Half-yearly report
Elderstreet VCT plc
Half-Yearly Report for the six months ended 30 June 2011
RECENT PERFORMANCE SUMMARY
 30 Jun  31 Dec  30 Jun
2011 2010 2010
pence pence pence
Net asset value per share 71.1 Â 76.6 Â 69.5
Cumulative distributions paid per share 50.0 Â 50.0 Â 48.0
---------- ---------- ---------
Total return per share 121.1 Â 126.6 Â 117.5
CHAIRMAN'S STATEMENT
I present the Half-Yearly Report for Elderstreet VCT plc for the six-month
period ended 30 June 2011.
Net Asset Value
At 30 June 2011, the Company's Net Asset Value ("NAV") per share stood at
71.1p, a decrease of 5.5p or 7.2% since 31 December 2010. This fall is mostly
attributable to the fall in value of two AIM stocks which are discussed further
below.
Venture capital investments
The Company made one follow-on investment of £134,000 in AngloINFO Limited
during the period.
The holding in WeComm Limited was sold for £939,000, realising a gain of £4,000
against the year end valuation, and £89,000 against the original cost. Smart
Education Limited also redeemed a proportion of the loan notes held by the
Company at par value.
The Board has reviewed the valuations of the unquoted investments at the period
end and made adjustments to the valuations of five companies. Total unrealised
losses for the period from the venture capital portfolio amounted to £1.6
million and total realised gains were £4,000. The most significant movements in
value were two of the AIM-quoted investments, Access Intelligence plc, which
fell by £976,000 (equivalent to 3.4p per share), and Snacktime plc, which fell
by £629,000 (equivalent to 2.2p per share).
Listed fixed income securities
The Company continues to hold a small portfolio of fixed interest investments
which are managed by Smith & Williamson Investment Management Limited. During
the period, this portfolio produced unrealised gains of £14,000.
Results
The loss on activities after taxation for the period was £1.6 million (2010:
£1.3 million), comprising a revenue return of £140,000 and a capital loss of
£1.7 million.
Dividend
The Company intends to pay an interim dividend to Shareholders of 2.0p per share
on 2 December 2011 to Shareholders on the register at 4 November 2011.
Top-up share issue
The Company undertook a top-up issue during the period, issuing 4,778,800 shares
at an average price of 80.0p per share. Net proceeds of the offer were £3.6
million. The additional funds will allow the Company to participate in more new
investment opportunities as well as providing a greater asset base over which
the fixed running costs will be borne.
Share buybacks
In June 2011, the Company spent approximately £160,000 purchasing 263,000 shares
for cancellation at a price of 60.5p per share at a 15% discount to the most
recently published NAV.
The Board has agreed to make funds of up to £200,000 available for share
buybacks following the release of these results. The Board will buy in shares at
approximately a 15% discount to the most recently published NAV and expects the
next buyback to take place at the end of November 2011. Shareholders who wish to
sell their shares should contact Downing.
Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required in the
Company's half-yearly results to report on principal risks and uncertainties
facing the Company over the remainder of the financial year.
The Board has concluded that the key risks facing the Company over the remainder
of the financial period are as follows:
(i) investment risk associated with investing in small and immature businesses;
(ii) liquidity risk arising from investing mainly in unquoted businesses; and
(iii) failure to maintain approval as a VCT.
In all cases the Board is satisfied with the Company's approach to these risks.
As a VCT, the Company is forced to have significant exposure to relatively
immature businesses. This risk is mitigated to some extent by holding a well-
diversified portfolio.
With a reasonably illiquid venture capital investment portfolio, the Board
ensures that it maintains an appropriate proportion of its assets in cash and
liquid instruments.
The Company's compliance with the VCT regulations is continually monitored by
the Administration Manager, who regularly reports to the Board on the current
position. The Company also retains PricewaterhouseCoopers to provide regular
reviews and advice in this area. The Board considers that this approach reduces
the risk of a breach of the VCT regulations to a minimal level.
Going concern
The Company has considerable financial resources at the period end, and holds a
diversified portfolio of investments. As a consequence, the Directors believe
that the Company is well placed to manage its business risks successfully
despite the current uncertain economic outlook.
The Directors have concluded that the Company has adequate resources to continue
in operational existence for the foreseeable future. Thus, they continue to
adopt the going concern basis of accounting in preparing the financial
statements.
Outlook
Since the end of the period, stock markets have experienced sharp falls in value
as a result of fears concerning eurozone bailouts and the general weakness of
the economy. At the time of writing, the impact on the Company's NAV had been
reasonably limited, showing a fall of approximately 1.0p per share  between 30
June and 26 August 2011.
This environment clearly remains difficult for small businesses. Â Accordingly,
the manager will continue to take an active hands-on approach in supporting the
portfolio companies through the challenges they face. This climate can also
provide good opportunities for new investments at attractive prices. Now that
the Company has a reasonable level of funds available, it is well- placed to
take advantage of those opportunities.
David Brock
Chairman
UNAUDITED BALANCE SHEET
as at 30 June 2011
 As at  As at  As at
30 Jun 30 Jun 31 Dec
 2011  2010 2010
 £'000  £'000  £'000
Fixed assets
Investments 15,185 Â 16,036 Â 17,834
-------- -------- ---------
Current assets
Debtors 46 Â 502 Â 33
Cash at bank and in hand 5,608 Â 942 Â 1,127
-------- -------- ---------
 5,654  1,444    1,160
Creditors: amounts falling due within one year (200) Â (210) Â (209)
-------- -------- ---------
Net current assets 5,454 Â 1,234 Â 951
-------- -------- ---------
Net assets 20,639 Â 17,270 Â 18,785
Capital and reserves
Called up share capital 1,452 Â 1,242 Â 1,226
Capital redemption reserve 212 Â 183 Â 199
Merger reserve 1,985 Â 2,211 Â 2,082
Share premium 8,999 Â 5,625 Â 5,625
Special reserve 1,619 Â 2,319 Â 1,728
Revaluation reserve 2,093 Â 1,240 Â 3,875
Capital reserve - realised 3,864 Â 4,321 Â 3,775
Revenue reserve 415 Â 129 Â 275
-------- -------- ---------
Equity shareholders' funds 20,639 Â 17,270 Â 18,785
Net Asset Value per share: 71.1p  69.5p  76.6p
UNAUDITED INCOME STATEMENT
for the six months ended 30 June 2011
 Six months ended
30 Jun 2011
 Revenue  Capital  Total
 £'000  £'000  £'000
Income 285 Â - Â 285
(Losses)/gains on investments  - realised -  4  4
 - unrealised -  (1,602)  (1,602)
--------- --------- --------
 285  (1,598)  (1,313)
Investment management fees (47) Â (141) Â (188)
Performance incentive fee - Â - Â -
Other expenses (98) Â - Â (98)
--------- --------- --------
Return/(loss) on ordinary activities before taxation 140 Â (1,739) Â (1,599)
Taxation - Â - Â -
--------- --------- --------
Return/(loss) attributable to equity shareholders 140 Â (1,739) Â (1,599)
Basic and diluted return per share 0.5p  (6.4p)  (5.9p)
 Six months ended  Year ended
30 Jun 2010 31 Dec 2010
 Revenue  Capital  Total  Total
 £'000  £'000  £'000  £'000
Income 264 Â - Â 264 Â 493
(Losses)/gains on investments
- realised - 206 206 197
 - unrealised -  (1,463)  (1,463)  827
--------- --------- --------- ------------
 264  (1,257)  (993)  1,517
Investment management fees (45) Â (134) Â (179) Â (351)
Performance incentive fee - Â (23) Â (23) Â (48)
Other expenses (106) Â (9) Â (115) Â (225)
--------- --------- --------- ------------
Return/(loss) on ordinary activities
before taxation 113 (1,423) (1,310) 893
Taxation (4) Â 4 Â - Â -
--------- --------- --------- ------------
Return/(loss) attributable to equity
shareholders 109 (1,419) (1,310) 893
Basic and diluted return per share 0.5p  (6.1p)  (5.6p)  3.7p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2011
 30 Jun  30 Jun  31 Dec
2011 2010 Â 2010
 £'000  £'000  £'000
Opening shareholders' funds 18,785 Â 17,865 Â 17,865
Issue of shares 3,823 Â 1,455 Â 1,455
Share issue costs (210) Â (80) Â (80)
Purchase of own shares (160) Â (158) Â (349)
Total recognised (losses)/gains in the period (1,599) Â (1,310) Â 893
Dividends - Â (502) Â (999)
--------- --------- -------
Closing shareholders' funds 20,639 Â 17,270 Â 18,785
UNAUDITED CASHFLOW STATEMENT
for the six months ended 30 June 2011
  Six  Six
 months  months  Year
 ended ended  ended
 30 Jun 30 Jun 31 Dec
2011 Â 2010 Â 2010
 Note £'000  £'000  £'000
Net cash outflow from operating activities
and returns on investments 1 (29) (9) (42)
--------- ---------- --------
Capital expenditure
Purchase of investments  (153)  (910)  (2,403)
Sale of investments  1,204  248  2,652
--------- ---------- --------
Net cash inflow/(outflow) from capital expenditure 1,051 Â (662) Â 249
--------- ---------- --------
Equity dividends paid  -  (502)  (999)
--------- ---------- --------
Net cash inflow/(outflow) before financing  1,022  (1,173)  (792)
Financing
Proceeds from share issue  3,823  1,454  1,455
Share issue costs  (204)  (80)  (86)
Purchase of own shares  (160)  (158)  (349)
--------- ---------- --------
Net cash inflow from financing  3,459  1,216  1,020
--------- ---------- --------
Increase in cash 2 4,481 43 228
Notes to the cash flow statement:
1 Net cash inflow from operating activities
and returns on investments
(Loss)/return on ordinary activities before (1,599) Â (1,310) Â 893
taxation
Losses/(gains) on investments  1,598  1,257  (1,024)
(Increase)/decrease in other debtors  (20)  16  64
(Decrease)/increase in other creditors  (8)  28  25
--------- ---------- --------
Net cash outflow from operating activities and
returns on investments (29) (9) (42)
2 Analysis of net funds
Beginning of period  1,127  899  899
Net cash inflow  4,481  43  228
--------- ---------- --------
End of period  5,608  942  1,127
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 June 2011
 Unrealised
  gain/(loss) % of
 Cost Valuation in period  portfolio
 £'000 £'000 £'000 by value
Top ten venture capital investments
Wessex Advanced Switching Products 60 2,467 (206) 11.9%
Limited
Smart Education Limited 1,274 1,901 - 9.1%
Snacktime plc * 1,375 1,577 (629) 7.6%
Fords Packaging Systems Limited 1,047 1,418 266 6.8%
Access Intelligence plc * 1,633 1,325 (976) 6.4%
Lyalvale Express Limited 915 1,255 228 6.0%
AngloINFO Limited 662 732 - 3.5%
Fulcrum Utility Services Limited * 500 594 (52) 2.9%
Baldwin & Francis (Holdings) Limited 690 572 (198) 2.7%
Aconite Technology Limited 460 460 - 2.2%
-----------------------------------------
 8,616 12,301 (1,567) 59.1%
Other venture capital investments 3,666 1,444 (49) 7.0%
Listed fixed income securities 1,408 1,440 14 6.9%
-----------------------------------------
Subtotal 13,690 15,185 (1,602) 73.0%
Cash at bank and in hand  5,608  27.0%
----------- -----------
Total investments  20,793  100.0%
All venture capital investments are unquoted unless otherwise stated.
* Quoted on AIM
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 30 June 2011
Additions
 £'000
Venture capital investments
AngloINFO Limited 134
Other investments 19
--------
 153
Disposals
Market Gain/ Total
 value at (loss) realised
1 January Disposal against  gain/
 Cost  2011 proceeds  cost (loss)
 £'000 £'000  £'000  £'000  £'000
Smart Education Limited 199 265 265 66 -
Wecomm Limited 850 935 939 89 4
----------------------------------------------------
 1,049 1,200 1,204 155 4
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half yearly financial results cover the six months to 30 June
2011 and have been prepared in accordance with the accounting policies set out
in the statutory accounts for the year ended 31 December 2010, which were
prepared under UK Generally Accepted Accounting Practice and in accordance with
the Statement of Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" revised January 2009.
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 are in respect of the six months ended 30 June 2010
and the year ended 31 December 2010 respectively.
5. Return per share
 30 Jun  30 Jun  31 Dec
2011 Â 2010 2010
Return per share based on:
Net revenue gain for the period (£'000) 140  109  185
Capital return per share based on:
Net capital (loss)/gain for the period (1,739) Â (1,419) Â 708
(£'000)
Weighted average number of shares 26,954,181 Â 23,287,887 Â 24,429,890
6. Dividends
Per 30 Jun 2011 31 Dec
 2010
 share Revenue  Capital  Total  Total
 pence £'000  £'000  £'000  £'000
Paid in the period
2009 Final dividend 2.0 - Â - Â - Â 502
2010 Interim dividend 2.0 - Â - Â - Â 497
--------- --------- ------- --------
  -  -  -  999
Paid on 6 July 2011
2010 Final dividend 2.0 146 Â 439 Â 585 Â -
7. Net Asset Value per share
 30 Jun  30 Jun 2010  31 Dec
 2011  2010
Net Asset Value per share based on:
Net Assets (£'000) 20,639  17,270  18,785
Number of Shares in issue 29,032,002 Â 24,845,844 Â 24,516,202
Net Asset Value per share 71.1p  69.5p  76.6p
8. Called up share capital
 Shares £'000
As at 1 January 2011 24,516,202 1,226
Shares issued in period 4,778,800 239
Shares bought back and cancelled (263,000) (13)
---------------------
As at 30 June 2011 29,032,002 1,452
Between 22 March 2011 and 5 May 2011, the Company allotted 4,778,800 Ordinary
Shares of 5p each, under the terms of a prospectus dated 21 December 2010, at
80.0p per share, with gross proceeds received thereon of £3.8 million. Issue
costs in respect of the offer amounted to £210,000.
During the period the Company purchased 263,000 Ordinary Shares of 5p each for
cancellation for an aggregate consideration of £160,000, at a price of 60p per
Ordinary Share of 5p each (approximately equal to a 15% discount to the most
recently published NAV at the time of purchase), and representing 2.5% of the
issued Ordinary Share capital held at 1 January 2010.
9. Capital and Reserves
 Capital     Capital
Redemption Merger Share Special Revaluation  reserve Revenue
 reserve  reserve  premium reserve  reserve  -realised  reserve
 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 199 2,082 5,625 1,728 3,875 3,775 275
January
2011
Issue of - - 3,584 - - - -
new shares
Share - - (210) - - - -
issue
costs
Purchase of own 13 - - (160) - - -
shares
Expenses - - - - - (141) -
capitalised
(Losses)/gains on
investments - - - - (1,602) 4 -
Realisation of
revaluations from
previous years - - - - (150) 150 -
Realisation of fair
value assets
previously acquired - (97) - - (30) 127 -
Transfer between
reserves - - - 51 - (51) -
Retained net
revenue for the - - - - - - 140
period
-------------------------------------------------------------------------
At 30 212 1,985 8,999 1,619 2,093 3,864 415
June
2011
Distributable reserves comprise the special reserve, capital reserve - realised,
revenue reserve, and are reduced by investment holding losses of £2,321,000 (31
Dec 2010: £510,000). £477,000 (31 Dec 2010: £477,000) of the merger reserve is
also distributable. At the period end, total distributable reserves were
£4,054,000 (31 Dec 2010: £5,745,000).
10. The Directors confirm that, to the best of their knowledge, the half-yearly
financial statements have been prepared in accordance with the "Statement: Half-
Yearly Financial Reports" issued by the UK Accounting Standards Board and the
half-yearly financial report includes a fair review of the information required
by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period, and any changes in the related
party transactions described in the last annual report that could do so.
11. The unaudited financial statements set out herein do not constitute
statutory accounts within the meaning of Section 434 of the Companies Act 2006
and have not been delivered to the Registrar of Companies. The figures for the
year ended 31 December 2010 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.
12. Copies of the unaudited half-yearly results will be sent to Shareholders
shortly. Further copies can be obtained from the Company's Registered Office and
downloaded from www.downing.co.uk
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Elderstreet VCT plc via Thomson Reuters ONE
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