Half-yearly report

I am pleased to present the interim report for Elderstreet VCT plc for the six-month period ended 30 June 2007.  These are the first results that the Company has published following the merger with Elderstreet Millennium Venture Capital Trust plc ("EMVCT").

 

Net Asset Value

At 30 June 2007, the Company's Net Asset Value per Ordinary Share stood at 81.9p, an increase of 9.3p or 12.8% since 31 December 2006 (after adjusting for the dividend of 3.5p per share paid during the period). 

 

The Net Asset Value per 'C' Share at the same date stood at 102.5p, an increase of 7.4p per 'C' Share (7.8%) over the six-month period, also after adjusting for the dividend paid.

 

Venture capital investments

During the period, the Company made three new investments and two follow-on investments totalling £769,000 and split between the Ordinary and 'C' Share pools as follows:

 

* Listed on AIM

 

The Ordinary Share pool made one major realisation in the period.  Computer Software Group plc was subject to a takeover offer which produced cash proceeds of £3 million on a holding which originally cost £0.7 million and a profit against cost of £2.3 million or against market value at the previous year end of £0.6 million.

 

Careforce Group plc was also the subject of a takeover offer, which resulted in the Ordinary Share pool receiving consideration shares in Mears Group plc and has shown an increase in value on the investment £108,000 over the period.

 

The Ordinary Share pool also made smaller realisations totalling £69,000 during the period.

 

Overall the investment portfolio gave rise to unrealised gains of £1.0 million over the period in respect of the Ordinary Share pool and £106,000 in respect of the 'C' Share pool.

 

The listed fixed income securities portfolio (held by the Ordinary Share pool) was valued at £3.1 million at the period end. These funds continue to be managed by Smith and Williamson Investment Management Limited.

 

The return on ordinary activities for the period was as follows:

 

 

The Board is proposing to distribute some of the gains realised on the disposal of Computer Software Group plc by the Ordinary Share pool.  An interim capital distribution to of 1.5p per share will be paid to Ordinary Shareholders on 5 October 2007 to Shareholders on the register at 14 September 2007.

 

No interim dividend will be paid in respect of the 'C' Share pool at this time.

 

The Company issued 6,149,782 Ordinary shares at a price 61.5p per share to shareholders in EMVCT as part of the Company's merger with EMVCT.

The Company continues to operate a policy of buying in for cancellation any shares that become available to ensure that there is liquidity in the market for any Shareholders wishing to dispose of their holding.

 

During the period the Company purchased 447,857 Ordinary Shares for cancellation at an average price of 73.9p per share.  No 'C' Shares were purchased during the period.

Following the merger with EMVCT, your Company now has a larger and broader portfolio which has seen some positive developments from a number of the more mature investments.  Although this has resulted in the disposal of some of the better performing investments, the Company continues to hold a well-balanced portfolio which may be able to provide further successful realisations in the medium term.

 

The Company also still has funds available for investment in both the Ordinary and 'C' Share pools.  Since the period end, a new investment of £600,000 has been made in WeComm Limited, a mobile data services developer and a further £100,000 invested in Mediasurface plc.  The Investment Manager reports continuing reasonable deal flow which should provide further good opportunities for investment.

 

 

Chairman

 

UNAUDITED INCOME STATEMENT

for the six months ended 30 June 2007

 

 

 

as at 30 June 2007

 

for the six months ended 30 June 2007

for the six months ended 30 June 2007

as at 30 June 2007

 

All venture capital investments are unquoted unless otherwise stated.

 

*  Quoted on AIM

for the period ended 30 June 2007

 

There were no disposals from the 'C' Share pool in the period.

 

* - Quoted on AIM

 

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

The Company has prepared its financial statements under UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised December 2005 ("SORP").

The financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments.

In order to better reflect the activities of a Venture Capital Trust and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. The net revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 842 Income and Corporation Taxes Act 1988.

All investments are designated as "fair value through profit or loss" assets and are initially measured at cost. Thereafter the investments are measured at subsequent reporting dates at fair value.

 

Listed fixed income investments and investments quoted on AIM are measured using bid prices in accordance with the International Private Equity and Venture Capital Valuation Guidelines.

 

In respect of unquoted instruments, fair value is established by using International Private Equity and Venture Capital Valuation Guidelines. Where no reliable fair value can be estimated for such unquoted equity investments they are carried at cost, subject to any provision for impairment. Where an investee company has gone into receivership or liquidation the investment, although not physically disposed of, is treated as being realised.

 

Gains and losses arising from changes in fair value are included in the income statement for the year as a capital item and transaction costs on acquisition or disposal of the investment expensed.

 

It is not the Company's policy to exercise either significant or controlling influence over investee companies.  Therefore the results of these companies are not incorporated into the revenue account except to the extent of any income accrued.

Dividend income from investments is recognised when the shareholders' rights to receive payment has been established, normally the ex dividend date.

 

Interest income is accrued on a time apportioned basis, by reference to the principal sum outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection.

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the income statement, all expenses have been presented as revenue items except as follows:

 

 

 

The tax effects on different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate using the Company's effective rate of tax for the accounting period.

 

Due to the Company's status as a Venture Capital Trust and the continued intention to meet the conditions required to comply with Section 842AA of the Income and Corporation Taxes Act (1988), no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments which arises.

 

Deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the accounts.

 

Issue costs in relation to the shares issued are deducted from the respective share premium account.

 

2.       All revenue and capital items in the Income Statement derive from continuing operations.

 

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

 

4.       The comparative figures were in respect of the six months ended 30 June 2006 and the year ended 31 December 2006 respectively.

 

 

 

 

The Special Reserve is a distributable reserve that allows the Company to make market purchases of its own shares and to pay distributions. The Ordinary Capital reserve - realised and Revenue Reserves are also distributable reserves.

 

9.       The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 December 2006 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the auditors' report on those financial statements was unqualified.

 

10.    Copies of the unaudited interim results will be sent to shareholders shortly. Further copies can be obtained from the Company's Registered Office or will be available for download from www.downing.co.uk.