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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Quester Vct 5 | LSE:QUV | London | Ordinary Share | GB0031102071 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 41.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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QUESTER VCT 5 PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER
2007
Summary of results for the year ended 31 December 2007
Per ordinary share (pence) 2007 2006 2005
Net asset value 67.4 84.9 88.6
Dividends
Dividend paid 1.0 1.0 -
Cumulative dividend 3.5 2.5 1.5
Total return* 70.9 87.4 90.1
*Net asset value plus cumulative dividend per share to ordinary shareholders
since the launch of the Company
The Directors do not recommend a dividend for the year ended 31 December 2007.
CHAIRMAN'S STATEMENT
Overview
In May 2007 we announced that the Quester management company had been acquired
by NewMedia SPARK plc (since renamed SPARK Ventures plc). SPARK Ventures plc is
a venture capital investment company traded on the Alternative Investment
Market (AIM) of the London Stock Exchange. It specialises in digital media,
software applications, technology and communications, complementing the
established activities of the former Quester group in these areas and its
strong healthcare business.
The Board believes that the acquisition by SPARK Ventures plc 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 Company. It
believes that the newly combined management group has the potential to deliver
enhanced long-term returns to investors in Quester VCT 5 plc.
The Board was involved in meetings with a number of possible acquirers of the
Quester management company and held further meetings with SPARK to discuss its
plans for the future management of Quester VCT 5. The Board sees the
acquisition by SPARK as a very positive development, and one that was much
needed, particularly in view of the negative performance of the fund to date (a
net asset value of 67.4p per share at 31 December 2007, cumulative dividends of
no more than 3.5p per share having been paid since launch, and an IRR for
investors of -5.6% per annum).
The two management teams have now been successfully integrated. Several
investments have seen a transition to new managers within SPARK, while
longstanding and valuable relationships with former Quester managers have been
retained, particularly where they have been able to contribute to an exit
process. The name of the Manager of Quester VCT 5 plc has been changed to SPARK
Venture Management Limited ("SPARK").
Shareholders' approval is being sought at the Annual General Meeting to a
change in the name of your Company to SPARK VCT 3 plc.
Since taking over management responsibility, the combined team has been very
active in reviewing both the portfolio and the investment strategy. In
particular, I would like to highlight the following actions taken by SPARK
which have had the full support of the Board. The combined team has conducted a
detailed review of the portfolio, including reassessment of the business
strategy, progress to date, opportunities and potential for value of each of
the investee companies. The companies have been classified into those that are
key to producing a good return for the whole portfolio; companies with
potential for growth; and companies where the plan is simply for cash recovery
of the existing valuation. The review resulted in the write-off of a number of
investments and a net reduction in valuation of others, contributing to a
significant reduction in the net asset value per share at 31 December 2007.
The SPARK team's review of the existing portfolio has confirmed encouraging
prospects for a number of the most significant venture capital investments.
While the majority of these companies are still at early stage and subject to
all the associated risks, a number of them are considered to offer the
potential for significant capital growth.
Results for the year ended 31 December 2007
The movement in net assets and net assets per share is summarised in the table
below
Unquoted Quoted Bonds, Total Pence
venture venture equities per
capital capital and net £'000 share
investments investments current
assets
£'000 £'000
£'000
Net asset value at 31 8,737 2,714 8,702 20,153 84.9
December 2006
Income and net gains on 66 68 363 497 2.1
disposal
Operating expenses - - (608) (608) (2.6)
Write-off of (1,951) (158) - (2,109) (9.0)
investments net of
recoveries
Net (loss)/gain on (1,458) (911) 666 (1,703) (7.3)
revaluation of
investments
Net assets before 5,394 1,713 9,123 16,230 68.1
dividends and share
buy-backs
Dividend paid, net of - - (224) (224) (1.0)
amounts reinvested
Share buy-backs - - (610) (610) 0.3
Net investment 2,404 274 (2,678) - -
Net asset value at 31 7,798 1,987 5,611 15,396 67.4
December 2007
Net assets per share, before the payment of dividends and share buy-backs, fell
by 16.8p in the year to 31 December 2007. The dividend paid in the year was
1.0p per share.
The total return to shareholders from the launch of the Company in December
2001 to 31 December 2007 was 70.9p per share before taking account of tax
reliefs.
The valuation review by the SPARK team has resulted in an overall reduction in
valuation of the unquoted investments for the year to 31 December 2007 of £
3,409,000 (including £1,951,000 representing impairment in value of
investments).
The year has seen, as expected, substantial follow-on investment in a number of
key companies in the portfolio. A number of these companies have demonstrated
successful business progress by closing new financing rounds at an uplift on
the Company's original investment valuation. In other cases, the terms of new
financing rounds or other transactions positive for the future of the business
- such as a merger with a larger company - have been such as to necessitate a
downward valuation adjustment at 31 December 2007 even though the Manager
considers that there are prospects for the ultimate realisation of a
substantial capital gain.
Over the period the quoted venture capital portfolio lost £1,001,000, of which
£158,000 represents impairment in value of investments.
The portfolio of bonds and listed equity investments performed well, with an
overall appreciation in value of £762,000.
Review of investment strategy
Following the integration of the SPARK and Quester teams, and the review of the
portfolio discussed above, the Board reassessed the Company's investment
strategy.
The activities of Quester VCT 5 have been focused in the venture capital area.
Venture capital is a long-term investment which, in the first few years, may
often show a drop in net asset value before showing any significant uplift,
reflecting initial costs and management fees, and the writing down in value of
troubled or failed investments which may occur in the first few years, before
gains on the successful investments start to flow through.
The portfolio of Quester VCT 5 has been invested in early stage companies, with
a significant bias towards technology. The Board is satisfied that SPARK has
longstanding skills, and a better record over recent years than Quester, in
this area.
Towards the end of the year the process of investment in new opportunities
sourced from SPARK commenced with £300,000 being invested in Skinkers Limited,
a company involved in information broadcast technology, and has continued since
the year end with £300,000 invested in the early stage online travel website
company Isango! Limited. The Company retains substantial reserves for follow-on
investment but will not add further new investments to the portfolio for the
time being.
The Board decided that the broad objectives will remain as before, subject to
important changes in investment emphasis. Whilst at present there are not
sufficient funds for further new investment within the context of that policy,
the principal changes in SPARK's investment approach from that of Quester will
be as follows:
* A greater focus on revenue producing companies, which may also require less
capital
* A shorter target holding period than Quester (under 5 years)
* SPARK's traditional expertise in media technology
* In healthcare, a reduced emphasis on drug discovery opportunities and a
greater emphasis on areas such as medical devices and diagnostics
* SPARK's experience in achieving returns from struggling companies
* An overriding concentration on the market opportunities that are appropriate
for early stage companies, rather than backing novel technologies
* A reduced emphasis on investment in AIM companies, unless they match the core
risk/return and pricing criteria in SPARK's area of expertise.
Board
Andrew Holmes, formerly managing director and chairman of the Quester
management company, and John Spooner, also a director of the Quester management
company, retired from the Board on 10 March 2008. I would like to record the
Board's warmest appreciation of the contribution that Andrew and John have made
to the affairs of the Company since its establishment in 2001.
Andrew Carruthers, CEO of SPARK, was appointed to the Board on 10 March 2008.
In accordance with the Articles of Association, he will stand for election at
the AGM.
Jay Patel, executive director of SPARK, was also appointed to the Board on 10
March 2008 but will not stand for election.
Dividends
The Directors do not recommend a dividend in respect of the year ended 31
December 2007.
Outlook
The bulk of the value in the assets of the Company is now represented by a more
concentrated venture capital portfolio including around 20 significant
investments which have been assessed by the SPARK team as having positive
prospects. It is emphasised that many of these investments are still at early
stage and subject to all the associated risks.
In a number of cases it may be appropriate for strategic reasons to seek an
early realisation of the investment. More generally, however, on the assumption
of successful progress of the key companies, and subject to favourable business
and market conditions, it should be expected that the bulk of the profitable
realisations of investments from within the existing portfolio will be
concentrated in the period 2010 to 2011.
Looking ahead, the Board recognises the potential volatility in returns from an
early stage technology portfolio. It believes that the modified approach
adopted by SPARK to the implementation of investment policy will, in the longer
term, provide better prospects for sustainable growth in net asset values and
total returns.
Michael Inwards
Chairman
30 April 2008
FUND SUMMARY AS AT 31 DECEMBER 2007
Industry sector Cost (1) Valuation Equity % of
£'000 £'000 % held fund by
value
Fifteen largest venture capital
investments
Workshare Limited TMT 764 1,037 2.9% 6.7%
Xention Limited Healthcare 700 738 3.4% 4.8%
Uniservity Limited TMT 700 700 11.6% 4.5%
Level Four Software TMT 580 580 4.1% 3.8%
Limited
Vivacta Limited Healthcare 455 570 3.9% 3.7%
Celona Technologies TMT 824 523 3.5% 3.4%
Limited
Cluster Seven Limited TMT 510 510 4.8% 3.3%
Imagesound plc AIM TMT 500 486 0.5% 3.2%
Oxford Immunotec Healthcare 711 476 3.7% 3.1%
Limited
MediGene AG FRANKFURT Healthcare 624 408 0.3% 2.7%
Xtera Communications, TMT 802 381 2.5% 2.5%
Inc.
Perpetuum Limited TMT 292 332 3.0% 2.2%
Allergy Therapeutics Healthcare 700 327 1.1% 2.1%
plc AIM
Identum Limited (2) TMT 305 305 2.7% 2.0%
Antenova Limited TMT 443 302 1.8% 2.0%
8,910 7,675 50.0%
Other venture capital investments
Skinkers Limited TMT 300 300 1.9% 1.9%
We7 Limited TMT 276 276 4.1% 1.8%
Secerno Limited TMT 182 182 1.7% 1.2%
Portrait Software plc TMT 565 170 1.4% 1.1%
AIM
Oxford BioMedica plc Healthcare 428 137 0.1% 0.9%
AIM
Haemostatix Limited Healthcare 130 130 3.1% 0.8%
Celldex Therapeutics, Healthcare 400 112 1.0% 0.7%
Inc.
Oxonica plc AIM Healthcare 90 103 0.9% 0.6%
Other investments: 1,821 700 4.5%
valuations less than £
100,000 (2)
4,192 2,110 13.5%
Total venture capital 13,102 9,785 63.5%
investments
Total quoted venture 3,872 1,987 12.9%
capital investments
Total unquoted venture 9,230 7,798 50.6%
capital investments
13,102 9,785 63.5%
Listed equity 2,505 3,989 25.9%
investments and fixed
interest securities
Total investments 15,607 13,774 89.4%
Cash and other net 1,622 1,622 10.6%
assets
Net assets 17,229 15,396 100.0%
(1) Amounts shown as cost represent acquisition cost as reduced in certain
cases(2) by amounts written off as representing an impairment in value
(2) Cost reduced by amounts written off as representing an impairment in value
BUSINESS REVIEW
Management changes
Following the acquisition of Quester Capital Management Limited by NewMedia
SPARK plc (since renamed SPARK Ventures plc) on 11 May 2007, the investment
team now responsible for the management of Quester VCT 5 plc 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.
Portfolio update and overview
The combined SPARK team has conducted a detailed review of the portfolio,
including reassessment of the business strategy, progress to date,
opportunities and potential for value of each of the investee companies. The
companies have been classified into those that are key to producing a good
return for the whole portfolio; companies with potential for growth; and
companies where the plan is simply for cash recovery of the existing valuation.
In parallel with this review, the SPARK team has reviewed the fair values of
the investments. This review, coupled with events affecting the investee
companies and stock market and financing conditions generally, has resulted in
the write-off of a number of investments and a net reduction in valuation of
others. Further details are given under "Valuation changes" below.
The bulk of the value in the assets of the Company is now represented by a more
concentrated venture capital portfolio including around 20 significant
investments which have been assessed by the SPARK team as having positive
prospects. It is emphasised that many of these investments are still at early
stage and subject to all the associated risks.
The fund summary above lists the venture capital investments held by the
Company at 31 December 2007 with their cost and valuation at that date. The 15
largest venture capital investments (including Identum Limited which has since
been sold) collectively account for 50% of the net assets at the balance sheet
date
Portfolio developments
Realisations
Realisations during the year included the quoted healthcare companies, Polaron
plc (proceeds
£158,000) and Cyclacel Pharmaceuticals, Inc. (part realisation £53,000).
The trade sale of Identum Limited to Trend Micro, Inc., a global leader in
antivirus and content security, which closed in January 2008, has brought in
proceeds of a further £305,000.
M&A activity
In March 2007 Oxxon Therapeutics was acquired by the AIM-traded healthcare
company Oxford BioMedica plc in a share-for-share transaction, representing the
culmination of an exit strategy initiated in 2006. As a condition of the
transaction an additional £91,000 was invested in Oxxon Therapeutics: this
subsequently became represented by tradable shares in the acquirer, which were
immediately placed in the market. The balance of the resulting holding in
Oxford BioMedica plc is currently retained in the portfolio.
In relation to Azea Networks, and despite the company's success in March 2007
in securing a US$20 million Series D funding round led by TVM Capital, it was
decided that certain strategic business development issues would most
effectively be addressed through merger with a larger group. This was achieved
in November 2007 with the acquisition of Azea by the US venture- backed company
Xtera Communications, Inc. on a share-for-share basis, valuing Azea at US$34.6
million (a 14% discount on the post-money valuation at the venture capital
round led by TVM Capital). This transaction provides Quester VCT 5 with an
investment through which Azea's commercial opportunities are more likely to be
successfully realised, as well as offering growth opportunities from a more
diversified business base.
The merger of Celldex Therapeutics with the NASDAQ-listed AVANT
Immunotherapeutics, Inc. was announced in October 2007 and closed in March
2008. While the terms on which the merger has taken place represent a
significant reduction in valuation from that previously reported for the
holding in Celldex, the transaction leaves Quester VCT 5 with a holding in a
publicly-traded company with a substantial pipeline of product candidates and
technology platforms, on the basis of which the SPARK team is optimistic as to
the prospects for recovery of value.
Follow-on financings
The year to 31 December 2007 has seen, as expected, substantial follow-on
investment in a number of key companies in the portfolio. The following
highlights the most significant transactions:
* Celona Technologies Limited: Celona is a developer of data transformation
software for large enterprises, enabling them to migrate from the legacy
software platforms which manage their operations to modern systems without
affecting customer service. The company reached an important milestone in June
2007 with the closing of a £7.0 million Series B funding round with Caledonia
Investments plc, enabling it to build out its sales and support activities and
to fund further product development.
* Oxford Immunotec Limited: this Oxford University spinout company is
commercialising a new test for the diagnosis of tuberculosis. The closing of
its Series C funding round in October 2007 raised US$40 million (including the
conversion of bridge finance) and was one of the world's largest fund raisings
for a diagnostics company in 2007. The round was led by two new international
investors, Clarus Ventures in the US and German-based Wellington Partners. The
funding will be used to support the next stage of the company's development,
including building up its sales and marketing capabilities in the United
States, securing approval by the US Food and Drug Administration (FDA) and
launching of T-SPOT®.TB in the US market, and significantly enhances its
prospects.
* Cluster Seven Limited : Cluster Seven provides technology for managing,
analysing and auditing the activity and data generated by Microsoft Excel
spreadsheets, its product being used principally in the investment banking
industry. Following good progress achieved in 2006, during the year the company
raised £1.5 million in additional equity from Quester funds as the sole
institutional investor.
* Level Four Software Limited: Level Four supplies advanced software products
for the testing and development of ATM services to major banks and financial
institutions worldwide. The
company raised £800,000 in February 2007 from Quester funds as the sole
institutional investor.
The terms of the new financing rounds for Celona and Oxford Immunotec have been
such as to necessitate a downward valuation adjustment at this stage even
though the transactions were positive for the future of the business and the
Manager considers that there are prospects for the ultimate realisation of a
substantial gain.
Investment activity
New investments
The table below sets out the new investments completed during the year to 31
December 2007:
Company Sector £'000
Academia Networks TMT 22
Limited
Oxonica plc Healthcare 90
Skinkers Limited TMT 300
Symetrica Limited TMT 44
Uniservity Limited TMT 700
We7 Limited TMT 276
1,432
Oxonica Limited is an AIM-traded company focused on developing commercial
solutions for international markets in the design of nanomaterials. Symetrica
Limited is an early stage company set to commercialise proprietary, high
performance gamma ray spectroscopy, imaging hardware and software for use in
the nuclear, medical and process control industries.
Uniservity Limited is a development stage company which 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
suite of tools to support innovative ways of teaching and learning, thereby
extending the classroom to the internet.
We7 Limited is an advertising funded music download service backed by a highly
experienced management team.
In the second half of the year, the Company closed two new investments sourced
from SPARK: Academia Networks Limited is an early stage social networking
website catering for the academic and scientific research community; Skinkers
Limited is involved in information broadcast technology. Its enterprise
software product enables organisations to deliver priority notifications and
distribute content through a controlled, highly versatile and secure universal
communication platform with such clients as BBC, Cisco, Bloomberg, FT and CNN.
In addition, its
`Livestation' product is a revolutionary live streaming internet broadcasting
solution built on technology co-developed with Microsoft research and designed
specifically to deliver uninterrupted live TV to large audiences at
dramatically reduced costs.
Another new investment has been closed since the year end, with £300,000 being
committed to Isango! Limited, an early stage online travel website company
offering users an authoritative source of travel experiences such as holiday
tours, sightseeing, attractions and activities in more than 50 countries across
the world.
Follow-on investments
The table below sets out the follow-on investments completed during the year to
31 December
2007:
Name Sector £'000
Follow-on rounds in AIM traded
companies:
Genosis plc Healthcare 113
Phoqus Pharmaceuticals plc Healthcare 58
171
Follow-on rounds in unquoted
companies:
Antenova Limited TMT 41
Azea Networks, Inc. (since TMT 71
acquired by Xtera Communications,
Inc.)
Celona Technologies Limited TMT 164
Cluster Seven Limited TMT 193
Haemostatix Limited Healthcare 69
Level Four Software Limited TMT 166
Oxford Immunotec Limited Healthcare 155
Pelikon Limited TMT 115
Perpetuum Limited TMT 107
Secerno Limited TMT 74
Vivacta Limited Healthcare 65
1,220
Bridge finance ahead of planned
realisation:
Arithmatica Limited TMT 31
HTC Healthcare Group plc Other 43
Identum Limited TMT 71
Oxxon Therapeutics Holdings, Inc. Healthcare 91
236
1,627
The most significant of the follow-on rounds, namely those relating to Celona
Technologies Limited, Cluster Seven Limited, Level Four Software Limited and
Oxford Immunotec Limited have been covered under "Portfolio developments"
above.
In the case of Pelikon Limited, the business plan objectives of the follow-on
round were not achieved and the terms of a further funding round eliminated any
value in the original holding.
Looking ahead - new investment opportunities
The investment policy of the Company is unchanged in substance from that set
out in the prospectus dated 23 December 2004.
Whilst at present there are not sufficient funds for further new investments,
when selecting new investments to add to the portfolio, within the context of
that policy, the SPARK investment team intends to give greater emphasis to:
* the identification of later-stage venture capital opportunities (i.e. in
companies that are revenue-generating at date of first investment), and
* investments for which the holding period (the period from date of first
investment to ultimate realisation for cash) may be expected to be less than
the 5+ years typically the case hitherto.
Having regard to the particular experience and reputation of the SPARK
investment team, the programme of new investment may be expected to include,
within the TMT (technology, media and telecoms) sector, a greater emphasis on
opportunities in the digital media and software applications sectors and a
reduced exposure to `hardware' investments which tend to involve longer holding
periods and are typically highly demanding in terms of capital requirements. In
healthcare, for similar reasons, a reduced exposure to drug discovery and a
greater emphasis on areas such as medical devices and diagnostics may be
expected.
In the selection of new venture capital investments, the emphasis is expected
to be on unquoted companies; where investment in an AIM-traded company is being
considered, the investment decision will be made by reference to the underlying
risk and return and pricing criteria in SPARK's area of expertise rather than
against a plan for the building of a quoted venture capital portfolio.
Valuation changes
Events during the year, and the results of the SPARK team's review, have
necessitated significant changes in the valuations of the venture capital
investments. In some cases the changes reflect the terms of recent
transactions, or market prices in respect of the quoted investments, while in
others the changes reflect the management team's own review of the companies'
current stage of development and their prospects.
Unquoted venture capital investments
During the year to 31 December 2007, in respect of unquoted investments, the
review has resulted in a net write-down of £3,409,000 (of which £1,951,000 has
been written off as representing an impairment in value).
The following valuation changes have been made in respect of investments
considered to have future potential:
* Vivacta Limited increased to reflect the terms of the most recent financing
round (increase of
£115,000) and Celona Technologies Limited and Oxford Immunotec Limited
similarly reduced
(reductions of £301,000 and £323,000 respectively).
* We are also pleased with our first investment in the `green tech' sector,
energy harvesting company Perpetuum Limited, which has achieved good early
progress and has successfully closed a new financing round during the period at
an uplift on the Company's original cost of investment (increase of £40,000).
* Following the merger of Azea Networks, Inc. with the US venture-backed
company Xtera Communications, Inc., the valuation has been reduced to reflect
the last round price of the shares received in exchange (reduction £193,000);
similarly the valuation of the holding in Celldex Therapeutics, Inc. has been
reduced to reflect the terms of the agreed merger with the NASDAQ-listed AVANT
Immunotherapeutics, Inc. (reduction £288,000).
* Antenova Limited, Arithmatica Limited and Lectus Therapeutics Limited reduced
to reflect the management team's assessment of the companies' value at this
stage in their development
(total reduction £508,000).
The write-offs are as follows:
* The valuation of the holding in Identum Limited has been reduced to reflect
the terms of the trade sale completed since 31 December 2007 (write-off £
304,000). Efforts to find a trade buyer for Advanced Valve Technologies Limited
within the timeframe dictated by the company's dwindling financial resources
proved unsuccessful and the company has been placed into administration
(write-off £402,000).
* In respect of HTC Healthcare Group plc and Mesophotonics Limited the
valuations have been reduced as an impairment in value to reflect the
management team's assessment of the companies' value at this stage in their
development or estimated to be recoverable in a trade sale (write-off in the
period £371,000).
* Keronite Limited and Pelikon Limited were unsuccessful in implementing the
business plans which formed the basis of the Company's investment and the terms
of further funding rounds in each case eliminated any value in the original
holdings (write-off £874,000).
Quoted venture capital investments
The year ended 31 December 2007 has seen poor performance of the companies in
Quester VCT 5's quoted venture capital portfolio. Market movements, and a
number of individual setbacks, have resulted in an overall reduction in
valuation of quoted venture capital investments of £1,001,000, of which £
158,000 has been written off as representing an impairment in value. The most
severe losses in value have been in the cases of healthcare companies Allergy
Therapeutics plc (£522,000), Genosis plc (£158,000), Phoqus Pharmaceuticals plc
(£115,000) and Oxford BioMedica plc (£105,000).
Listed equity and bond portfolio
Approximately £2.5 million was withdrawn from the equity and bond portfolio
during the year to fund new and follow-on investments and the operations of the
Company.
Outlook
The SPARK team's review of the portfolio has confirmed encouraging prospects
for a number of the most significant venture capital investments.
It is emphasised, however, that the majority of these companies are still at
early stage and remain vulnerable, in the case of certain of the healthcare
companies, to the risk of adverse results in scientific development or clinical
programmes and, in the case of the TMT companies, to the normal risks of early
stage commercial development when there may be a critical dependence on key
customer contracts, as well as ongoing funding risk.
On the assumption of successful progress of the key investments and subject to
favourable business and market conditions, it should be expected that the bulk
of the profitable realisations of investments from within the existing
portfolio will be concentrated in the period 2010 to 2011, although it is
always possible that earlier opportunities may arise for the crystallisation of
strategic value.
SPARK Venture Management Limited
Manager
30 April 2008
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2007
Note 2007 2006
£'000 £'000
Loss on investments at fair value 1 (3,624) (206)
through profit or loss
Income 2 309 292
Investment management fee 3 (356) (617)
Other expenses 4 (250) (218)
Loss on operating activities (3,921) (749)
Interest payable on loan notes (2) (2)
Loss on ordinary activities before (3,923) (751)
taxation
Tax on loss on ordinary activities 6 - -
Loss on ordinary activities after (3,923) (751)
taxation
Basic and fully diluted earnings per 8 (16.8)p (3.1)p
share
All 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.
There are no gains and losses for the year other than those passing through the
profit and loss account of the Company.
BALANCE SHEET
AS AT 31 DECEMBER 2007
2007 2006
Note £'000 £'000
Fixed assets
Investments at fair value through 13,774 17,212
profit or loss
Current assets
Debtors 199 278
Cash at bank 1,698 2,847
1,897 3,125
Creditors: amounts falling due within (229) (138)
one year
Net current assets 1,668 2,987
Creditors: amounts falling due after (46) (46)
more than one year
Net assets 15,396 20,153
Capital and reserves
Called-up equity share capital 229 237
Capital redemption reserve 24 15
Share premium account 5,996 5,982
Special reserve 10,644 14,986
Fair value reserve (1,834) (1,468)
Profit and loss account 337 401
Total equity shareholders' funds 15,396 20,153
Net asset value per share 9 67.4p 84.9p
CASHFLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006
£'000 £'000
Cash outflow from operating activities (105) (623)
Financial investment
Purchase of venture capital investments (3,059) (3,856)
Purchase of listed equities and fixed interest (456) (2,433)
investments
Sale of venture capital investments 315 200
Sale of listed equity and fixed interest 2,990 3,639
investments
Total net financial investment (210) (2,450)
Equity dividends paid (239) (246)
Financing
Buy-back of ordinary shares (610) (626)
Issue of shares under the terms of the 15 16
dividend
reinvestment scheme
Total financing (595) (610)
Decrease in cash for the year (1,149) (3,929)
Reconciliation of net cash flow to movement
in net funds
Decrease in cash for the year (1,149) (3,929)
Net funds at the start of the year 2,847 6,776
Net funds at the end of the year 1,698 2,847
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 DECEMBER 2007
Share Share Capital Special Revaluation Profit Total £
capital premium redemption reserve reserve £ and '000
£'000 account reserve £ £'000 '000 loss
£'000 '000 account
£'000
At 1 January 2007 237 5,982 15 14,986 (1,468) 401 20,153
Shares issued 1 14 - - - - 15
under the dividend
reinvestment
scheme
Shares purchased (9) - 9 (610) - - (610)
for cancellation
Realisation of - - - - 1,337 (1,337) -
prior years' net
losses
on investments
Transfer from - - - (3,732) - 3,732 -
special reserve to
profit and
loss account
Net loss on - - - - (1,703) 1,703 -
revaluation of
investments
Loss on ordinary - - - - - (3,923) (3,923)
activities after
taxation
Dividends - - - - - (239) (239)
At 31 December 229 5,996 24 10,644 (1,834) 337 15,396
2007
NOTES TO THE FINANCIAL STATEMENTS
1 Loss on investments
The overall loss on investments at fair value through profit or loss disclosed
in the profit and loss account is analysed as follows:
2007 2006
£'000 £'000
Net gain on disposal 188 126
Write-off of investments (2,109) -
Net loss on revaluation of investments (1,703) (332)
(3,624) (206)
`Net gain on disposal' represents the difference between proceeds received and
the carrying values of those investments sold during the year.
The amounts reported under `write-off of investments' represent the proportion
of the carrying value that have, in the opinion of the Directors, suffered an
impairment in value.
2 Income
2007 2006
£'000 £'000
Dividend income
Listed UK companies 77 98
Listed foreign companies 36 32
Interest receivable
Listed fixed interest securities 59 113
Loans to venture capital investee 66 -
companies
Bank deposits 71 49
309 292
3. Investment management fee
2007 2006
£'000 £'000
Investment management fee 304 540
Irrecoverable VAT 52 77
356 617
SPARK Venture Management Limited ("SVML"), formerly called Quester Capital
Management Limited, provides investment management services to the Company
under an agreement dated 3 December 2001, as amended by a supplemental
agreement dated 23 December 2004.
SVML is a wholly owned subsidiary of SPARK Ventures plc, a company in which AB
Carruthers and JR Patel are beneficial shareholders. APG Holmes and JA Spooner
were executive directors of SVML until their retirement in April 2008.
The management fee is subject to a cap to ensure that the Company's running
costs do not exceed 3.5% of the closing net asset value. The cap for the
current year was £179,000 (2006: £nil).
The management fee, which is calculated monthly and is payable quarterly in
advance, is levied at a rate of 2.5% on the Company's net assets at each
respective month end. 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
year 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.
There are no provisions for compensation in the event of termination of the
agreement.
SVML also provides administrative and secretarial services to the Company for
which it was entitled to a fee of £58,000 for the year (2006: £56,000) adjusted
annually in line with changes in the Retail Price Index.
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 SVML out of the fee above.
4. Other expenses
2007 2006
£'000 £'000
Administrative and secretarial services 58 56
Directors' remuneration (note 5) 50 39
Auditors' remuneration
-Fees payable to the Company's auditor for audit of 14 14
the financial statements
-Fees payable to the Company's auditor and its 8 6
associates for other services relating to tax
Legal and professional expenses 26 12
Insurance 10 15
UKLA, LSE and registrar's fees 16 16
Transaction costs 8 9
Irrecoverable VAT 16 37
Other 44 14
250 218
5. Directors' remuneration
2007 2006
£000 £000
Amounts payable to Directors or companies 50 39
controlled by them
50 39
6. Tax on ordinary activities
2007 2006
£'000 £'000
Corporation tax - -
Reconciliation of loss on ordinary activities to
taxation
2007 2006
£'000 £'000
Loss on ordinary activities before tax (3,923) (751)
Tax on ordinary activities at standard UK (1,177) (225)
corporation tax rate at 30% (2006: 30%)
Effects of:
Non taxable items - UK dividends and net losses on 1,064 61
investments
Unutilised management expenses 113 164
- -
7. Dividends
2007 2006
£'000 £'000
Final dividend: 1p per share paid on 28 March 2007 239 -
Interim dividend: 1p per share paid 15 May 2006 - 246
239 246
8. Earnings per share
The loss per share of 16.8p (2006: loss 3.1p) is based on the loss on ordinary
activities after tax of £3,923,000 (2006: loss £751,000) and on the weighted
average number of ordinary shares in issue during the year of 23,316,331 (2006:
24,218,576).
There is no dilution effect in respect of the year ended 31 December 2007 (31
December 2006:
nil).
9 Net asset value per share
The net asset value per share as at 31 December 2007 of 67.4p (2006: 84.9p) is
based on net assets of £15,396,000 (2006: £20,153,000) divided by the
22,850,431 ordinary shares in issue at that date (2006: 23,727,722). There is
no dilution effect as at 31 December 2007 (2006: nil).
10. Financial information
This preliminary statement was approved by the Board on 30 April 2008.The
financial information set out above does not constitute the company's statutory
accounts for the years ended 31 December 2007 or 31 December 2006, but is
derived from and has been prepared on the same basis as those financial
statements.
Statutory accounts for 2006, which were prepared under UK GAAP, have been
delivered to the registrar of companies and those for 2007, prepared under UK
GAAP, will be delivered in due course.
The auditors have reported on the 2006 and 2007 year end accounts and their
reports were unqualified and did not include references to any matters to which
the auditors drew attention by way of emphasis without qualifying their reports
and did not contain statements under section 237(2) or (3) of the Companies Act
1985.
A copy of the Company's statutory accounts 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 2007 are
expected to be posted to shareholders on 6 May 2008 and will be available to
the public at the registered office of the Company at 33 Glasshouse Street,
London W1B 5DG.
END
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