Review of trading portfolio

Introduction

As at 30 September 2010, the portfolio comprised interests in the companies commented on below.

The tough trading and fundraising conditions of the past two years have taken a toll on some of the businesses in which Starvest is invested to such an extent that as at 30 September 2010:

• eight portfolio companies accounted for 75% of the portfolio value; all of these companies are mineral exploration ventures on which we comment first; in every case, the year end valuation exceeds original cost;

• of the next eight investments one deteriorated during the year but has recovered since the year end; otherwise they have held there own, showing small share price improvements which are expected to continue into the current year as the businesses progress; collectively these account for a further 21% of the portfolio value;

• the remainder amount to 4% only include both mineral exploration ventures as well as other businesses which are all valued below cost; we hope that some in this final grouping will recover and may well yet surprise us.

Disposals
In order to reduce the bank overdraft and provide funds for overheads, during the year the Company raised £640,000 before costs by selling the following interests:

• a small equity holding in Beowulf Mining plc, but retained a convertible loan note which was subsequently converted to equity;

• a part of the holding in Ariana Resources plc; and

• approximately two thirds of the holding in Franconia Minerals Corporation yielding a substantial return on the initial investment.

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