 months ended 30 June Year
2005 2004 ended 31
December
2004
Note Revenue Capital Total Revenue Capital Total Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000
(Loss)/profit on - (365) (365) - 82 82 (86)
investments
Income 180 - 180 317 - 317 618
Investment (137) (137) (274) (132) (132) (264) (552)
management fee
Other expenses (166) - (166) (131) - (131) (277)
(Loss)/return on (123) (502) (625) 54 (50) 4 (297)
ordinary
activities
before taxation
Tax on ordinary - - - 2 - 2 2
activities
(Loss)/return on (123) (502) (625) 56 (50) 6 (295)
ordinary
activities after
taxation
Proposed - - - - - - -
dividend
Transfer (from)/ (123) (502) (625) 56 (50) 6 (295)
to reserves
(Loss)/earnings 3 (0.51)p (2.05)p (2.56)p 0.24p (0.22)p 0.02p (1.20)p
per share
The revenue column of this statement is the revenue 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.
BALANCE SHEET
Note 30 June 31 December 30 June
2004
2005 2004
�'000 �'000 �'000
Fixed assets
Investments at valuation 15,171 12,615 19,867
Current assets
Debtors 413 56 273
Cash at bank 6,829 9,373 2,447
7,242 9,429 2,720
Creditors (amounts falling (270) (94) (327)
due within one year)
Net current assets 6,972 9,335 2,393
Creditors (amounts falling (46) (46) (46)
due in over one year)
Net assets 22,097 21,904 22,214
Capital and reserves
Called-up equity share 248 239 239
capital
Share premium account 1 5,966 4,992 4,992
Special reserve 1 16,379 16,544 17,311
Capital reserve - realised 1 (237) 130 (556)
- unrealised 1 (212) (77) 163
Revenue reserve 1 (47) 76 65
Total equity shareholders' 22,097 21,904 22,214
funds
Net asset value per share 89.2p 91.6p 92.9p
SUMMARISED CASH FLOW STATEMENT
6 months 6 months Year ended
ended ended
31 December
30 June 2005 30 June 2004 2004
�'000 �'000 �'000
Net cash (outflow)/inflow from (299) 394 557
operating activities
Corporation tax repaid - - 2
Net capital expenditure and financial (3,063) (1,427) 5,343
investment
Dividends paid - (221) (221)
Financing 818 1,347 1,338
(Decrease)/increase in cash for the (2,544) 93 7,019
period
Reconciliation of net cash flow to
movement in net funds
(Decrease)/increase in cash for the (2,544) 93 7,019
period
Net funds at the start of the period 9,373 2,354 2,354
Net funds at the end of the period 6,829 2,447 9,373
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. Movement in reserves
Share Special Capital Capital Revenue
premium reserve reserve reserve reserve
account realised unrealised
�'000 �'000
�'000 �'000 �'000
At 1 January 2005 4,992 16,544 130 (77) 76
Share issues pursuant to 1,031 - - - -
the offers for
subscription
Expenses of share issues (57) - - - -
Share buy back and - (165) - - -
cancellation
Net loss on realisation of - - (207) - -
investments
Net unrealised loss - - - (158) -
on investments
Transfer from unrealised - - (23) 23 -
reserve
Investment management fee - - (137) - -
charged to capital
Net loss for the period - - - - (123)
At 30 June 2005 5,966 16,379 (237) (212) (47)
2. This Interim Report has been prepared using new accounting standards, which
have been issued to begin the process of converging UK standards with
International Financial Reporting Standards ("IFRS"). The relevant
standards are FRS 25 Financial Instruments: Disclosure and Presentation and
FRS 26 Financial instruments: Measurement. These standards have been
adopted by the Company with effect from 1 January 2005.
All investments held by the Company are classified as `fair value through
profit or loss'. For investments actively traded in organised financial
markets, fair value is generally determined by reference to Stock Exchange
quoted market bid prices at the close of business on the balance sheet date.
Previously all listed investments were valued with reference to closing mid
market prices at the balance sheet date. The effect of this change in
accounting policy on the net asset value of the Company as at 30 June 2005 has
been to reduce it by �34,000. The comparative figures have not been restated as
the impact is immaterial.
In addition, transaction costs incurred on the purchase and sale of investments
are now charged through the Statement of Total Return in the period in which
they are incurred instead of being included within the cost of the investment
or deducted from the proceeds of a sale. This has no impact on the net asset
value of the Company but impacts the unrealised and realised gain or loss on
investments.
3. The calculation of the revenue loss and capital loss per share for the
period is based respectively on the net loss after tax of �123,000 and the
net capital loss after tax of �502,000 divided by the weighted average
number of shares in issue during the period of 24,446,922.
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 23 September 2005. Further copies can be obtained from the
Company's registered office.
6. The Interim Report will also be available on request from the Company's
registered office, 29 Queen Anne's Gate, London SW1H 9BU.
END
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