QUESTER VCT 4 PLC
INTERIM STATEMENT FOR THE SIX MONTHS ENDED 30 APRIL 2007
FINANCIAL HIGHLIGHTS
Per ordinary share (pence) 30 April 31 October 30 April
2007 2006 2006
Capital values
Net asset value 54.8 65.8 65.2
Share price 54.3 54.0 54.0
Return and dividends
Dividend paid in the period 1.0 1.0 1.0
Cumulative dividend (tax free) 5.9 4.9 4.9
Total return* 60.7 70.7 70.1
*Net asset value plus cumulative dividend per share
The returns summarised above are applicable only to original shareholders of
Quester VCT 4 plc. They do not represent the historic returns to subsequent
subscribers.
The above table excludes any tax benefits (20% income tax relief and capital
gains deferral) received on subscription for shares in the Company. Inclusive
of initial income tax relief, the total return to an original investor would be
equivalent to 80.7p per share as at 30 April 2007.
A final dividend in respect of the year ended 31 October 2006 of 1p per share
was paid on 15 March 2007, increasing cumulative dividends to 5.9p per share.
CHAIRMAN'S STATEMENT
Overview
In May 2007 we announced that Quester Capital Management Limited, the company
that manages Quester VCT 4 plc, had been acquired by NewMedia SPARK plc
(`SPARK'). SPARK is a venture capital investment company traded on the
Alternative Investment Market (AIM) of the London Stock Exchange, focused on
early stage investment in the ICT and media sectors and is one of the few
specialist and successful companies with expertise similar to Quester.
SPARK's current market capitalisation is �64 million and it has a portfolio of
21 investments. Its net assets at 31 March 2007 were �72 million. It
specialises in digital media, software applications, technology and
communications, which complements Quester's own activities in these areas.
Quester's strong healthcare business will be developed alongside SPARK's new
focus in this area.
The combined group will be responsible for managing funds of over �275 million
including the three Quester-managed VCTs - the Company, Quester VCT plc and
Quester VCT 5 plc - the Quester Venture Partnership, an institutional fund, and
University linked funds.
The Board believes that the acquisition of Quester by SPARK will provide
greater access to some of the UK's best early stage entrepreneurs as well as
broadening the range of investment opportunities available to the
Quester-managed VCTs, and that the combined management group has the potential
to deliver enhanced long-term returns to investors in Quester VCT 4. The Board
sees the acquisition of Quester by SPARK as a very positive development.
The combined management team has carried out a fresh assessment of the fair
values of the investments in the individual portfolio companies at the current
stage of their development against their recent progress to business plans. A
number of significant valuation changes have arisen from this review, resulting
in a reduction in the net asset value by 11p per share at 30 April 2007 to
54.8p per share.
Net assets
The movement in net assets is summarised in the table below:
�'000 Pence per
share
Net asset value at 31 October 2006 31,924 65.8
Income 125 0.3
Operating expenses (621) (1.3)
Net realised gain on investments 185 0.4
Net unrealised loss on investments (4,525) (9.5)
Net assets before dividends and share buy-backs 27,088 55.7
Dividend paid net of amounts reinvested (458) (1.0)
Share buy-backs (470) 0.1
Net asset value at 30 April 2007 26,160 54.8
No interim dividend is declared in respect of the period.
Outlook
As noted in the investment manager's report, there are a number of companies
where the opportunity may exist for the achievement of a profitable exit in the
relatively short term (2007-2008). However, indications are that the flow of
cash realisation proceeds from the most significant venture capital
investments, provided general market conditions are favourable, looks likely to
be concentrated in the years from 2009. The Board is confident that the
combined management team will be working closely with these portfolio companies
to help them achieve their objectives and to maximise the value of Quester VCT
4's portfolio.
It is regretted that it has been necessary to report a significant reduction in
the valuation of the portfolio at 30 April 2007. Overall, we believe that the
portfolio offers attractive recovery potential.
Robert Wright
Chairman
27 July 2007
INVESTMENT MANAGER'S REPORT
Introduction
Following the acquisition of Quester Capital Management Limited by NewMedia
SPARK plc on 11 May 2007, the investment team responsible for the management of
Quester VCT 4 is led by Andrew Carruthers, CEO of SPARK, along with Jay Patel,
Executive Director, and Tom Teichman, Chairman of SPARK, and ongoing members of
the Quester team.
The combined team presents its first investment manager's report on Quester VCT
4 for the half year to 30 April 2007.
Venture capital portfolio: investment activity
In line with the indication given in the 2006 Annual Report, one new investment
has been added to the portfolio at a cost of �700,000 and the Company is now
fully invested. A total of �2.6 million was committed in the period to 17
follow-on investments.
New investment
The Company invested �700,000 in a �2.4 million first funding round for
UniServity Limited, with the balance provided by other Quester managed funds.
UniServity is a leading provider of web-based learning platforms to the
educational sector, enhancing communication and collaboration between schools,
teachers, pupils and the community. UniServity's learning platforms provide
schools with a customised online suite of tools to support innovative ways of
teaching and learning, thereby extending the classroom to the internet.
UniServity is one of only a few learning platform providers approved by the
British Education Communications and Technology Agency as an accredited
supplier and is well placed to benefit from the Government's commitment to
ensure that all schools have a learning platform before the end of 2008.
Follow-on investments
A feature of the current period is that several portfolio investments have been
engaged in raising new rounds of finance to fund their ongoing development.
Accordingly, the number of follow-on investments has continued to be
substantial.
The most significant of these transactions in the half year were as follows:
* Workshare: Workshare is an information security company that delivers secure
content compliance solutions ensuring safe information exchange without
business disruption. We are very pleased with Workshare's development over the
four years since Quester VCT 4's original investment in July 2002. In December
2006 the company closed a US$23 million Series B funding round led by
Steelpoint Capital Partners and supported by the Company and other Quester
funds. The capital raised in this new round positions the company to extend its
reach worldwide by investing in acquisitions, distribution in new markets and
new service delivery models.
* Azea Networks: Azea specialises in developing line terminal equipment for
transoceanic submarine optical networks: its technology and expertise exploits
the full potential of existing cable assets to deliver substantial capacity
gains for the operators. In March 2007, following the commissioning of a
successful cable upgrade, Azea secured a US$20 million Series D funding round
led by TVM Capital, supported by Quester VCT 4 and other Quester funds and
syndicate partners: this provides working capital for further technical and
business development and is designed to take the company to break even.
* Celona Technologies: Celona is a developer of data migration software for
communications service providers (CSPs) enabling them to transform the software
platforms which manage their operations without affecting customer service. The
company has recently reached an important milestone with the closing of a �7
million Series B funding round with Caledonia Investments plc. This will enable
Celona to build out its sales and support activities and will fund further
product development, extending the support provided by the Company and other
Quester funds (including bridge finance provided during the half year).
We continued to provide bridge finance to Oxford Immunotec, the Oxford
University spinout company which has developed a new test for the diagnosis of
tuberculosis. This company has been investing resources in the opportunity in
the United States, where it has submitted an application for FDA approval for
the marketing of its product. Discussions are in progress with US venture
capital firms on the terms of a new financing round to support the launch of
the US marketing effort.
In line with an earlier commitment, the Company invested its share of the final
tranche of the Series B round of Xention Discovery. This drug discovery company
is focused on ion channel targets: it has recently initiated Phase I clinical
development of a treatment for atrial fibrillation. The additional investment
was made after the company achieved several key milestones which were part of
the syndicate's requirements for the release of this remaining tranche of
existing funding.
Summary of follow-on investments:
Name Industry sector �'000
Advanced Valve Technologies Limited Industrial Products & services 14(1)
Antenova Limited Communications 129
Anthropics Technology Limited Communications 10
Arithmatica Limited Semiconductors 86
Azea Networks Inc Communications 238
Celona Technologies Limited Software 304
Celoxica Holdings Limited Software 44
Cluster Seven Limited Software 97
HTC Healthcare Limited Consumer services 57
Identum Limited Software 179
Lectus Therapeutics Limited Biotechnology 129
Level Four Software Limited Software 27
Nomad Software Limited Software 152
Oxford Immunotec Limited Diagnostics and devices 255
Oxxon Therapeutics Holdings, Inc Biotechnology 243(2)
Workshare Limited Software 378
Xention Discovery Limited Biotechnology 300
2,642
(1) Loan subsequently repaid.
(2) Bridging investment realised immediately upon the company's acquisition by
Oxford Biomedica plc.
Venture capital portfolio: realisations and M&A activity
Realisations from the portfolio of quoted venture capital investments generated
�1 million in proceeds and a net gain of �185,000 over carrying value at 31
October
2006. These transactions included the sales of the entire holdings in Cyclacel
and Polaron; a start was also made on the process of selling the immediately
tradable shares in MediGene AG held following its acquisition of Avidex.
We are pleased to report the acquisition of Quester VCT 4's unquoted holding in
Oxxon Therapeutics by the AIM-traded biotech company, Oxford Biomedica plc,
this paper-for-paper transaction being the culmination of an exit strategy
initiated over a year ago. As part of the arrangements, the existing syndicate
was required to put up some additional cash for Oxxon Therapeutics: a loan of �
243,000 was made that became represented by tradable shares in the acquirer,
which were immediately placed for �268,000 realising a profit of �25,000. The
balance of the resulting holding in Oxford Biomedica is subject to
marketability restrictions until the end of September 2007.
Venture capital portfolio: valuation changes
The combined management team has carried out a fresh assessment of the fair
values of the investments in the individual portfolio companies at the current
stage in their development against their recent progress to business plans:
* The valuations of companies that have recently completed third-party funding
rounds (Workshare, Azea Networks and Celona Technologies) have been adjusted in
line with the terms of those rounds. An adjustment has also been made in the
case of Oxford Immunotec to reflect the expected terms of the round currently
under negotiation. These revaluations represent an increase of �581,000 in the
case of Workshare and reductions totalling �1,954,000 in respect of other
companies.
* To reflect an improvement in the company's trading position, the valuation of
the holding in Elateral has been increased by �324,000.
* Advanced Valve Technologies, De Novo Pharmaceuticals and HTC Healthcare have
found it difficult to achieve success with their corporate strategies: in these
cases provisions for impairment have been increased to 100% and in the case of
Mesophotonics to 75% of cost, although we continue to work with the companies
to achieve value from these investments (reduction in valuations �2,208,000).
* Celldex Therapeutics, Nexagent and Teraview are considered to be all making
reasonable progress, but to reflect a more prudent assessment at this stage in
their development we have reduced the carrying value of the investments
(reduction in valuations �1,470,000).
In summary, the changes in the valuations of unquoted investments have resulted
in a net reduction in valuations of �4,727,000.
Listed equity portfolio
The listed equity portfolio has performed well over the half year with the
valuation increasing by �408,000. In line with the indication given in the last
Annual Report, a total of �3 million has been realised from the portfolio
during the half year to provide liquidity for the new investment in UniServity
and the follow-on investments that have been made.
Conclusion
With the completion of one new investment during the half-year, the Company is
now fully invested. For the immediate future the focus of activity on the part
of the management team will be on the development of value in the portfolio
companies.
There are a number of companies where the opportunity may exist for the
achievement of a profitable exit in the relatively short term (2007-2008).
However, the majority of the investments in the venture capital portfolio -
dating from Quester VCT 4's main investment phase 2001-2005 - are in companies
which are in the course of development from the early stage at which Quester
VCT 4 first invested into stronger revenue growth and progress towards
profitability. Accordingly it is too soon to expect cash realisations from
these investments in the near future. Indications are that the flow of cash
realisation proceeds from the most significant venture capital investments,
provided general market conditions are favourable, looks likely to be
concentrated in the years from 2009.
Quester Capital Management Limited
Manager
27 July 2007
FUND SUMMARY AS AT 30 APRIL 2007
Industry sector Original Valuation % % of
cost equity fund
�'000 �'000 held by value
Quoted venture capital investments
Allergy Therapeutics Biotechnology 700 956 1.1% 3.7%
plc
Celoxica Holdings plc Software 1,359 153 3.1% 0.6%
Genosis plc Diagnostics & devices 111 17 0.6% 0.1%
MediGene AG Biotechnology 1,142 744 1.0% 2.8%
Oxford Biomedica plc Biotechnology 1,130 684 3.5% 2.6%
Portrait Software plc Software 1,130 497 2.7% 1.9%
Public Recruitment Industrial products & 250 81 0.6% 0.3%
Group plc services
Quadnetics Group plc Electronics 143 189 0.3% 0.7%
Total quoted venture 5,965 3,321 12.7%
capital investments
Unquoted venture capital investments
Advanced Valve Industrial products & 1,730 - 30.6% 0.0%
Technologies Limited services
Antenova Limited Communications 1,383 1,039 4.7% 4.0%
Anthropics Technology Communications 1,115 45 7.0% 0.2%
Limited
Arithmatica Limited Semiconductors 1,572 515 13.7% 2.0%
Azea Networks Inc Communications 2,687 1,920 8.3% 7.3%
Celldex Therapeutics Biotechnology 1,400 585 2.7% 2.2%
Inc
Celona Technologies Software 1,952 1,200 13.6% 4.6%
Limited
Cluster Seven Limited Software 255 255 2.4% 1.0%
De Novo Diagnostics & devices 803 - 3.0% 0.0%
Pharmaceuticals
Limited
Elateral Holdings Software 1,155 479 13.7% 1.8%
Limited
Haemostatix Limited Biotechnology 11 11 0.6% 0.0%
HTC Healthcare Group Consumer services 771 - 8.7% 0.0%
plc
Identum Limited Software 1,338 1,338 6.7% 5.1%
Lectus Therapeutics Biotechnology 182 182 1.5% 0.7%
Limited
Level Four Software Software 95 95 0.7% 0.4%
Limited
Mesophotonics Limited Electronics 893 223 7.4% 0.9%
Nexagent Limited Software 1,666 794 5.7% 3.0%
Nomad Software Limited Software 1,554 1,554 7.5% 5.9%
Opsys Management Electronics 1,038 - 3.5% 0.0%
Limited
Oxford Immunotec Diagnostics & devices 1,594 1,470 9.3% 5.6%
Limited
Pelikon Limited Hardware 69 69 0.5% 0.3%
Perpetuum Limited Electronics 93 93 1.7% 0.4%
Sift Group Limited Internet 917 698 6.2% 2.7%
Teraview Limited Diagnostics & devices 947 710 5.4% 2.7%
UniServity Limited Software 700 700 11.6% 2.7%
Vivacta Limited Diagnostics & devices 195 195 3.0% 0.7%
Workshare Limited Software 1,910 2,590 7.3% 9.9%
Xention Discovery Biotechnology 1,050 1,125 5.1% 4.3%
Limited
Total unquoted venture capital investments 29,075 17,885 68.4%
Total venture capital 35,040 21,206 81.1%
investments
Listed equity 2,650 3,733 14.3%
investments
Total investments 37,690 24,939 95.4%
Cash and other net 1,221 1,221 4.6%
assets
Net assets 38,911 26,160 100.0%
PROFIT AND LOSS ACCOUNT
Note 6 months 6 months Year ended
ended ended
31 October
30 April 2007 30 April 2006 2006
�'000 �'000 �'000
Net (losses)/profits on (4,340) 2,836 3,456
investments at fair value through
profit or loss
Income 125 194 412
Investment management fee (395) (398) (800)
Other expenses (223) (215) (418)
(Loss)/profit on operating (4,833) 2,417 2,650
activities
Interest payable on loan notes (3) (3) (5)
(Loss)/profit on ordinary (4,836) 2,414 2,645
activities before taxation
Tax on ordinary activities - - -
(Loss)/profit on ordinary (4,836) 2,414 2,645
activities after taxation
Basic and diluted (loss)/earnings 4 (10.0)p 4.8p 5.3p
per share
All items in the above statement are derived 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.
A statement of total recognised gains and losses has not been presented because
all gains and losses are included in the statement above.
BALANCE SHEET
30 April 31 October 30 April
2007 2006 2006
�'000 �'000 �'000
Fixed assets
Investments at fair value 24,939 30,624 28,299
through profit or loss
Current assets
Debtors 34 148 183
Cash at bank 1,601 1,715 4,382
1,635 1,863 4,565
Creditors: amounts falling due (314) (463) (330)
within one year
Other creditors
Net current assets 1,321 1,400 4,235
Creditors: amounts falling due (100) (100) (100)
in over one year
Net assets 26,160 31,924 32,434
Capital and reserves
Called-up equity share capital 476 485 497
Capital redemption reserve 56 47 35
Share premium account 338 309 310
Special reserve 32,416 33,730 34,437
Fair value reserve (9,444) (4,781) (5,019)
Profit and loss account 2,318 2,134 2,174
Total equity shareholders' funds 26,160 31,924 32,434
Net asset value per share 54.8p 65.8p 65.2p
SUMMARISED CASH FLOW STATEMENT
30 April 30 April 31 October
2007 2006 2006
�'000 �'000 �'000
Net cash outflow from operating (531) (260) (783)
activities
Net capital expenditure and 1,345 (27) (1,767)
financial investment
Dividends paid net of amounts (458) (476) (477)
reinvested
Buy-back of ordinary shares (470) (496) (899)
Decrease in cash for the period (114) (1,259) (3,926)
Reconciliation of net cash flow
to movement in net funds
Decrease in cash for the period (114) (1,259) (3,926)
Net funds at the start of the 1,715 5,641 5,641
period
Net funds at the end of the 1,601 4,382 1,715
period
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
Share Capital Share Special Fair Profit Total
capital redemption premium reserve value and loss
reserve account reserve account
�'000 �'000 �'000 �'000 �'000 �'000 �'000
At 1 November 485 47 309 33,730 (4,781) 2,134 31,924
2006
Shares issued - - 29 - - - 29
under the
Dividend
Reinvestment
Scheme
Shares bought (9) 9 - (470) - - (470)
back
Realisation (138) 138 -
of prior
years' net
unrealised
profits on
investments
Transfer from - - - (844) - 844 -
special
reserve to
profit and
loss account
Transfer of - - - - (4,525) 4,525 -
net
unrealised
loss on
revaluation
of
investments
to fair value
reserve
Loss on - - - - - (4,836) (4,836)
ordinary
activities
after
taxation
Dividend paid - - - - - (487) (487)
At 30 April 476 56 338 32,416 (9,444) 2,318 26,160
2007
Notes
1. The financial information contained in this report has been prepared on the
basis of the accounting policies set out in the Annual Report for the year
ended 31 October 2006.
2. A final dividend in respect of the prior year totalling �487,000 was paid on
15 March 2007.
3. The number of ordinary shares in issue as at 30 April 2007 was 47,696,728
(30 April 2006: 49,722,899).
4. The calculation of earnings per share for the period is based on the loss
after tax of �4,836,000 (2006: profit of �2,414,000) divided by the weighted
average number of shares in issue during the period being 48,259,627 (2006:
50,341,560) ordinary shares of 1p each.
5. The unaudited financial statements set out above do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
statutory accounts for the period ended 31 October 2006 have been delivered to
the Registrar of Companies and received an audit report which was unqualified
and did not contain any statements under S237(2) and (3) of the Companies Act
1985.
6. Copies of the unaudited interim results are expected to be sent to
shareholders on 27 July 2007. Further copies can be obtained from the Company's
registered office.
A copy of the above document is to 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
London E14 5HS
END
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