Preliminary Announcement

Elderstreet Downing VCT PLC
26 May 2000


 
ELDERSTREET DOWNING VCT PLC - FINAL RESULTS 
 
PRELIMINARY ANNOUNCEMENT OF RESULTS  
FOR THE YEAR ENDED 31 DECEMBER 1999 
                                    

FINANCIAL HIGHLIGHTS

          

                                                                             
                                                       1999            1998  
                                                       pence           pence 
   Net asset value per share                           125.1           94.7   
      
   Revenue return per ordinary share                     2.7             3.1  
        
   Total dividends per ordinary share                    2.5             3.0  
        
   (including tax credits where reclaimable)                                 
   Net assets                                   £18.9 million   £14.4 million
 
 
The statement to shareholders by the Chairman, David Brock, includes the
following comments:
 
Introduction 
I am pleased to present the Company's preliminary announcement of results for
the year ended 31 December 1999, the second year in Elderstreet Downing's
life.
 
Your Company has been extremely active during the year and has made good
progress in building up a portfolio of investments in a variety of qualifying
businesses. The Company's net asset value per share had risen to 125.1p
(compared to an initial 95p) by 31 December 1999 which represents an
increase of 30.8% over the year. The Company had invested approximately 70%
of its available funds by the year-end.
 
Venture capital investments 
At the end of the financial year £10.6 million had been invested in twenty
eight companies, details of which are set out in the annual report under
Review of Investments. Since 1 January 2000 a further £2.0 million has been
invested in ten companies and £0.4 million of follow on investments has been
made in three companies. The venture capital portfolio now totals over £12
million spread across thirty eight companies, which sees your Company fully
qualified for VCT purposes, well inside the three year statutory deadline of
31 December 2000.
 
The British Venture Capital Association valuation guidelines require an
unquoted investment to be valued at cost unless there is a significant event
such as further fund raising or a failure to proceed to plan. The majority of
the Company's unquoted investments are thus currently held at cost. The two
exceptions are Topnotch Health Clubs plc and Shopcreator Developments
Limited. Topnotch has been revalued upwards by £342,000 following a further
fundraising by the company. In addition, I am pleased to inform you that
Topnotch has recently floated on AIM at a price in excess of the year end
valuation. Shopcreator has also been revalued upwards by £201,000 following a
further fundraising which took place in December 1999.
 
Investments listed on the Alternative Investment Market ('AIM') are all
valued at the quoted mid-market price and have, in all but one case, shown
upward movements in price over cost. The most significant increase has been
in the Company's holding in Freecom.net Plc which was valued at £3.2 million
at the Balance Sheet date. Elderstreet Downing originally invested £239,000
in June 1999 and Freecom.net subsequently floated on AIM in November 1999.
Since the year end part of the holding in Freecom.net Plc has been sold
giving rise to realised gains of in excess of £900,000 (approximately 6p per
share).
 
During the year the Company also invested £99,000 in Harrier Group PLC prior
to its flotation on AIM. The Company subsequently disposed of the holding
realising a gain on £185,000. The Company also realised a gain of £96,000 on
the disposal of part of its holding in Baron Corporation plc.
 
Listed fixed income investments 
The listed fixed income investments have been, and continue to be, managed by
Cazenove Fund Management Limited. The fixed interest portfolio gave rise to
losses of £185,000 during the year arising as a result of increases in
interest rates and weak bond prices.
 
Results and dividend 
Gross revenue for the period was £837,000 (1998 - £761,000). Net revenue
after taxation was £406,000 (1998 - £401,000) and net assets per share at the
year-end was 125.1p (1998 - 94.7p).
 
An interim dividend 1.5p net per share was paid during the year. Your Board
is proposing to pay a final dividend of 1.0p per share on 3 July 2000 to
shareholders on the register at 9 June 2000.
 

Share repurchases

The Board is conscious that the Company's share price is affected by the
illiquidity of it's shares in the market, resulting from the requirement that
shareholders must retain their shares for at least five years in order to
retain their tax benefits. In line with accepted practice with VCTs, the
Company has a policy of purchasing its own shares. Details of such purchases
made during the year are given in the annual report in the Report of the
Directors. A Special Resolution to continue with this policy is proposed for
the forthcoming AGM.
 
Cancellation of share premium account
In order to facilitate share buy-backs, the Board will be submitting
proposals to shareholders, which will be subject to an Extraordinary General
Meeting. These proposals would, if accepted by shareholders and granted Court
approval, enable the Company to re-designate the share premium account as a
reserve which would be available to fund share purchases, without affecting
the Company's ability to pay dividends.
 
Annual General Meeting 
The third Annual General Meeting of the Company will be held at 32 Bedford
Row, London WC1R 4HE at 11:00am on 28 June 2000. Notice of the meeting is at
the end of this document. Two items of Special Business are proposed as
Special Resolutions in the Notice of Meeting; (1) to authorise the Directors
to allot shares other than pro-rata to existing shareholders and (2) seeking
to renew the Company's authority to purchase up to 1,513,600 ordinary shares
in the market, representing approximately 10% of the current issued ordinary
share capital.
 
Publication of share price
The Company's share price continues to be quoted in the Financial Times on a
daily basis in the 'Investment Companies' sector.
 
Outlook 
It is encouraging that, even at this early stage in your Company's life, two
unquoted investments have floated on AIM. Your Company is now over 80%
invested in 34 venture capital companies and, therefore, the rate of
investment in new companies will slow down. The focus in the current year will
be on monitoring, supporting and creating value in our investee companies.
 
David Brock 
Chairman     26 May 2000
 
 
STATEMENT OF TOTAL RETURN (incorporating the revenue account) 
for the year ended 31 December 1999 
 

                                                                              
                           Year ended                   Period ended          
                        31 December 1999              31 December 1998        
                   Revenue  Capital     Total   Revenue    Capital      Total 
                   £'000      £'000     £'000     £'000      £'000      £'000 
  
  Gains on           -        4,697     4,697        -          18         18
  investments                                                    
  
  Income             837        -         837       761          -        761
             
  Investment        (59)       (177)     (236)      (43)       (131)     (174)
  management               
  fees       
                                                                 
  Other            (217)        -        (217)     (177)          -      (177)
  expenses   
                                 
  Return on          561        4,520    5,081       541        (113)     428 
  ordinary                      
  activities
  before tax
                                                                 
  Tax on            (155)          54     (101)     (140)          32    (108)
  ordinary                                   
  activities 
                                                                 
  Return              406       4,574     4,980      401         (81)     320 
  attributable                
  to                                                                 
  shareholders                                                                

                                                                             
  Dividends          (379)         -       (379)     (364)          -    (364)
                                          
  Transfer            27          4,574    4,601       37          (81)   (44)
  to/(from)                                                      
  reserves
                                                                    
  Return per          2.68p       30.20p    32.88p    3.06p     (0.62)p  2.44p
  ordinary                                                                    
  share                                                                       
 
 
BALANCE SHEET as at 31 December 1999 
 
 
                                                         1999      1998 
                                                        £'000     £'000 
 
Fixed Assets          
 
Venture capital investments                            15,185     2,090
Fixed income investments                                2,355     7,685 
                                                       ______    ______
 
Total fixed asset investments                          17,540     9,775 
                                                       ______    ______
Current assets 
 
Debtors                                                    331      419
Cash at bank                                             1,249    4,529 
                                                        ______   ______
                                                         1,580    4,948
 
Creditors: amounts falling
due within one year                                       (185)    (373)      
                                                        ______    ______

Net current assets                                       1,395     4,575 
                                                        ______    ______
Net assets                                              18,935    14,350 
 

Capital and reserves  
                           
Called up share capital                                     756      758  
Share premium account                                    13,636   13,636
Capital redemption reserve                                    1        -
Capital reserve - realised                                  (34)     (96)
Capital reserve - unrealised                              4,527       15
Revenue reserve                                              49       37 
                                                         ______   _______

 
Total equity shareholders' funds                         18,935    14,350 
 
Net asset value per ordinary share                       125.1p     94.7p
 
 
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 31 December 1999 or 1998.
The financial information ended for the period ended 31 December
1998 is derived from the statutory accounts for that period which have been
delivered to the Registrar of Companies. The auditors reported on those
accounts; their report was unqualified and did not contain a statement under
s237 (2) or (3) Companies Act 1985. The statutory accounts for the year ended
31 December 1999 will be finalised on the basis of the financial information
presented by the directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the company's annual
general meeting.
 
The proposed dividend for the year ended 31 December 1999 will be paid on 3
July to shareholders on the register at the close of business on 9 June 2000.
 
A copy of the full annual report and financial statements for the year ended
31 December 1999 will be printed and posted to shareholders. Copies will also
be available to the public at the registered office of the company at 69
Eccleston Square, London SW1V 1PJ.