Neptune-Calculus Income & Growth Regulatory News (NEP)

Financial highlights

I present the Company's results for the year ended 31 December 2012. Net assets per Ordinary Share as at 31 December 2012 were 56.7p, compared with 56.2p as at 30 June 2012 and 58.9p as at 31 December 2011. These movements reflect the fact that we paid an interim dividend of 1 penny per share and dividends of 3 pence per share were paid during the whole year. The total accumulated shareholder value (comprising net asset value per share plus cumulative dividends paid to date) is 76.2p per Ordinary Share.

Our qualifying investments are managed by Calculus Capital Limited and are in a combination of unquoted and AIM companies. During the year two new qualifying unquoted investments were made: £400,000 in Human Race Group Limited and £250,000 in Secure Electrans Limited. Further details of these investments are set out in the Investment Manager's Review that follows this statement. During the year we sold a number of our smaller AIM quoted investments. Triage Holdings Limited redeemed just over £116,000 of the Company's holding of preference shares and RMS Group Holdings Limited redeemed the Company's remaining holding of £200,000 of its loan stock.

The overall value of the quoted portfolio, which is composed entirely of AIM companies, increased by 48.7 per cent over the last twelve months on a like for like basis which compares with an increase in the FTSE AIM All-Share Index of 1.9 per cent over the year. A significant contributor to the quoted portfolio's strong performance was the increase in the value of EpiStem Holdings plc from £3.50 per share as 31 December 2011 to £5.45 as at 31 December 2012.

The value of the unquoted portfolio showed a decline of 12.1 per cent over the past twelve months on a like for like basis. The majority of our unquoted investments have retained or increased their value but, as mentioned in our Interim Report, Heritage House Media Limited was written down to nil and we have also written down the value of Lime Technology Limited.

A more detailed analysis of investment performance can be found in the Investment Manager's Review that follows this statement.

Our non-qualifying investments comprise holdings in the Neptune Income Fund, the Neptune Quarterly Income Fund and liquidity funds. Both Neptune Funds are biased towards large cap stocks and our investments in the Neptune Income Fund increased by 6.1 per cent and in the Neptune Quarterly Income Fund by 9.6 per cent over the year, compared to an increase of 5.8 per cent in the FTSE 100 index. During the year the Company sold £350,000 of its holding in the Neptune Income Fund and £350,000 of its holding in the Neptune Quarterly Income Fund to make qualifying investments and to buy back shares. We also used £190,000 of the proceeds to increase our investment in liquidity funds.

During the year, the Company purchased a total of 283,163 Ordinary Shares for cancellation for a consideration of £149,000 at a price of 52.5 pence per share representing 2.5 per cent of the current issued share capital.

Another method of returning cash to shareholders is through payment of tax-free dividends. The Company paid an interim dividend for 2012 of 1 penny per Ordinary Share in October 2012. This, together with the 2011 final dividend of 2 pence per share paid in June 2012, resulted in dividends of 3 pence being paid during the year. The total dividends paid to an ordinary shareholder to date are 19.5p.

The Directors are also pleased to propose a final dividend for 2012 of 2 pence per Ordinary Share which, subject to shareholder approval, will be payable on 7 June 2013 to shareholders on the register on 3 May 2013.

The Company's Articles of Association require an ordinary resolution to be proposed at this year's Annual General Meeting to determine whether the Company should continue as a VCT. The Board has considered the Investment Manager's view of the prospects for the portfolio and the feedback it has received on the wishes of the VCT's shareholders. It has taken into account the fact that the full value of the Company's portfolio would not be achieved in a rapid realisation. Accordingly the directors are recommending that shareholders should vote in favour of the resolution to be proposed at the Annual General Meeting for the continuation of the Company as a VCT. Conditional on the continuation vote being passed, the Board would like to make available to existing shareholders an enhanced share buyback which is described below. An enhanced share buyback allows shareholders to roll over their existing shareholding by tendering their existing shares and receiving new shares and, by doing so, to benefit from additional income tax relief on those new shares.

A separate circular ("the Circular") to accompany the Report and Accounts contains the notice of Annual General Meeting and sets out the Board's reasons for recommending that shareholders vote for the continuation of the Company as a VCT.

The notice of Annual General Meeting contained in the Circular also sets out, inter alia, a composite resolution to be proposed which, if passed, will allow the Company to offer shareholders an enhanced share buyback ("Enhanced Buyback" or "EBB").

Enhanced Buybacks have been used by an increasing number of VCTs in recent years and allow shareholders to subscribe for new shares ("Substitution Shares") in the Company, pro rata to their existing holding and at a small premium to NAV, and fund this purchase by selling their existing shares back to the Company. No cash is required from the shareholder and, subject to his or her personal circumstances; additional income tax relief of up to 30 per cent of the amount subscribed for Substitution Shares is available.

The resolution required to effect the Enhanced Buyback is conditional on the passing of the continuation vote also to be proposed at the Annual General Meeting which, if passed, will allow the Company to continue as a Venture Capital Trust as noted above.

In addition to the Enhanced Buyback, a small top up offer (the "Top Up Offer") will be offered for those shareholders who wish to subscribe additional cash, in addition to or instead of rolling over their existing shareholding for Substitution Shares under the Enhanced Buyback. The resolutions required to implement the Top Up Offer are also contained in the notice of Annual General Meeting set out in the Circular.

Although the UK remains in a low growth environment and many high profile companies have found conditions challenging, we believe that the investments in the portfolio are well placed and can show good returns in the medium to longer term.

Philip Stephens

Chairman

Calculus Capital manages the Company's qualifying portfolio.

The FTSE AIM All-Share index rose by 1.85 per cent during 2012. It was outperformed by the FTSE 100, which rose by 5.85 per cent over the same period.

At the year end, the portfolio of qualifying investments comprised 16 companies, made up of both unquoted and AIM stocks.

The quoted portfolio, which consists entirely of AIM companies, has shown an overall increase in value for the year of 48.7 per cent on a like for like basis. At 31 December 2012, it was valued at £1,383,000 compared with £1,017,000 as at 31 December 2011. During the year the Company made no new quoted investments. The Company sold its holding in Egdon Resources plc, Kennedy Ventures plc (renamed from Managed Support Services plc in June 2012) and the majority of its holding in Croma Security Solutions to release cash to make further qualifying investments.

EpiStem Holdings plc ("EpiStem") has had a number of successes in 2012. In March the company announced a distribution agreement in India for tuberculosis testing with Xcelris Laboratories. In August, the company announced that it has reached agreement with Becton Dickinson for the distribution of its Genedrive tuberculosis test on a global basis (excluding India and the Indian Sub Continent). Becton Dickinson is a leading global medical technology group and the agreement includes an upfront payment to EpiStem of $1m with further milestone payments of up to $3m, alongside escalating supply volumes over the next 5 years.

Infrastrata plc ("Infrastrata") has re-positioned itself to be better placed to benefit from developments in the gas storage market and also from traditional oil and gas exploration. In March 2011, Infrastrata spun out part of its exploration interests into two companies, Brigantes Energy Limited and Corfe Energy Limited ("Corfe"). Infrastrata and Corfe were awarded three offshore blocks adjacent to the Dorset coast close to the giant Wytch Farm oilfield in the UK's 26th licensing round. An agreement with BP Gas Marketing Limited ("BPGM") regarding the appraisal of the Islandmagee gas storage facility in County Antrim, and the grant of an option to BPGM to acquire a 50.495 per cent equity interest in the project is also a notable step for Infrastrata's gas storage development operations. 'Very encouraging prospects' have been identified from two seismic surveys carried out at County Antrim in Northern Ireland, and the license group proposes to drill its first exploration well during 2013. An initial most likely estimate of prospective resources for the first of these prospects is 13 million barrels of oil (mmbo) recoverable (net 6 mmbo to Infrastrata prior to any farm-out).

Several of the unquoted companies are making good progress and have increased in value over the year. Overall, the unquoted portfolio has shown a decrease in value over the year of 12.1 per cent on a like for like basis. One of the reasons for this was the decision to write down the investment in Heritage House Media to nil in April 2012 after the company appointed administrators following withdrawal of its overdraft facility at short notice. At 31 December 2012, the unquoted portfolio was valued at £3,578,000 compared with £3,675,000 at 31 December 2011.

New qualifying investments were made during the year in Human Race Group Limited ("Human Race") and Secure Electrans Limited ("Secure"). The Company also made a small follow on investment of £21,000 in Lime Technology Limited ("Lime"). The section on unquoted portfolio companies in the Report and Accounts contains further information.

The Company invested approximately £400,000 in Human Race in April 2012. Human Race is the UK's largest and most diverse mass participation sports events company. The group owns and delivers over 55 events annually in triathlon, cycling, running, duathlon, aquathlon and open water swimming for over 100,000 participants of all abilities and ages. The portfolio of events includes the Toshiba Windsor Triathlon, Cycletta, the Eton Triathlon Super Sprints, Festival of Sport Cornwall, Wiggle Dragon Ride, Etape Cymru, Off Road Winter Series, the Speedo Open Water Swimming Series and a partnership with the British 10k Run. The group's objective is to be a leader in the ownership and delivery of mass participation sports events. Human Race's core management team has had previous success in the sector, building up the sports events business Quintus from 2001 to 2008 through organic growth and acquisition. Quintus was a previous investment of the VCT which was sold to IMG, the world's largest sports rights company.

The Company invested £150,000 in Secure in September 2012 and an additional £100,000 in October 2012. Secure's original technology focused on smart metering in homes. More attractive in terms of potential size is the Secure patented technology to address fraud related 'card not present' (i.e. internet) transactions. The importance of tackling 'card not present' fraud is paramount to the credit card industry which globally suffered a loss of $2.7bn in 2010. Secure's answer has been to take Chip&PIN technology from the retail sector and apply it to internet transactions. The company has developed an end-to-end payments and security infrastructure which incorporates Chip&PIN for which it has received EMV (EuroPay, MasterCard, Visa), American Express and PCI (Payment Card Industry) PTS 3.1 global certification.

Terrain Energy Limited ("Terrain") has interests in six petroleum licenses; Keddington, Kirklington, Dukes Wood, Kelham Hills and Burton on the Wolds in the East Midlands and Larne in Northern Ireland. Larne contains the company's most exciting prospects: an exploration well is planned for late 2013. The first prospect to be drilled is likely to be a conventional oil play with an initial "most likely" estimate of the prospective resources of approximately 13 mmbo recoverable (net 1.3 mmbo to Terrain). In July 2012, the company appointed Eric King as Chief Operating Officer. Eric has extensive experience in the UK oil and gas sector having previously worked for several smaller E&P companies. In addition he was chairman of the UKOGL management committee and joint founding director of PROSPEX. The new COO's primary focus is to maximise the potential of the producing wells by reducing down time and increasing production. Having completed a workover of the Dukes Wood well in the summer, Terrain is currently producing from wells at Keddington, Dukes Wood and Kirklington. On average, 100 barrels of oil and 500,000 standard cubic feet of gas per day are being produced (gross). Subsequent to the year end, Terrain appointed Steve Jenkins as chairman and Tony Rawlinson and Mark Thompson stepped down as Chairman and director respectively. Steve Jenkins was formerly Chief Executive of Nautical Petroleum which was acquired by Cairn Petroleum in 2012.

MicroEnergy Generation Services Limited ("MicroEnergy") was set up to own and operate small wind turbines in the UK. The Company entered into a contract to buy a fleet of 168 small wind turbines (

A small top up equity investment of £21,000 was made in Lime, a low carbon based building materials developer, in the second half of the year. The company's main product is Hembuild, a lime and hemp based building material manufactured in panel form and used in the mainstream construction industry. Lime has recently completed the archives for the Science Museum, its largest contract to date. The new CEO has introduced new product lines including a budget friendly timber frame offering since he started in January 2012. He also recognised the need to invest in strengthening and upgrading the sales operation. The results of these changes are starting to come through, with a higher level of quotations going out and a stronger and broader serious prospects list, although the impact of these was not reflected in the results for the year to 31 October 2012. Lime's subsidiary, Hemp Technology, operates a fibre processing plant for hemp and linseed. Since investment, Hemp Technology has been developed as a supplier to the European paper industry for which there is demand to process 6-8,000 tonnes of linseed per annum.

Waterfall Services Limited ("Waterfall"), which provides catering and support services, is ahead of budget in the year to date in terms of revenues and profits. However 2013/14 will undoubtedly be a challenging year for the company with a couple of contract losses to take effect. As such, Waterfall's focus over the next eighteen months will be on retention and organic growth, overhead control and cost reduction. Calculus Capital and the other institutional shareholders are working to support the management in their actions during this process.

Triage Holdings Limited ("Triage") redeemed approximately £116,000 of its preference shares in May. Triage provides IT repair and refurbishment services. The market has been difficult since the financial crash of 2008. Market volumes have declined due to a fall in retail sales and work being taken back in-house. Competition has also put pressure on margins. Performance in 2012 has been reasonable given the weakness in the market.

In December 2012 MCD Ventures Limited ("MCD") redeemed its loan stock. MCD also made a capital repayment of 4.5 pence per share in the same month. MCD sold its trading subsidiary, Mechadyne International Limited, to Kolbenschmidt Pierburg Innovations GmbH (KSPG). As part of the conditions of sale, the holding company has changed its name to MCD Ventures Limited from Mechadyne Plc. The consideration for the sale was structured as an initial payment of 4.5 pence per share and further payments contingent on future performance up to a cut-off date of 2025.

In March 2012, RMS Group Holdings Limited redeemed its preference shares. The proceeds of £200,000 were reinvested in April as part of the Company's investment in Human Race. RMS provides port services from six locations on the Humber Estuary, the UK's busiest trading estuary. The group's services cover shipping, stevedoring, storage/warehousing and support logistics for import and export cargoes moving between Northern Europe, the Baltic, Russia, the Iberian peninsula and the Mediterranean. The group has continued to perform well against budget throughout 2012.

Optare plc became a subsidiary of Ashok Leyland in January 2012. Optare ceased to be a VCT qualifying holding from the date of the transaction.

Croma Security Solutions redeemed its £45,000 loan stock in December 2012.

Since the year end, Terrain has redeemed all of its loan stock and the Company has received proceeds of £75,000 plus a redemption premium. There have been no other developments since the year end.

Although the UK economy remains fragile, we believe that the companies in the investment portfolio are well positioned to show good returns in the medium to longer term.

John Glencross

Calculus Capital Limited

27 March 2013

The ten largest holdings by value are included below:

* The valuations of certain investments include small purchases made which are non-qualifying investments. These cost £15,926 and are valued at £11,712.

[] Included within Other AIM Investments is a holding in Optare plc which became non-qualifying in 2012. This investment cost £300,000 and is valued at £5,200.

∞ Included in the cost of the equity holding is £37 of Heritage House Media shares which belong to Neptune-Calculus SPV, which is wholly owned by the Company. Included within the cost of the loan stock holding of Heritage House Media is £5,463 and £120,344 respectively of loan stock held by Neptune-Calculus SPV. These are valued at £nil. These investments are non-qualifying.

‡ The valuation of Triage Holdings Limited preference shares includes a redemption premium and unpaid dividends which are non-qualifying. These cost £nil and are valued at £110,987.

# The valuation of Lime Technology Limited loan stock includes rolled up interest that is non-qualifying. This cost £16,544 and is valued at £16,544.

† The valuation of Heritage House Media Limited loan stock includes rolled up interest which is non-qualifying. This cost £309,118 and is valued at £nil.

The following unquoted investments are included in the investment portfolio at the balance sheet date. Further details of these companies (based on the latest published accounts) are provided below:

RMS Group Holdings is a Humberside based port operator, and provides customers with shipping, stevedoring and storage warehousing. The group also has a national logistics division.

Services provides catering and support services to the aged care, welfare and education markets. In 2008, the company acquired Taylor Shaw, an independent caterer with a strong foothold in the education market, and in 2009 established a specialist kosher division to cater for the Jewish aged care market. The group now employs over 2,200 people.

Triage Holdings provides IT repair and refurbishment services and auto identification solutions to customers. The group has headquarters in Stevenage, but operates repair centres in several other locations across the UK.

Terrain Energy was established by Calculus Capital Limited in 2009 to develop a portfolio of onshore oil and gas producing assets in the UK.

Other funds managed by Calculus Capital Limited have invested in this company and have combined voting rights of 10.6 per cent.

Lime Technology is a low carbon based building materials developer based in Abingdon. Lime is a leader in lime and hemp based building products for the mainstream construction industry. Through its subsidiary, Hemp Technology, the company controls the hemp supply chain from seed to finished wall.

Other funds managed by Calculus Capital Limited have invested in this company and have combined voting rights of 0.7 per cent.

* The Lime Technology group accounts are not required to be audited. These figures are derived from the Lime Technology Limited, Hemcrete Projects Limited and Hemp Technology Limited accounts which have been audited.

MicroEnergy is a company set up by Calculus Capital in 2011 to acquire renewable, microgeneration facilities. The company has entered into a contract to buy a fleet of 168 small wind turbines (

Other funds managed by Calculus Capital Limited have invested in this company and have combined voting rights of 9.9 per cent.

Secure Electrans, founded in 2000, develops internationally patented systems that provide solutions to card payment fraud.

Other funds managed by Calculus Capital Limited have invested in this company and have combined voting rights of 12.9 per cent.

Human Race Group Limited own and operate over 55 mass participation sports events including triathlon, cycling, running, duathlon, aquathlon and open water swimming.

Other funds managed by Calculus Capital Limited have invested in this company and have combined voting rights of 39.6 per cent.

The Company is exposed to a variety of risks and the principal risks identified by the Board are noted below.

The Company is required at all times to observe the conditions within the Income Tax Act 2007 for the maintenance of approved VCT status. This involves compliance with a number of tests which, if not met, could result in the loss of a number of tax reliefs which are currently available to both the Company and its shareholders under its VCT status. The tests are under continual review by Calculus Capital Limited, the administrator and (qualifying) investment manager of the Company. The Board keeps these matters under continual review through the provision of monthly management information and quarterly Board meetings. The Board has also retained the services of a VCT consultant to undertake an independent monitoring role.

The majority of the Company's investments will ultimately be in small and medium size companies as these meet the VCT qualifying holdings rules. These companies may not be publicly traded or freely marketable and realisations of such investments can be difficult and can take a considerable amount of time. They also, by their nature, tend to carry higher risk than a larger or longer established business. This risk is in part mitigated by diversifying the investments and maintaining around 25 per cent of the Company's portfolio in liquid assets to enable any short term cash requirements to be met.

In addition, the Company is subject to other price risk constituting uncertainty about the future prices of financial instruments held by the Company. The Company has also invested in loan stocks and as a result is subject to credit risk. The majority of the loan stocks are fixed rate so the Board does not consider interest rate risk to be material. The Company has no exposure to foreign currency risk, nor does it have any interest bearing liabilities. Further comment is provided on the financial risks of the Company in note 18 to the accounts.

The Board regularly reviews the risks the business faces and their potential impact on the Company. The Board monitors the Company's performance through the use of regular financial information and administrator and management reports.

An interim dividend of 1.0 pence per Ordinary Share was paid during the year. As the proposed final dividend of 2.0 pence per Ordinary Share has to be approved at the Annual General meeting, it will be paid, subject to approval, to shareholders on 7 June 2013. The record date of the dividend will be 3 May 2013.

The directors are responsible for preparing the Directors' Report, the Remuneration Report and the accounts in accordance with applicable law and regulations.

Company law requires the directors to prepare accounts for each financial year. Under that law the directors have to prepare the accounts in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the company for that period. In preparing these accounts, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the accounts;

• prepare the accounts on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the accounts and the Remuneration report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.

The accounts are published on the www.calculuscapital.com website, which is a website maintained by the Company's Investment Manager, Calculus Capital Limited. The maintenance and integrity of the website maintained by Calculus Capital Limited is, so far as it relates to the Company, the responsibility of Calculus Capital Limited. The work carried out by the auditor does not involve consideration of the maintenance and integrity of this website and accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom covering the preparation and dissemination of the accounts may differ from legislation in their own jurisdiction.

To the best of my knowledge:

• the accounts, prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws), give a true and fair view of the assets, liabilities, financial position and profit of the company; and

• the Director's Report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board

Philip StephensChairman

27 March 2013

The total column is the profit and loss account of the Company. The revenue and capital columns are provided as supplementary information in accordance with the AIC SORP.

All items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

There is no statement of recognised gains and losses as there were no other gains and losses. The relevant accompanying notes are an integral part of this statement.

The relevant accompanying notes are an integral part of this statement.

The relevant accompanying notes are an integral part of this statement.

The relevant accompanying notes are an integral part of this statement.

The accounts were approved by the Board of Directors on and were signed on its behalf by:

Philip Stephens

Director

27 March 2013

The relevant accompanying notes are an integral part of this statement.

The accounts have been prepared under the historical cost convention, except for the valuation of investments at fair value, and in accordance with applicable UK accounting standards. The Directors have prepared the accounts on a basis compliant with the recommendations of the Statement of Recommended Practice January 2009 ("the SORP") for Investment Trust Companies and Venture Capital Trusts produced by the Association of Investment Companies ("AIC"). The accounts have been prepared on a going concern basis, notwithstanding the continuation vote to be held at the AGM, for the reasons referred to on page 16.

The Company has not prepared consolidated accounts and has accounted for its subsidiary Neptune-Calculus SPV Limited ("Neptune-Calculus SPV") as an investment on the grounds that its results are immaterial to the Company and control is intended to be temporary because the subsidiary has been acquired and held exclusively with a view to its subsequent disposal in the near future.

As the Company's business is investing in financial assets with a view to profiting from their total return in the form of increases in fair value, investments are designated as fair value through profit or loss on initial recognition in accordance with Financial Reporting Standard 26 (FRS 26) Financial Instruments: Recognition and Measurement and International Private Equity and Venture Capital ('IPEVC') guidelines. Fair value is the amount for which an asset can be exchanged between knowledgeable, willing parties in an arm's length transaction. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the investments is provided on this basis to the Board of Directors.

Investments held at fair value through profit or loss are initially recognised at fair value, being the consideration given and excluding transaction or other dealing costs associated with the investment, which are expensed and included in the capital column of the Income Statement.

After initial recognition, investments, which are classified as fair value through profit or loss, are measured at fair value. Gains or losses on investments classified as fair value through profit or loss are recognised in the capital column of the Income Statement, and allocated to the capital reserve - other, and capital reserve - investment holding loss as appropriate.

Aggregate transaction and dealing costs included in disposals and additions are disclosed in note 8 to the accounts, as recommended by the SORP. All purchases and sales of quoted investments are accounted for on the trade date basis. All purchases and sales of unquoted investments are accounted for on the date that the sale and purchase agreement becomes unconditional.

For quoted investments, fair value is established by reference to bid, or last, market prices depending on the convention of the exchange on which the investment is quoted at the close of business on the balance sheet date.

Unquoted investments are valued using an appropriate valuation technique so as to establish what the transaction price would have been at the balance sheet date. Such investments are valued in accordance with the IPEVC guidelines. Primary indicators of fair value are derived from earnings or sales multiples, using discounted cash flows, recent arm's length market transactions by independent third parties, from net assets, or where appropriate, at cost for recent investments or the valuation as at the previous reporting date.

Premiums on loan stock investments and preference shares are accrued at fair value when the Company has the right to receive the premium and expects to do so.

Those venture capital investments that may be termed associated undertakings are not equity accounted for and are carried at fair value as determined by the Directors in accordance with the Company's accounting policy, as required by FRS 9 "Associates and Joint Ventures", where venture capital entities hold investments as part of an investment portfolio.

Dividends receivable on equity shares and on unquoted funds are recognised as income on the date on which the shares or units are marked as ex-dividend. Where no ex-dividend date is available, the income is recognised when the Company's right to receive it has been established.

Interest income on loan stock and dividends on preference shares are accrued on a daily basis. Provision is made against this income where recovery is doubtful.

Interest receivable from fixed income securities is recognised using the effective interest rate method.

Interest receivable on bank deposits is included in the accounts on an accruals basis.

Other income is credited to the revenue column of the Income Statement when the Company's right to receive the income is established.

All expenses are accounted for on an accruals basis. Expenses are charged through revenue in the Income Statement except as follows:

- costs which are incidental to the acquisition or disposal of an investment are taken to the capital column of the Income Statement;

- expenses are charged to the capital column in the Income Statement where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect management fees have been allocated 75 per cent to the capital column and 25 per cent to the revenue column in the Income Statement, being in line with the Board's expected long-term split of returns, in the form of capital gains and income respectively, from the investment portfolio of the Company;

- expenses associated with the issue of shares are deducted from the Share premium account.

Capital reserve - other

The following are accounted for in this reserve:

- gains and losses on disposal of investments;

- transaction costs which are incidental to the acquisition of investments;

- 75% of management fee expenses, together with the related tax effect, is charged to the capital column of the Income Statement in accordance with the above policies; and

- 100% of performance incentive fees except where the diminution is deemed to be permanent.

Capital reserve - investment holding loss

The following are accounted for in this reserve:

- movements in the fair value of investments held at the year end.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversals of the underlying timing differences can be deducted. Timing differences are differences between the Company's taxable profits and its results as stated in the accounts.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

No taxation liability arises on gains from sales of fixed asset investments by the Company by virtue of its venture capital trust status. However, the net revenue (excluding UK dividend income) accruing to the Company is liable to corporation tax at the prevailing rates.

Any tax relief obtained in respect of management fees allocated to capital is reflected in the capital reserve - other and a corresponding amount is charged against revenue. The relief is the amount by which corporation tax payable is reduced as a result of capital expenses.

Dividends to shareholders are accounted for in the year in which they are paid or approved in general meetings. Dividends payable to equity shareholders are recognised in the Reconciliation of Movements in Shareholders' Funds when they are paid, or have been approved by shareholders in the case of a final dividend and become a liability of the Company.

Where shares are purchased for cancellation, the consideration paid, including any directly attributable incremental costs, is deducted from distributable reserves. As required by the Companies Act 2006, the equivalent of the nominal value of shares cancelled is transferred to capital redemption reserve.

For the year ended 31 December 2012, Calculus Capital Limited waived £2,384 (2011: £36,483) of its fees. At 31 December 2012, there was £45,439 outstanding payable to Calculus Capital Limited (31 December 2011: Calculus Capital Limited £17,509). Details of the terms and conditions of the investment management agreement are set out under "Management" in the Directors' Report.

Further details of Directors' Remuneration can be found in the Directors' Remuneration Report.

At 31 December 2012, the Company had £1,095,327 (31 December 2011: £977,428) of excess management expenses to carry forward against future taxable profits. The deferred tax asset of £262,878 (31 December 2011: £244,357) has not been recognised due to the fact that it is unlikely the excess management fees will be set off in the foreseeable future.

The Company paid an interim dividend on 17 October 2012 of 1p per Ordinary Share (2011: 1p). The Directors are proposing a final dividend of 2p per Ordinary Share in respect of the year ended 31 December 2012 (2011: 2p). Subject to shareholder approval, the dividend will be paid on 7 June 2013 to shareholders on the register on 3 May 2013.

Basic and diluted earnings per Ordinary share is based on the net revenue on ordinary activities attributable to the Ordinary Shares of £39,000 (2011: £44,000) and on 11,413,774 (31 December 2011: 11,827,117) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.

Basic and diluted capital return per Ordinary Share is based on the net capital return for the year of £34,000 (2011: deficit of £666,000) and on 11,413,774 (31 December 2011: 11,827,117) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.

Basic and diluted total return per Ordinary Share is based on the total return on ordinary activities attributable to the Ordinary Shares of £73,000 (2011: deficit of £622,000) and on 11,413,774 (31 December 2011: 11,827,117) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.

As the Company has not issued any convertible securities or share options, there is no dilutive effect on return per share.

It is estimated that the Enhanced Buyback will not significantly affect the above total returns per share.

Unquoted and money market investments includes unquoted shares valued at £nil in the Company's subsidiary Neptune-Calculus SPV. These shares cost £5,500 resulting in an unrealised loss through the profit and loss account of £120,344. Neptune-Calculus SPV was incorporated on 29 November 2011. As at 31 December 2012, Neptune-Calculus SPV Limited had share capital of £5,500 and reserves and net profit of £nil.

The sale proceeds shown above do not agree with the cash flow statement. The £59,000 difference relates to two transactions that traded in December 2012 and were settled in January 2013: £45,000 from the redemption of the Croma Security Solutions Group plc loan stock and £13,900 from the capital repayment from MCD Ventures Limited.

Note 18 to the accounts provides a detailed analysis of investments held at fair value through profit and loss in accordance with Financial Reporting Standard 29 'Financial Instruments: Disclosures'.

During the year, the Company incurred transaction costs of £nil (2011: £nil) on purchases of investments and £202 (2011: £370) on sales of investments. These amounts are included in "gains/(losses) on investments at fair value" as disclosed in the Income Statement.

The Company had the following interests of 3 per cent or more in the share capital of its portfolio companies:

* Included within this holding are 128,333 A ordinary shares and 1,762,856 AA Ordinary Shares held by Neptune-Calculus SPV which is wholly-owned by the Company.

During the year, the Company purchased for cancellation 283,163 Ordinary Shares of 10p (2011: 388,168) at a price of 52.5 pence per share (2011: 59.5p). The consideration was £149,407 including stamp duty of £745.

The Special reserve was created to (i) create a distributable reserve which can be used by the Company to fund purchases of its own shares; (ii) to enable the Company to offset the effects of any future unrealised losses on future dividends payable in respect of shares; and (iii) since the Company revoked its status as an investment company, for any other purpose. The Company is therefore able to make distributions out of the aggregate of its Revenue reserve, Special reserve and Capital reserves, excluding any gains arising on the valuation of unquoted investments.

The basic and diluted net asset value per Ordinary Share is based on net assets (including current year revenue) of £6,434,000 (31 December 2011: £6,852,000) and on 11,351,880 (31 December 2011: 11,635,043) Ordinary Shares, being the number of Ordinary Shares in issue at the end of the year.

The decrease in debtors shown above does not agree with the movement in debtors shown in Note 10 above. As disclosed in Note 8, the £59,000 difference relates to two transactions that traded in December 2012 and were settled in January 2013: £45,000 from the redemption of the Croma Security Solutions loan stock and £13,900 from the capital repayment from MCD Ventures Limited.

At 31 December 2012 and 2011 the Company did not have any financial commitments which had not been accrued.

The objective of the Company is to generate long term capital growth and tax free dividends for investors. The investment policy is to invest approximately 75 per cent of the Company's funds in a diversified portfolio of holdings in qualifying investments, whether unquoted or traded on AIM. Investments are made selectively across a diverse range of sectors in companies which have the potential to generate growth and enhance their value. The investments in a particular company may be made in loan stocks or preference shares as well as equity shares where it is felt this would enhance shareholder return. In accordance with the Company's risk averse approach, the Investment Manager will only invest when it believes it has identified the right investment opportunity. The balance of approximately 25 per cent of the Company's funds can be invested in a combination of Neptune income funds, a portfolio of similar income generating UK listed shares and money market instruments.

The ten largest holdings by value and the amounts invested in quoted equity, unquoted equity, unquoted bonds, unquoted preference shares, quoted funds and unquoted funds are set out in the Investment Portfolio, within the Report and Accounts.

The Company's financial instruments comprise securities, cash balances and debtors and creditors that arise from its operations.

The Company has no exposure to foreign currency risk.

The principal risks the Company faces in its portfolio management activities are:

- Market price risk

- Interest rate risk

- Liquidity risk

- Credit risk

The Investment Manager's policies for managing these risks are summarised below and have been applied throughout the year. The Board keeps the risks under continual review through the provision of monthly management information and quarterly board meetings.

Market price risk arises from uncertainty about the future prices of financial instruments held in accordance with the Company's investment objectives. It represents the potential loss that the Company might suffer through holding market positions in the face of market movements. This risk is monitored by the Investment Manager on a regular basis and by the Board at meetings with the Investment Manager.

The Board reviews each investment purchase in the qualifying portfolio to ensure that any acquisition allows the Company to maintain an appropriate spread of other price risk and that it falls within the VCT qualifying criteria at the time of purchase. It considers the associated business risks of each investment. These include, but are not restricted to, the industry sector, management expertise and financial stability of each company.

The Company does not use derivative instruments to hedge against market price risk. The maximum potential exposure to market price risk is the value of the investment portfolio as at 31 December 2012 of £6,371,000 (31 December 2011: £6,504,000).

The Board believes that the Company's assets are mainly exposed to market price risk, as the Company holds most of its assets in the form of investments in VCT qualifying small UK companies whose equity shares are either quoted or valued by reference to the share prices of quoted comparable companies and are thus subject to market movements. The Board considers that investments in loan stock and/or preference shares may also be sensitive to changes in quoted share prices as the value of these financial instruments can be determined with reference to the enterprise value of the investee company which may be based on the value of quoted comparable companies.

The table below shows the impact upon profit and net assets if there were to be a 10 per cent (31 December 2011: 10 per cent) movement in overall share prices, and assumes:

- that each of the sub categories of instruments (shares and loan stocks other than liquidity funds) held by the Company produces an overall movement of 10 per cent, and

- that the actual portfolio of investments held by the Company is perfectly correlated to this overall movement in share prices. Shareholders should however note that this level of correlation is highly unlikely in reality.

If overall share prices fell/rose by 10 per cent (2011: 10 per cent), with all other variables held constant:

A decrease of £611,208 (31 December 2011: £643,530) in the net assets of the Company would have decreased investment management fees payable to the Investment Managers for the financial year under review by £21,392 (31 December 2011: £22,524). An increase of £611,208 (31 December 2011: £643,530) would have increased investment management fees payable by £2,384 (31 December 2011: £22,523).

The impact of a change of 10 per cent has been selected, as in current market conditions, an increase/(decrease) in the aggregate values of investments by 10 per cent is reasonably possible based on historical changes that have been observed.

Interest is earned on cash balances and money market funds and is linked to the banks' variable deposit rates. The board does not consider interest rate risk to be material. Interest rate risk arising on loan stock instruments is not considered significant, as the main risks on these investments are credit risk and market price risk. The Company does not have any interest bearing liabilities.

As required by Financial Reporting Standard 29 'Financial Instruments: Disclosures' an analysis of financial assets and liabilities, which identifies the risk of the Company's holding of such items is provided. The Company's financial assets comprise equity and preference shares, loan stock, cash and debtors. The interest rate profile of the Company's financial assets is given in the table below:

* Included within the loan stock balance as at 31 December 2012 is £nil (2011: £120,000) loan stock held by the Company through its wholly owned subsidiary Neptune-Calculus SPV.

The variable rate is based on the banks' deposit rate, and applies to cash balances held and the money market funds. The benchmark rate which determines the interest payments received on interest bearing cash balances is the Bank of England base rate which was 0.5 per cent as at 31 December 2012 (31 December 2011: 0.5 per cent).

The investments the Company holds include AIM quoted securities where the liquidity is generally below that of securities listed/quoted on the main market and it also holds unquoted investments where there is no ready market for the securities. The ability of the Company to realise positions may therefore be restricted when there are no willing purchasers.

The Board, which monitors the Company's overall liquidity risk, seeks to ensure that an appropriate proportion of the Company's investment portfolio is invested in cash and readily realisable securities, which are sufficient to meet any funding commitments that may arise.

At 31 December 2012, the Company held £1,474,000 (31 December 2011: £2,189,000) in cash and readily realisable securities (including the investments in the Neptune Income and Neptune Quarterly Income Funds) to pay accounts payable and accrued expenses.

The failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss. The Company manages this risk by ensuring that where an investment is made in an unquoted loan, it is made as part of the overall equity and debt package. The recoverability of the debt is assessed as part of the overall investment process and is then monitored on an ongoing basis by the Investment Manager who reports to the Board on any recoverability issues. It also ensures that cash at bank is held only with reputable banks with high quality external credit ratings. None of the Company's financial assets are secured by collateral or other credit enhancements. The total exposure to loan stocks is set out above in the interest rate risk section.

All assets of the Company which are traded on a recognised exchange are held by Reyker Securities plc, the Company's custodian. The Board regularly monitors the Company's risk by reviewing assessments of the custodian submitted by the Investment Manager.

Investments held at fair value through profit and loss are valued in accordance with IPEVC guidelines as follows:

The valuation method used will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCA guidelines. Following a review of the performance of MCD Ventures Limited, the basis of valuation changed between 31 December 2011 and 31 December 2012 from the recent investment price to discounted cash flow. Following a review of the performance of Triage Holdings Limited, the basis of valuation changed between 31 December 2011 and 31 December 2012 from an earnings multiple to discounted cash flow.

As required by Financial Reporting Standard 29 'Financial Instruments: Disclosures' (the Standard) an analysis of financial assets and liabilities, which identifies the risk of the Company's holding of such items is provided. The Standard requires an analysis of investments carried at fair value based on the reliability and significance of the information used to measure their fair value.

In order to provide further information on the valuation techniques used to measure assets carried at fair value, the measurement bases are categorised into a "fair value hierarchy" as follows:

- Quoted market prices in active markets - "Level 1"

Inputs to Level 1 fair values are quoted prices in active markets for identical assets. An active market is one in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company's investments in AIM quoted equities, money market funds and the quoted Neptune funds are classified within this category.

- Valued using models with significant observable market inputs - "Level 2"

Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. The Company has no investments classified within this category.

- Valued using models with significant unobservable market inputs - "Level 3"

Inputs to Level 3 fair values are unobservable inputs for the asset. Unobservable inputs may have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date (or market information for the inputs to any valuation models). As such, unobservable inputs reflect the assumptions the Company considers that market participants would use in pricing the asset. The Company's unquoted equities, preference shares and loan stock are classified within this category. As explained in note 1, unquoted investments are valued in accordance with the IPEVCA guidelines.

* Included within the fixed interest investments is £120,000 loan stock held by the Company through its wholly owned subsidiary Neptune-Calculus SPV Limited.

The table below shows movements in the assets measured at fair value based on Level 3 valuation techniques for which any significant input is not based on observable market data. During the year there were no transfers between levels 1, 2 or 3.

* Included within the fixed interest investments is loan stock purchased by the Company's wholly owned subsidiary Neptune-Calculus SPV Limited for £5,463, on which a loss of £5,463 has been recognised in the Income Statement.

* Included within the fixed interest investments is loan stock purchased by the Company's wholly owned subsidiary Neptune-Calculus SPV Limited for £5,463, on which a loss of £114,881 has been recognised in the Income Statement.

The Standard requires disclosure, by class of financial instruments, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. The portfolio has been reviewed and both downside and upside reasonable possible alternative assumptions have been identified and applied to the valuation of each of the unquoted investments. Applying the downside alternatives the value of the unquoted investment portfolio would be £382,000 (31 December 2011: £490,000) or 11.0 per cent (31 December 2011: 13.3 per cent) lower. Using the upside alternatives the value of the unquoted investment portfolio would be increased by £382,000 (31 December 2011: £364,000) or 11.0 per cent (31 December 2011: 9.9 per cent).

The Company finances its operations through its issued share capital and existing reserves. The only financial liabilities of the Company are creditors all of which are sterling denominated and are due within one year. The creditors are disclosed in note 11. No interest is paid on these liabilities.

All assets and liabilities are carried at fair value.

The Company's capital management objectives are to ensure that it will be able to continue as a going concern and to maximise the income and capital return to its Ordinary shareholders.

The Board, with the assistance of the Investment Manager monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the planned level of gearing, which takes account of the Manager's views on the market; the need for new issues of equity shares; and the extent to which revenue in excess of that which is required to be distributed should be retained. The capital of the Company is made up of called up share capital and reserves as detailed on the balance sheet.

The Company's qualifying investments are managed by Calculus Capital Limited. John Glencross, a Director of the Company, has an interest in Calculus Capital Limited and is a Director of Terrain Energy Limited, Lime Technology Limited and Human Race Group Limited. The amounts paid to the Investment Manager are disclosed in note 3. Calculus Capital Limited also acts as administrator to the Company and received a fee in the year to 31 December 2012 of £19,845 (2011: £21,661).

Calculus Capital Limited receives annual fees from Terrain Energy Limited, Lime Technology Limited and Human Race Group Limited for the provision of John Glencross as a Director, as well as annual monitoring fees. Calculus Capital also receives an annual monitoring fee from MicroEnergy Generation Services Limited. Other funds under the management or advice of Calculus Capital Limited have also invested in Terrain Energy Limited, Lime Technology Limited, Human Race Group Limited and MicroEnergy Generation Services Limited. In the year ended 31 December 2012, the amount payable to Calculus Capital Limited which was attributable to the investment made by the Company was £5,122 (2011: £6,438) (excluding VAT) from Terrain Energy Limited, £6,184 (2011: £5,470) (excluding VAT) from Lime Technology Limited, £2,442 (2011: £nil) from Human Race Group Limited and £751 (2011: £927) (excluding VAT) from MicroEnergy Generation Services Limited.

In the year ended 31 December 2012, Calculus Capital Limited received an arrangement fee of £518 (2011: £8,250) as a result of the Company's investment in Lime Technology Limited, an arrangement fee of £7,500 (2011: £nil) as a result of the Company's investment in Secure Electrans Limited and an arrangement fee of £12,000 (2011: £nil) as a result of the Company's investment in Human Race Group Limited.

As mentioned in the Directors' Report, the Company may co-invest with other funds managed and advised by Calculus Capital Limited. The allocation between different funds takes into account such factors as the funds available for investment and the time horizon of these funds, the size of a potential investment, and the existing sector exposure of the various funds.

These are not full accounts in terms of Section 434 of the Companies Act 2006. Full audited accounts for the year ended 31 December 2011 have been lodged with the Registrar of Companies. The Report and Accounts for the year ended 31 December 2012 will be sent to shareholders shortly and will be available for inspection at 104 Park Street, London, W1K 6NF, the Company's registered office, and will be published on www.calculuscapital.com, a website maintained by the Company's Investment Manager, Calculus Capital Limited. The audited accounts for the year ended 31 December 2012 contain an unqualified audit report.