Neptune-Calculus Income & Growth Regulatory News (NEP)

Neptune-Calculus Income and Growth VCT plc

Neptune-Calculus Income and Growth VCT is a tax efficient listed company which has the objective of generating long term capital growth and tax free dividends for investors. The Company is managed as a VCT in order that shareholders may benefit from the tax reliefs available.

The Company's 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 Company does not invest in start-up and seed capital situations. The balance of the Company's investments can be invested in a combination of Neptune income funds and a portfolio of similar income generating UK listed shares and money market instruments.

Performance summary

*Being the latest practicable date prior to publication and including net revenue after 30 June 2011.

I present your Company's results for the six months ended 30 June 2011. Net assets per Ordinary Share on 30 June 2011 were 61.9 pence compared with 68.5 pence as at 31 December 2010. This decline is mainly due to the payment of dividends totaling 3.5 pence per Ordinary Share during the period and a fall in the value of the quoted portfolio of AIM companies. The dividend payments are outlined in the section below, and took the total cumulative dividends paid on the Ordinary Shares since inception to 15.5 pence.

Our qualifying investments, which are a combination of AIM companies and unquoted companies, are managed by Calculus Capital. Over the period under review, the overall quoted portfolio fell, on a like-for-like basis by approximately 17.5 per cent, although the AIM market itself was also down by over 8 per cent. We sold the holding in Brulines Group plc during May. Although the stock was a good income generator, the company had recently issued a profits warning, reflecting the tough market conditions within the leisure sector at present. The unquoted portfolio fared better over the period under review, falling by only 2.4 per cent on a like-for-like basis over the period.

Several new investments have been made during the last six months, including a small investment of £10,000 into Mechadyne Holdings Limited, an automotive technology company. As mentioned in the Annual Report and Accounts, in January 2011 the Company invested £63,000 into Heritage House Media in order to support the new Chief Executive's development plans. This was followed in April by a further £21,000 as part of a total fundraising of £400,000. The business has already moved to cheaper and more convenient premises in Peterborough and more focus is being put on digital offerings, an area with potentially significant growth opportunities.

In March, the Company invested £75,000 in Terrain Energy Limited ("Terrain") loan stock as part of a fundraising of £750,000. The investment was part of a fundraising programme intended to give Terrain visibility over its funding needs to meet development, appraisal and exploration commitments until the end of 2012.

£100,000 has also been invested in MicroEnergy Generation Services Limited ("MicroEnergy"), with £30,000 of this provided as ordinary equity and £70,000 in the form of long-term loan stock with a coupon of 7 per cent. MicroEnergy is a company set up to acquire renewable, microgeneration facilities, including (but not limited to) wind, anaerobic digestion, hydro and micro CHP (Combined Heat and Power), and is currently in negotiations with a wind turbine partner to acquire a portfolio of renewable energy assets.

Following the period end, the Company completed a £328,000 investment in Abingdon based Lime Technology Limited ("Lime"). £128,000 of this was provided as ordinary equity with the remaining £200,000 provided in the form of long-term loan stock with a coupon of 8 per cent. Lime was founded in 2002 and is a leader in renewable lime and hemp based building products for the mainstream construction industry. Lime produces Tradical© Hemcrete© which is a negative carbon bio-composite product comprised of hemp and a lime based binder. Through its subsidiary, Hemp Technology, the company controls the hemp supply chain from seed to finished wall.

Our non-qualifying investments comprise holdings in the Neptune Income Fund and Neptune Quarterly Income Fund as well as £68,000 held in cash funds. These investments are managed by the Board to ensure that the Company has the required amount of liquidity available to it at any point in time. £400,000 of the Neptune Funds were sold during the period. The Neptune Funds, which have a bias towards income generating large cap stocks, broadly maintained their value over the period in spite of the political unrest in the Middle East and the Japanese tsunami.

A more detailed analysis of qualifying investment performance can be found in the Investment Managers' Review following this statement.

David McEuen retired as a Director with effect from 30 June 2011. David has been with the Company since its flotation in 2005, and on behalf of the Board, I would like to thank David for the experience he brought and the commitment he has shown to the Company over the years.

We paid the 2010 final dividend of 2.0 pence per Ordinary Share in June following shareholder approval at the AGM. Additionally, we paid a special interim dividend for 2011 of 1.5 pence per Ordinary Share in March. In line with our policy of maximising tax-free dividends to shareholders, the Directors are pleased to declare an interim dividend of 1 penny per Ordinary Share payable on 17 October 2011, to shareholders on the register on 23 September 2011.

In order to return further cash to shareholders, the Board has exercised its powers to buy back shares during the period. In the six months to 30 June 2011, the Company repurchased a total 665,948 Ordinary Shares for cancellation at an average price of 59.9 pence per Ordinary Share. As at 30 June 2011 there were 11,635,043 Ordinary Shares in issue.

Whilst the UK economic outlook remains uncertain, there has been encouraging performance from several companies within the portfolio in recent months. The portfolio itself has been expanded since the start of the year with several new and follow-on unquoted investments made. It is well diversified with sectors such as energy, business services, life sciences and logistics represented and we believe there is good upside potential if conditions begin to improve.

Philip Stephens

Chairman

Calculus Capital advises the Company in respect of qualifying investments made by the Company.

At 30 June the portfolio of qualifying investments comprised 15 companies, made up of both AIM quoted and unquoted stocks. The Company continues to meet the requirements for approved VCT status.

During the period the Company made no further quoted investments, and the investment in Brulines Holdings plc was sold during May as it was felt there was no further upside potential in the stock given the current economic pressures in the leisure sector. Disappointingly, the quoted portfolio fell, on a like-for-like basis, by 17.5 per cent over the period, although the AIM market itself was also down by over 8 per cent. Managed Support Services plc was particularly badly hit following the release of a profits warning in March, although more recent indications suggest an improvement in trading during the second quarter of 2011. At 30 June 2011, the quoted portfolio was valued at £1,157,709 compared with £1,618,862 at 31 December 2010.

EpiStem Holdings plc ("EpiStem") continues to show year on year growth in revenues and earnings, and during November 2010 was reappointed as a subcontractor to the US National Institute of Health's Biodefence programme. In March 2011, EpiStem announced a collaboration agreement with Sanofi-Aventis U.S relating to EpiStem's proprietary biomarker technologies. Although the fundamentals of the company remain strong, trading in the shares on AIM is relatively light and its share price has been depressed slightly due to some sustained selling by some smaller shareholders.

Pressure Technologies plc, which develops high pressure equipment for the oil and gas, biogas and defence industries, has also held up well over the period, in spite of weak demand from the oil and gas industry. The company is now seeing improved activity in this market and also expects to see continued growth in its engineered products division following the acquisitions of Al-Met Limited and Hydratron Limited during 2010. Both Al Met (which manufactures engineered alloys for high pressure valves), and Hydratron (which manufacturers pumps and hydraulic control panels), supply products that can be used on existing rigs as well as new ones, and have profited from increased industry investment on existing rigs.

The unquoted portfolio fell by 2.4 per cent over the period on a like-for-like basis. At 30 June 2011, the portfolio was valued at £3,206,126 compared with £3,009,533 at 31 December 2010. Investments were made during the period in Terrain Energy Limited ("Terrain"), MicroEnergy Generation Services Limited ("MicroEnergy") and Heritage House Media Limited ("Heritage"). The Company also made a small investment of £10,000 in Mechadyne Holdings Limited, an automotive technology company.

Terrain continues to make good progress, and the fair value of the investment has increased to reflect this. In March, the Company invested £75,000 in Terrain long-term loan stock as part of a fundraising of £750,000 intended to give Terrain visibility over its funding needs to meet development, appraisal and exploration commitments until the end of 2012. The drilling and completion of a new horizontal well at the Keddington oil field last year (Keddington-3z) has proved to be a success with consistent production of c. 130 barrels of oil per day and c. 600,000 cubic feet of gas (gross). In order to maximize the potential of the Keddington field, drilling commenced in April 2011 on a second horizontal well, Keddington-4z, which is currently on test production. In March 2011, Terrain also acquired a 10 per cent interest in the PL1/10 licence in the Larne-Lough Neagh Basin in Northern Ireland, where the main prospect is a conventional gas play. The following licence developments are planned for the second half of 2011: obtaining c. 250km of 2D seismic on the Northern Ireland licence; a work over of Dukes Wood-1 well to restore production from Dukes Wood-1 and Kirklington-3z; and applications for further licence interests in the 14th Onshore Licensing Round.

In early April, £100,000 was invested in MicroEnergy Generation Services Limited. MicroEnergy is a company set up to acquire renewable, microgeneration facilities, including (but not limited to) wind, anaerobic digestion, hydro and micro CHP (Combined Heat and Power), and is currently in negotiations to acquire its first renewable energy assets. The investment was provided as £30,000 of ordinary equity and £70,000 in the form of long-term loan stock with a coupon of 7 per cent.

The Company also invested £84,000 in Heritage House Media during the period as part of a £400,000 fundraising supporting the new Chief Executive's development plans for the business. The business has already been relocated to cheaper, more convenient premises in Peterborough and the management team has been streamlined. In addition, several digital and internet based product offerings are under development and some key contracts are subject to renegotiation.

The fair value of our investment in Waterfall Services Limited has increased to reflect continued good performance. The group generated revenues in excess of £42 million for the year to March 2011, and in spite of the widespread school closures in December, continues to increase earnings year on year. In May, Waterfall won a five year contract to cater for over 120 schools in Sheffield, which takes the number of people employed by Waterfall over 3,000 for the first time. This is triple the number of employees at the time the original investment was made in 2007. The group is diversified, since as well as the education sector, it also provides catering in the aged care and welfare sectors, as well as for some business and industry customers.

RMS Group Holdings has had a very good start to 2011, with volumes increasing, and is comfortably ahead of budget for the five months to the end of May, although the fair value of the investment has marginally declined due to a movement in comparable quoted earnings multiples. For the five months to the end of May, the group is 9 per cent up on budget, and up nearly 18 per cent compared to this stage last year. Total borrowings also fell below £10 million for the first time in May, illustrating the progress that has been made, as at the time of the management buyout in 2007, they stood at over £15.6 million.

The fair value of our investment in Triage Holdings Limited has reduced. Although revenues have stabilised following several difficult years, reduced earnings, relatively modest comparable quoted multiples in the sector and the presence of debt in the capital structure of the business have led us reduce the value of the ordinary equity to zero. However, the fair value of the overall investment continues to be carried above original cost due to the presence of the preference shares and loan stock. The management team has coped well under the difficult market conditions, managing costs, and taking decisive action to close sites where necessary, transferring the remaining work to other sites with spare capacity. About £1.3 million of new business has been targeted for the 2011 financial year, and over half of this had been achieved by June, with revenue for the 2011 financial year forecast to be up by nearly £500,000 on 2010.

In August 2011, the Company completed a £328,000 investment into Abingdon based Lime Technology Limited. £128,000 of this was provided as ordinary equity with the remaining £200,000 provided in the form of long-term loan stock with a coupon of 8 per cent. Lime was founded in 2002 and is a leader in renewable lime and hemp based building products for the mainstream construction industry. Lime produces Tradical© Hemcrete© which exhibits excellent thermal properties, is a negative carbon bio-composite product comprised of hemp and a lime based binder and has been specified in the new Adnams distribution centre, a temperature controlled warehouse for the Wine Society and Marks & Spencer's Cheshire Oaks store. Through its subsidiary, Hemp Technology, Lime controls the hemp supply chain from seed to finished wall. Regulatory compliance with the Code for Sustainable Homes and the pressure on developers of commercial buildings to build more responsibly are the key drivers in bringing Lime's products into the mainstream construction industry.

The portfolio has been expanded in recent months, with several new and follow-on unquoted investments made. It is well diversified with sectors such as energy, business services, life sciences and logistics represented. Whilst the UK economy remains subdued, we believe the portfolio has good upside potential once conditions begin to improve.

John Glencross

Calculus Capital Limited

17 August 2011

The ten largest holdings by value are included below:

As at 30 June 2011

Ɨ 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 valuation of Triage Holdings Limited preference shares includes a redemption premium which is non-qualifying. This cost £nil and is valued

at £76,150.

* The valuations of certain investments include small non-qualifying investments. These cost £10,974 and are valued at £7,519.

* These figures are audited.

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

The accompanying notes are an integral part of this statement.

* These figures are audited.

The accompanying notes are an integral part of this statement.

* These figures are audited.

The accompanying notes are an integral part of this statement.

* These figures are audited.

The accompanying notes are an integral part of this statement.

The unaudited half-yearly financial information does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006 and has not been reviewed nor audited by the auditors. This information has been prepared on the basis of the accounting policies used in the statutory financial statements of the Company for the year ended 31 December 2010. The statutory financial statements for the year ended 31 December 2010, which contained an unqualified auditors' report, have been lodged with the Registrar of Companies, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

The Directors have declared an interim dividend of 1 penny per Ordinary Share. This dividend is payable on 17 October 2011 to shareholders on the register on 23 September 2011.

Revenue return per Ordinary Share is based on the net revenue deficit on ordinary activities attributable to the Ordinary Shares of £3,000 (30 June 2010: £92,000, 31 December 2010: £165,000) and on 12,022,374 (30 June 2010: 12,400,991, 31 December 2010: 12,396,607) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.

Capital return per Ordinary Share is based on the net capital deficit for the period of £389,000 (30 June 2010: £1,125,000, 31 December 2010: £999,000) and on 12,022,374 (30 June 2010: 12,400,991, 31 December 2010: 12,396,607) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.

Total return per Ordinary Share is based on the total deficit on ordinary activities attributable to the Ordinary Shares of £392,000 (30 June 2010: £1,033,000, 31 December 2010: £834,000) and on 12,022,374 (30 June 2010: 12,400,991, 31 December 2010: 12,396,607) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.

The basic net asset value per Ordinary Share is based on net assets (including current period revenue) of £7,199,000 (30 June 2010: £8,409,000, 31 December 2010: £8,422,000) and on 11,635,043 (30 June 2010: 12,400,991, 31 December 2010: 12,300,991) Ordinary Shares, being the number of Ordinary Shares in issue at the end of the period.

The decrease in debtors shown above does not agree with the movement shown on the Balance Sheet due to the presence of an investments receivable debtor of £300,011, which is included in the debtors at the period end, and which is not an operating activity. This represents an amount conditionally subscribed to acquire shares and loan stock in Lime Technology Limited. The conditions for the investment were satisfied during August and at this time a further £28,000 was invested. The total amount invested in Lime Technology Limited was £328,000 with £128,000 of this provided as ordinary equity and £200,000 in the form of long-term loan stock with a coupon of 8 per cent.

Similarly, the decrease in creditors shown above does not agree with the movement shown on the Balance Sheet principally because of the share buyback creditor of £62,000 included in creditors as at 31 December 2010, which is not an operating activity.

The Company's qualifying investments are managed by Calculus Capital Limited. Neptune Investment Management Limited served as the Company's non-qualifying investment manager up to 31 December 2010, when this appointment was terminated.

John Glencross, a Director of the Company, has an interest in Calculus Capital Limited. The amounts payable to the Managers are disclosed below:

In the six months to 30 June 2011, Calculus Capital Limited received an arrangement fee of £2,526 (31 December 2010: £3,790) as a result of the Company's follow-on investments in Heritage House Media Limited.

During the same period, Calculus Capital Limited also received an arrangement fee of £2,250 (31 December 2010: £nil) as a result of the Company's follow-on investment in Terrain Energy Limited.

Calculus Capital Limited receives an annual fee from Terrain Energy Limited for the provision of John Glencross as a Director, as well as an annual monitoring fee. Other funds under the management or advice of Calculus Capital Limited have also invested in Terrain Energy Limited. In the six months to 30 June 2011, the amount payable to Calculus Capital Limited which was attributable to the investment made by the Neptune-Calculus Income and Growth VCT plc was £5,909 (31 December 2010: £7,235) (excluding VAT).

The half-yearly financial report, which has not been audited or reviewed by auditors pursuant to the Auditing Practices Board Guidance on Review of Half-Yearly Financial Information is the responsibility of, and has been approved by, the Directors. The Directors confirm that to the best of their knowledge the half-yearly financial report, which has been prepared in accordance with the Disclosure and Transparency rules and in accordance with applicable accounting standards including the statement 'Half-yearly financial reports' issued by the UK Accounting Standards Board, gives a true and fair view of the assets, liabilities, financial position and the deficit of the Company as at 30 June 2011.

The Directors confirm that the Chairman's Statement, the Investment Managers' Reviews, and note 6, include a fair review of the information required by DTR 4.2.7R, 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 financial year, and 4.2.8R of the Disclosure and Transparency Rules.

The Directors of Neptune-Calculus Income and Growth VCT plc are:

Philip Stephens

John Glencross

David Kempton

By order of the Board

Philip Stephens

Chairman

17 August 2011

The half yearly report will shortly be posted to shareholders. Copies of the report will also be available from the Company's registered office at 104 Park Street, London, W1K 6NF or from the Qualifying Investment Manager's website at www.calculuscapital.com/neptunevct.aspx.