Final Results QUESTER VCT 5 PLC ("the Company") Summary of results
for the year ended 31 December 2004 Per Ordinary Share 2004 2003
2002 (pence) (69 weeks) Capital Values Net asset value 91.6 92.7
92.8 Share price 85.5 96.0 96.0 Return and Dividends Dividend - 1.0
0.5 Cumulative dividend 1.5 1.5 0.5 Total Return* 93.1 94.2 93.3
*Net asset value plus cumulative dividend Shareholder information
Annual General Meeting 11.30 a.m. 19 April 2005 CHAIRMAN'S
STATEMENT INTRODUCTION During the year ended 31 December 2004
steady progress has been made towards the completion of Quester VCT
5's initial investment phase. The year has seen favourable
conditions for investment in venture capital, and in
technology-related investments in particular. New investments
completed during the year have included opportunities resulting
from Quester's association with the research activities of several
leading UK universities, as well as investments in more established
companies and companies raising capital on AIM. INVESTMENTS
COMPLETED At 31 December 2004 the venture capital portfolio of
Quester VCT 5 included 23 companies, including 18 unquoted
companies and five companies whose shares are traded on AIM. In the
current economic environment, the Board considers that a strategy
of investing in highgrowth sectors within the economy offers the
best opportunity for the achievement of superior investment
returns. Accordingly, the portfolio of Quester VCT 5 includes a
strong weighting in the information and communication technology
("ICT") and the healthcare and life sciences sectors. Within these
sectors, the portfolio is diversified and the companies that have
been selected operate in a range of different markets. The unquoted
investments of Quester VCT 5 have generally been made alongside
Quester's fund for institutional investors, the Quester Venture
Partnership, and other Quester funds. These coinvestment
arrangements are appropriate to the needs of ambitious high growth
companies, which may require significant amounts of capital to
develop technology-based products or to grow their businesses
internationally. PROGRESS OF THE PORTFOLIO At the end of this third
year, the portfolio still contains a relatively high proportion of
early stage businesses. Shareholders will appreciate that venture
capital is a long term investment which, in the first few years,
may often show a drop in net asset value before any significant
uplift. The Directors believe that Quester VCT 5's net asset value
of 91.6p per share at 31 December 2004 reflects a satisfactory
performance at this stage in the life of the Company. The net asset
value reflects the successful realisation of two AIM-traded
investments as well as the write-off or writing down in value of
certain investments that have underperformed against plan. Among
the unquoted investments that are currently held at cost, a number
of the companies have shown encouraging underlying business
progress, but it is too soon for this to be reflected in their
valuations. Across the portfolio as a whole, the Board considers
that progress is satisfactory at this stage in Quester VCT 5's
development and that there is substantial upside potential in the
longer term. REALISATIONS It is encouraging to report that
successful realisations of two venture capital investments were
achieved during the year, together producing realised gains of
�433,000. NET ASSETS, REVENUE AND DIVIDENDS The net asset value per
share of the Company was reduced by 1.2% over the year, from 92.7p
at 31 December 2003 to 91.6p at 31 December 2004. The movement is
summarised as follows: �'000 Pence per share Net asset value at 31
December 2003 20,861 92.7 Income 618 2.6 Investment management fee,
other expenses and tax (827) (3.4) Realised net gains on disposal
of investments 399 1.7 Write-off of investments (250) (1.1) Net
unrealised loss on revaluation of investments (235) (1.0) Net
proceeds from issue of shares 1,393 - Shares issued under the
dividend re-investment scheme 34 - Share buy-backs (89) 0.1 Net
asset value at 31 December 2004 21,904 91.6 The statement of total
return for the year shows a loss of �295,000, equivalent to 1.2p
per share. This comprises a loss of �362,000 on the capital
account, partially offset by a profit of �67,000 on revenue account
(0.3p per share). Against this background, the Directors do not
recommend a final dividend. CHANGE OF CORPORATE BROKER AND MARKET
MAKERS In July 2004 the Company changed its corporate broker to
Noble & Company Limited. Following this change, Winterflood
Securities Limited became market makers in the Company's shares.
FURTHER OFFERS FOR SUBSCRIPTION As shareholders will already be
aware, on 23 December 2004, the Company launched further offers for
subscription of up to 10,928,962 new ordinary shares in the
Company. As at 8 March 2005, the total number of ordinary shares
issued pursuant to these offers was 386,682. The 2004/05 and
2005/06 offers are expected to remain open until 4 April 2005 and
30 June 2005, respectively. OUTLOOK Over the coming year further
progress may be expected towards completion of Quester VCT 5's
initial investment phase, and further diversification of the
portfolio with the benefit of the additional capital being raised
under the current offers. The higher level of merger and
acquisition ("M&A") activity currently being shown by larger
companies and stock market conditions more conducive to the
achievement of successful flotations, particularly for smaller
companies on AIM, point to the opportunities that may be available
in due course for successful sales of businesses such as those in
which Quester VCT 5 has invested. Bill Passmore Chairman 16 March
2005 INVESTMENT MANAGER'S REPORT PROGRESS WITH VENTURE CAPITAL
INVESTMENT During the year ended 31 December 2004, eight new
investments were completed at an initial cost of �1.6 million. The
new investments included three in unquoted companies: two in
software, Argelcom Limited (�36,000) and Celona Technologies
Limited (�129,000); and one in consumer services, HTC Healthcare
Group plc (�214,000). In pursuit of the Company's strategy to
invest in attractive companies raising capital on AIM, a total of
�1.2 million was invested in five companies covering a range of
different sectors: Allergy Therapeutics plc (�500,000), Offshore
Hydrocarbon Mapping plc (�175,000), Polaron plc (�250,000), Public
Recruitment Group plc (�250,000) and Quadnetics Group plc
(�57,000). An additional �0.7 million was invested in eight of the
existing portfolio companies, either as further tranches of
originally agreed commitment or as follow-on investment. The
follow-on investments included additional commitments to Advanced
Valve Technologies Limited (�154,000), Anadigm Limited (�150,000)
and Antenova Limited (�177,000). As previously reported, the
portfolio that we have been building for Quester VCT 5 is an early
stage venture capital portfolio, consisting largely of
technology-related companies serving markets with considerable
potential over the long term. The summary of the businesses of the
ten largest investments gives a flavour of the significant
commercial opportunities that companies in the portfolio are
seeking to address. It is emphasised, however, that most of the
companies concerned are still at a relatively early stage of
development. For those involved in technology-related
opportunities, there may at this stage still be only limited, if
any, sales revenues and a reported financial loss. This pattern of
financial results should be appreciated as typical of early stage
companies exploiting technology-related opportunities and their
business plans. REALISATIONS We are pleased to be able to report
that successful realisations of two venture capital investments
were achieved during the year: The holding in Amino Technologies
plc, which had been acquired for �143,000 in November 2003 as an
unquoted investment, was sold in tranches following the admission
of the company's shares to trading on AIM in June 2004 and
subsequently, realising total proceeds of �522,000 and a gain of
�379,000. The holding in Offshore Hydrocarbon Mapping plc, which
had been acquired for � 175,000 in March 2004 in a placing upon the
admission of the company's shares to trading on AIM, was sold in a
series of market transactions up to July 2004, realising a gain of
�54,000. A BALANCED PORTFOLIO The portfolio so far established is
balanced by sector and well spread. A summary of the sectors
covered by the portfolio at 31 December 2004 is provided in the
table below: Industry sector Existing venture Valuation Number of
capital investments portfolio at valuation % �'000 Healthcare &
life sciences 41.2 2,834 7 Software 16.6 1,141 5 Electronics &
communications 15.5 1,068 3 Business services 9.2 634 2 Industrial
products 8.8 605 3 Semiconductors 5.6 383 2 Consumer services 3.1
214 1 100.0 6,879 23 RESERVES FOR FOLLOW-ON INVESTMENT Many of the
unquoted investments in Quester VCT 5's portfolio are early stage
companies in the ICT, healthcare and life sciences sectors, serving
markets with considerable growth potential over the long term.
These young companies generally will require further rounds of
finance as they grow. It is important that Quester VCT 5 should be
in a position to contribute to this funding process, provided the
companies concerned continue to make satisfactory progress.
Accordingly, Quester VCT 5 holds reserves for further investment in
existing portfolio companies. Taking these reserves for possible
future follow-on investment into account, 53.4% of the fund (at
cost) is now allocated to the existing venture capital investments.
�'000 % of fund (at cost) Current portfolio at cost 7,345 33.4%
Outstanding commitments: existing portfolio companies 138 0.6%
Amounts reserved for follow-on investment: existing 4,266 19.4%
portfolio companies 11,749 53.4% Under the VCT legislation, at
least 70% of the Company's investments have to be represented by
qualifying holdings. In order to comply with this requirement and
maintain an appropriate level of reserves, �8.1 million was held in
non-interest bearing cash accounts at the year end (this balance is
expected to reduce significantly over the current year as further
qualifying investments are made). This results in a lower level of
interest income but is consistent with managing the venture capital
portfolio appropriately for current market conditions and long term
capital growth. VALUATION OF THE VENTURE CAPITAL PORTFOLIO The
venture capital investments have been valued in line with the
Company's accounting policies, which are based on the valuation
guidelines issued by the British Venture Capital Association
("BVCA") in June 2003. Holdings in companies whose shares are
traded on AIM are valued on the basis of mid-market prices on 31
December 2004. It was disappointing that AIT Group plc, which had
reported satisfactory results for its financial year ended 31 March
2004, was obliged in August 2004 to issue an announcement that
revenue and profit expectations for the year to 31 March 2005 would
be lower than anticipated. The share price fell following that
announcement and stood at 31p as at 31 December 2004. For Quester
VCT 5, the effect was a reduction of � 386,000 over the year in
carrying value of this investment (the valuation at 31 December
2004 being �405,000 against cost of �565,000). Other AIM
investments showed a net appreciation in value of �126,000. Where
companies in the unquoted portfolio have fallen behind plan,
provisions have been made against the cost of the investments
concerned. The provisions total �553,000 in respect of five
unquoted investments: Anadigm Limited (� 39,000), Arithmatica
Limited (�103,000), Digital Union UK Limited (�72,000),
Mesophotonics Limited (�89,000) and Reqio Limited (�250,000). The
investment in Reqio Limited has been treated in accounting terms as
a write-off, although some return may yet be achieved from this
investment. LISTED EQUITY AND BOND PORTFOLIOS At 31 December 2004
the Company held a portfolio of bonds to a value of �2.5 million
and a portfolio of listed equities valued at �3.2 million (showing
an unrealised capital profit of �384,000). CONCLUSION As at the
date of this report, the initial investment phase of the Company is
well progressed. The total number of venture capital investments is
expected to increase in due course from the current 23 to around
30, dependent on the level of funds raised from the current offers
for subscription. Quester Capital Management Limited Manager 16
March 2005 FUND SUMMARY AS AT 31 DECEMBER 2004 Quoted venture
Industry sector Original Valuation Equity % % of fund capital
Investments Cost held by value �'000 �'000 AIT Group plc Software
565 405 2.9% 1.8% Allergy Therapeutics Healthcare and life 500 627
1.1% 2.9% plc sciences Polaron plc Industrial products 250 259 1.2%
1.2% Public Recruitment Business services 250 234 0.8% 1.1% Group
plc Quadnetics Group plc Industrial products 57 63 0.2% 0.3% Total
quoted venture capital investments 1,622 1,588 7.3% Unquoted
venture capital investments Advanced Valve Industrial products 413
283 10.2% 1.3% Technologies Limited Anadigm Limited Semiconductors
237 199 1.7% 0.9% Antenova Limited Electronics & 402 402 2.2%
1.8% communications Argelcom Limited Software 36 36 2.5% 0.2%
Arithmatica Limited Semiconductors 287 184 2.5% 0.9% Avidex Limited
Healthcare & life 440 440 1.5% 2.0% sciences Azea Networks, Inc
Electronics & 398 398 2.8% 1.8% communications Celona
Technologies Software 129 129 3.6% 0.6% Limited Cyclacel Group plc
Healthcare & life 500 500 0.6% 2.3% sciences Digital Union UK
Business software 243 171 5.3% 0.8% Limited Footfall Limited
Business services 400 400 3.1% 1.8% HTC Healthcare Group Consumer
services 214 214 3.5% 1.0% plc Lorantis Holdings Healthcare &
life 400 400 0.9% 1.8% Limited sciences Mesophotonics Limited
Electronics & 357 268 2.4% 1.2% communications Oxford Immunotec
Healthcare & life 250 250 3.8% 1.1% Limited sciences Oxxon
Therapeutics Healthcare & life 367 367 1.3% 1.7% Holdings, Inc.
sciences Workshare Limited Software 400 400 2.6% 1.8% Xention
Discovery Healthcare & life 250 250 2.4% 1.1% Limited sciences
Total unquoted venture capital 5,723 5,291 24.1% investments Total
venture capital 7,345 6,879 31.4% investments Listed fixed interest
2,512 2,517 11.5% investments Listed equity investments 2,835 3,219
14.7% Total investments 12,692 12,615 57.6% Cash and other net
assets 9,289 9,289 42.4% Net assets 21,981 21,904 100.0% STATEMENT
OF TOTAL RETURN (incorporating the revenue account) FOR THE YEAR
ENDED 31 DECEMBER 2004 Notes 2004 2004 2004 2003 2003 2003 Revenue
Capital Total Revenue Capital Total �'000 �'000 �'000 �'000 �'000
�'000 (Loss)/profit on - (86) (86) - 64 64 investments Income 1 618
- 618 647 - 647 Investment management 2 (276) (276) (552) (196)
(196) (392) fee Other expenses 3 (277) - (277) (227) - (227) Return
on ordinary 65 (362) (297) 224 (132) 92 activities before tax Tax
on ordinary 2 - 2 - - - activities Return on ordinary 67 (362)
(295) 224 (132) 92 activities after tax Dividends proposed - - -
(221) - (221) Transfer to/(from) 67 (362) (295) 3 (132) (129)
reserves Return per share 5 0.3p (1.5)p (1.2)p 1.0p (0.6)p (0.4)p
The revenue column of this statement is the profit and loss account
of the Company. All revenue and capital items in the above
statement derive from continuing operations. The Company has only
one class of business and derives its income from investments made
in shares and securities and from bank deposits. The accompanying
notes are an integral part of this statement. BALANCE SHEET AS AT
31 DECEMBER 2004 2004 2003 Note �'000 �'000 Fixed assets
Investments 12,615 18,288 Current assets Debtors 56 627 Cash at
bank 9,373 2,354 9,429 2,981 Creditors (amounts falling due within
one year) (94) (362) Net current assets 9,335 2,619 Creditors
(amounts falling due in over one (46) (46) year) Net assets 21,904
20,861 Capital and reserves Called-up equity share capital 239 225
Share premium 4,992 3,580 Special reserve 16,544 17,390 Capital
reserve - realised 130 (527) - unrealised (77) 184 Revenue reserve
76 9 Equity shareholders' funds 21,904 20,861 Net asset value per
share 6 91.6p 92.7p The financial statements were approved by the
directors on 16 March 2005 and were signed on their behalf by: Bill
Passmore Chairman The accompanying notes are an integral part of
this statement. CASHFLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER
2004 2004 2003 �'000 �'000 Cash outflow from operating activities
557 92 Corporation tax refund/(paid) 2 (2) Financial investment
Purchase of venture capital investments (2,348) (3,920) Purchase of
listed equities and fixed interest (6,285) (8,951) investments Sale
of venture capital investments 776 18 Sale/redemption of listed
equity and fixed 13,200 10,121 interest investments Total financial
investment 5,343 (2,732) Equity dividends paid (221) (93) Financing
Issue of ordinary shares pursuant to the offers 1,446 2,854 for
subscription made during the year Issue of shares in accordance
with the terms of 34 13 the dividend reinvestment scheme Share
issue expenses (53) (101) Buy back of ordinary shares (89) (23)
Total financing 1,338 2,743 Increase in cash for the period 7,019 8
Reconciliation of net cash flow to movement in net funds Increase
in cash for the period 7,019 8 Net funds at the start of the period
2,354 2,346 Net funds at the end of the period 9,373 2,354 The
accompanying notes are an integral part of this statement. NOTES TO
THE FINANCIAL STATEMENTS 1 Income 2004 2003 �'000 �'000 Dividend
income Listed equity shares 78 40 Interest receivable Listed fixed
interest securities 446 515 Bank deposits 94 92 618 647 2
Investment management fee Quester Capital Management Limited
("QCML") provides investment management services to the Company
under an agreement dated 3 December 2001, as amended by a
supplemental agreement dated 23 December 2004. A charge of �552,000
(2003: �392,000) in respect of the management fee payable to QCML
was accrued during the year together with irrecoverable VAT of
�71,000 (2003: �54,000). The fee, which is calculated monthly and
is payable in advance, was levied at a rate of 2.5% (2003: 2%) on
the Company's net assets during the financial year ended 31
December 2004. With effect from 1 January 2005, this fee is to be
capped to ensure that the Company's running costs do not exceed
3.5% of closing net asset value at the end of each financial
period. 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. 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. QCML provides administrative and secretarial
services to the Company for which it is entitled to a fee of
�53,000 per annum (linked to the movement in the RPI). This fee is
included in other expenses (note 3). 3 Other expenses 2004 2003
�'000 �'000 Administration and secretarial services 53 51
Directors' remuneration (note 4) 39 39 Auditor's remuneration Audit
services 18 19 Non audit services 8 7 Insurance 12 8 Legal and
professional 15 18 UKLA, LSE and registrar fees 14 10 Other 19 10
Irrecoverable VAT 99 65 277 227 4 Directors' remuneration 2004 2003
�'000 �'000 Fees paid to directors 12 12 Amounts paid to third
parties, excluding VAT, in 27 27 consideration of the services of
directors 39 39 The total fees paid or payable in respect of
individual directors for the period is detailed in the Directors'
Remuneration Report. 5 Return per share The revenue return per
share of 0.3p (2003: 1.0p) is based on the aggregate of the net
return from ordinary activities after tax of �67,000 (2003:
�224,000) and on ordinary shares of 23,610,383 (2003: 21,644,753),
being the weighted average number of shares in issue during the
year. The capital loss per share of 1.5p (2003: 0.6p) is based on
the net realised and unrealised capital loss for the period after
tax of �362,000 (2003: � 132,000) and on ordinary shares of
23,610,383 (2003: 21,644,753), being the weighted average number of
shares in issue during the year. 6 Net asset value per share The
net asset value per share as at 31 December 2004 of 91.6p (2003:
92.7p) is based on net assets of �21,904,000 (2003: �20,861,000)
divided by the 23,905,023 (2003: 22,498,6400 ordinary shares in
issue at that date. The financial information set out above does
not constitute the Company's statutory accounts for the year ended
31 December 2004. The statutory accounts for the year ended 31
December 2004 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 London E14 5HS Copies
of the full financial statements for the year ended 31 December
2004 are expected to be posted to shareholders on 17 March 2005 and
will be available to the public at the registered office of the
Company at 29 Queen Anne's Gate, London, SW1H 9BU. END DATASOURCE:
QUESTER VCT 5 PLC
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