Annual Financial Report

INVESTEC STRUCTURED PRODUCTS CALCULUS VCT PLC ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 28 FEBRUARY 2013 INVESTMENT OBJECTIVE The Company's principal objectives for investors are to: â€¢ invest in a portfolio of Venture Capital Investments and Structured Products that will provide investment returns that are sufficient to allow the Company to maximise annual dividends and pay an interim return either by way of a special dividend or cash offer for shares on or before an interim return date; â€¢ generate sufficient returns from a portfolio of Venture Capital Investments that will provide attractive long-term returns within a tax efficient vehicle beyond an interim return date; â€¢ review the appropriate level of dividends annually to take account of investment returns achieved and future prospects; and â€¢ maintain VCT status to enable qualifying investors to retain their income tax relief of up to 30 per cent. on the initial investment and receive tax-free dividends and capital growth. Full details of the Company's investment policy can be found below. FINANCIAL REVIEW Ordinary Share Fund 12 Months to 12 Months to 28 February 29 February 2013 2012 Total return Total return Â£309,000 (Â£80,000) Total return per ordinary share 6.5p (1.7)p Revenue Net loss after tax (Â£46,000) (Â£71,000) Revenue return per ordinary share (1.0)p (1.5)p Dividend Recommended final dividend 5.25p 5.25p As at As at 28 29 February February 2013 2012 Assets (investments valued at bid market prices) Net assets Â£4,562,000 Â£4,501,000 Net asset value ("NAV") per ordinary share 96.3p 95.0p Mid market quotation Ordinary shares 92.5p 97.5p (Discount)/premium to NAV (3.9)% 2.6% C Share Fund 12 Months to 11 Months to 28 February 29 February 2013 2012* Total return Total return Â£104,000 (Â£33,000) Total return per C share 5.4p (1.7)p Revenue Net loss after tax (Â£35,000) (Â£45,000) Revenue return per C share (1.8)p (2.3)p Dividend Recommended final dividend 4.5p 4.5p As at As at 28 29 February February 2013 2012 Assets (investments valued at bid market prices) Net assets Â£1,805,000 Â£1,788,000 NAV per C share 93.5p 92.6p Mid market quotation C shares 90.0p 94.0p (Discount)/premium to NAV (3.7)% 1.5% * The C shares were issued in three tranches, on 1 April 2011, 5 April 2011 and 4 May 2011. CHAIRMAN'S STATEMENT I am delighted to present your Company's results for the year ended 28 February 2013. The Investec Structured Products Calculus VCT plc (the "Company") is a tax efficient listed company which aims to address shareholder needs for: â€¢ attractive tax-free dividends; â€¢ a clear strategy for returning capital; â€¢ downside protection through the Structured Products portfolio and investment in lower risk VCT qualifying companies with a high percentage of investments in loan stock and preference shares; and â€¢ low annual management fees. The Company, which launched in March 2010, is a joint venture between Investec Structured Products (part of Investec Plc) and Calculus Capital Limited, and brings together both Managers' award winning expertise in their respective fields of Structured Products and Venture Capital. During the year, the majority of investments have been in Structured Products which do not produce an income but generate a capital return. The remainder of the investments are in qualifying growth companies of which only a proportion can be invested in loan stocks and redeemable preference shares which generate an income. Consequently, the Company has shown a negative revenue return and a strong positive capital return to produce an overall positive return in line with expectations. The net asset value per ordinary share was 96.3 pence as at 28 February 2013 compared to 95.0 pence as at 29 February 2012. This is after paying a dividend to ordinary shareholders in 2012 of 5.25 pence per share. The net asset value per C share was 93.5 pence as at 28 February 2013 compared to 92.6 pence as at 29 February 2012. This is after paying a dividend to C shareholders in 2012 of 4.50 pence per share. The net asset values have subsequently risen to 99.7 pence per ordinary share and 93.7 pence per C share as at 30 April 2013. Your Board and Managers are encouraged by the performance of the Company to date and believe it is well placed to make further progress in the forthcoming year. Structured Products Portfolio Our non-Qualifying Investments are managed by Investec Structured Products. As at 28 February 2013, the Ordinary Share Fund held a portfolio of four Structured Products and the C Share Fund held a portfolio of two Structured Products based on the FTSE 100 Index. The products differ by duration and counterparty in order to minimise risk and create a diversified portfolio of investments. Up to 20 per cent. of the Structured Products portfolio of the C Share Fund will be able to be invested in other indices besides the FTSE 100 Index. The Structured Products portfolio continues to perform well. As at 28 February 2013 the FTSE 100 was trading at 6,360.8. This means that while the level of the FTSE 100 will change, if all of the Structured Products in both the Ordinary Share Fund and C Share Fund were to mature at this level, they would yield the maximum payoff for investors in each share fund. Venture Capital Investments Calculus Capital manages the portfolio of VCT Qualifying Investments made by the Company. During the year the Company made 11 Qualifying Investments for the Ordinary Share Fund, investing a total of Â£1,700,000 and the Company has now met its requirement for the Ordinary Share Fund portfolio to be at least 70 per cent. invested in Qualifying Investments by 28 February 2013. The Company also made four Qualifying Investments totalling Â£280,000 for the C Share Fund. The combined portfolio is required to be 70 per cent. invested in qualifying holdings by 28 February 2014. A detailed analysis of the new investments and the investment performance can be found in the Investment Manager's Review that follows this statement. Dividend In line with our aim to provide a regular tax-free dividend stream, the Directors are pleased to propose a final dividend of 5.25 pence per ordinary share and 4.5 pence per C share which, subject to shareholder approval, will be paid on 31 July 2013 to ordinary shareholders and C shareholders on the register on 24 May 2013. This will take dividends paid to date to 15.75 pence per ordinary share and 9.0 pence per C share. Developments since the Year End Since the year end a further Â£50,000 has been invested for the C Share Fund in Benito's Hat, a Mexican-themed fast casual restaurant business. Horizon Discovery Limited, a translational genomics company, also received a Â£50,000 investment from the C Share Fund in mid-May. Outlook We believe that the Company's strategy is proving effective. The success of the Structured Products portfolio thus far provides the basis for dividend returns to shareholders whilst enabling the construction of a portfolio of companies to generate longer-term returns. Calculus Capital continues to find that there are a number of attractive investment opportunities available to the Company. Michael O'Higgins Chairman 22 May 2013 INVESTMENT MANAGER'S REVIEW (Qualifying Investments) Portfolio Developments Calculus Capital Limited manages the portfolio of Qualifying Investments made by the Company. To maintain its qualifying status as a Venture Capital Trust, each of the Ordinary Share Fund and the C Share Fund needs to be at least 70 per cent. invested in qualifying securities by the end of the relevant third accounting period. The relevant date for the ordinary shares was 28 February 2013 at which date the qualifying percentage for the ordinary shares was 71.4 per cent. The relevant date for the C shares is 28 February 2014. During the year under review, the Company completed Qualifying Investments in nine unquoted companies as shown below: Amount Invested Amount by Invested Ordinary by Shares C Shares Company Sector Â£ Â£ AnTech Limited Oil services 270,000 - Brigantes Energy Limited Oil & gas exploration & production 125,000 - Corfe Energy Limited Oil & gas exploration & production 75,000 - Dryden Human Capital Group Limited Business services 100,035 - Hampshire Cosmetics Limited Manufacturing 250,000 - Human Race Group Limited Sports and leisure 300,000 150,000 Secure Electrans Limited Information technology 100,000 50,000 Tollan Energy Renewable energy 360,000 - Venn Life Science Holdings plc Healthcare 120,033 80,000 New Holdings AnTech Limited ("AnTech") In late January 2013, Â£270,000 was invested in AnTech by the Ordinary Share Fund, of which Â£120,000 was ordinary equity and Â£150,000 was loan stock. Founded in 1994, Exeter based AnTech is a specialist engineering design and manufacturing company providing a range of products to the upstream oil and gas industry. The investment was made to support the roll-out of a new generation of directional drilling tools, primarily for use in wells drilled using coiled tubing. Coiled tubing drilling provides a lower cost approach to drilling shallower wells. The investment has been made in conjunction with an equity investment of Â£2 million by Saudi Aramco Equity Ventures, the venture investment arm of Saudi Aramco, the world's largest oil company measured by oil production and reserves. Thus, VCT (and EIS) investment has acted as a catalyst to secure significant inward investment by a major non-UK corporate. Ordinary C Share Share 2012 2011 Fund Fund Latest Audited Results Â£'000 Â£'000 Investment Information Â£'000 Â£'000 Year ended 31 Aug 31 Aug Turnover 1,548 1,188 Total cost 270 - Pre-tax profit 230 223 Income recognised in year/period 1 - Net assets 1,291 967 Equity valuation 120 - Valuation basis: Cost Loan stock valuation 150 - Total valuation 270 - Voting rights* 1.1% - * Other funds managed by Calculus Capital have combined voting rights of 16.8 per cent. Brigantes Energy Limited ("Brigantes") and Corfe Energy Limited ("Corfe") Brigantes and Corfe (details of which follow) were initially intended to be one investment but were split for structural efficiency reasons. Brigantes and Corfe were originally each established to hold certain oil and gas exploration assets and spun out from InfraStrata Plc. Brigantes acquired an interest in InfraStrata's Northern Ireland exploration assets and Corfe acquired an interest in InfraStrata's exploration assets in Southern England. Brigantes In September 2011, Brigantes completed the purchase of a 5 per cent. working interest in UK onshore licence PEDL 070 which contains the producing Avington oil field. The field produces at an average rate of 60-70 bpd (barrels per day) and Brigantes' share in this field has entitled it to a total of 1,068.6 barrels since 1 June 2011. Brigantes' main prospect is a 40 per cent. working interest in the Northern Ireland onshore licence PL1/10 at Larne. Significant P50 prospective resources of 450 million barrels have been identified should all structures prove to be successful. An exploration well is planned for early 2014. The company has also participated at a 10 per cent. interest level in a Cairn Energy led licence application under the 27th Offshore Licensing Round in May. The results of this should be known within the next few months. Ordinary C Share Share 2012 2011 Fund Fund Latest Audited Results Â£'000 Â£'000 Investment Information Â£'000 Â£'000 Year ended 31 Jul 31 Jul Turnover 70 15 Total cost 125 - Pre-tax loss (920) (126) Income recognised in year/period - - Net assets 1,131 1,310 Equity valuation 140 - Valuation basis: Prospective resources Loan stock valuation - - Total valuation 140 - Voting rights* 3.3% - * Other funds managed by Calculus Capital have combined voting rights of 26.6 per cent. Corfe In September 2011, Corfe also completed the purchase of a 5 per cent. working interest in the UK onshore licence PEDL 070 which contains the Avington oil field, with its interest commencing from 1 June 2011. The field produces at an average 60-70 bpd and Corfe's share in this field has entitled it to a total of 1,068.6 barrels since 1 June 2011. In February, Corfe entered into an agreement with Egdon Resources plc and Celtique Energie Limited in relation to UK onshore licence PEDL 201. Under the terms of this agreement, Corfe will earn a 12.5 per cent. interest and test drilling is planned to commence in early 2013. Initially a relatively shallow oil prospect will be drilled, but the hope is that there will be reserves of up to 3.2 million barrels. The InfraStrata bidding group, in which Corfe is involved, has recently been awarded the P1918 licence over blocks 97/14, 97/15 and 98/11 under the 26th Offshore Licensing Round. Under the terms of the agreement, Corfe is entitled to be assigned a 12 per cent. interest in these blocks. Ordinary C Share Share 2012 2011 Fund Fund Latest Audited Results Â£'000 Â£'000 Investment Information Â£'000 Â£'000 Year ended 31 Jul 31 Jul Turnover 40 15 Total cost 75 - Pre-tax profit 64 107 Income recognised in year/period - - Net assets 2,006 1,329 Equity valuation 96 - Valuation basis: Prospective resources Loan stock valuation - - Total valuation 96 - Voting rights* 2.0% - * Other funds managed by Calculus Capital have combined voting rights of 27.3 per cent. Dryden Human Capital Group Limited ("Dryden") Dryden is a global professional services recruitment and executive search group. Dryden's first business commenced operations in 1996 and it is now one of the leading international groups within the professional services recruitment market. Headquartered in the UK, it specialises in the actuarial, insurance and compliance recruitment sector and operates out of London, Zurich, Mumbai, Shanghai, Hong Kong, Sydney and New York. The group comprises of five businesses: Darwin Rhodes, a specialist recruiter operating globally within niche areas of the insurance and finance sectors; Drake Fleming, an executive search and recruitment consultancy specialising in HR, change and business transformation; Edison Morgan, a retained, executive search firm operating in the insurance and asset management sectors; Baker Noble, a search and selection consultancy specialising in senior appointments within private and institutional investment management; and MGM Search, an international search and selection consultancy specialising in recruitment and resourcing solutions for the professional staffing sector. In April 2012, the group appointed a new CEO with extensive experience in the recruitment industry and the Asia Pacific markets. In addition, the group has invested in its team, with several new senior employees î º principally to continue the growth of the business in Asia Pacific. The group's recent focus has been to develop existing businesses and potentially add complementary professional service business lines. It has done this through the newly launched Drake Fleming human resources, change management and business transformation business. Dryden has also invested in improved technical equipment across the business, providing a good platform for growth. As part of a larger fund-raising in February 2013, the Ordinary Share Fund made an investment of Â£100,000 in the equity to help finance this development. Calculus Capital knows the business well, with our EIS funds having invested in the group in 2011. Ordinary C Share Share 2012 2011 Fund Fund Latest Audited Results (group) Â£'000 Â£'000 Investment Information Â£'000 Â£'000 (11 month) year ended 31 Mar 31 Mar Turnover 9,822 9,367 Total cost 100 - Pre-tax profit 291 1,224 Income recognised in year/period - - Net assets 5,143 4,313 Equity valuation 100 - Valuation basis: Cost Loan stock valuation - - Total valuation 100 - Voting rights* 2.9% - * Other funds managed by Calculus Capital have combined voting rights of 17.1 per cent. Hampshire Cosmetics Limited ("Hampshire") In December 2012, Â£250,000 was invested in Hampshire by the Ordinary Share Fund, of which Â£100,000 was ordinary equity and Â£150,000 was loan stock. Founded in the 1970s, Hampshire is an established company which develops and manufactures a comprehensive range of products covering fragrances, body treatments, skincare and shampoos. The business, trade and assets have been acquired by a management team that has previously been backed by Calculus Capital in a successful investment. Ordinary C Share Share 2012 2011 Fund Fund Latest Audited Results Â£'000 Â£'000 Investment Information Â£'000 Â£'000 Year ended 31 Mar 31 Mar Turnover 16,535 18,599 Total cost 250 - Pre-tax (loss)/profit (668) 428 Income recognised in year/period 2 - Net assets 1,357 4,000 Equity valuation 100 - Valuation basis: Cost Loan stock valuation 150 - Total valuation 250 - Voting rights* 4.6% - * Other funds managed by Calculus Capital have combined voting rights of 80.4 per cent. Human Race Group Limited ("Human Race") (formerly Participate Sport) In April 2012, Â£175,000 was invested in Human Race by the Ordinary Share Fund, of which Â£100,000 was ordinary equity and Â£75,000 was 8 per cent. five year loan stock. The C Share Fund made an investment of Â£75,000, of which Â£50,000 was ordinary equity and Â£25,000 was loan stock. Following the increases in allowable investment limits, a follow on investment of Â£125,000 in 8 per cent. five year loan stock was made by the Ordinary Share Fund in July 2012. The C Share Fund also made a Â£75,000 follow on investment of 8 per cent. five year loan stock at this time. Human Race is the UK's largest and most diverse mass participation sports events company. Human Race owns and delivers over 58 events in triathlon, cycling, running, duathlon, aquathlon and open water swimming for over 100,000 participants of all abilities and ages. Ordinary C Share Share 2012 Fund Fund Latest Audited Results (group) Â£'000 Investment Information Â£'000 Â£'000 Year ended 31 Dec Turnover 3,196 Total cost 300 150 Pre-tax profit 22 Income recognised in year/period 11 5 Net assets 2,032 Equity valuation 100 50 Valuation basis: Discounted cash flow and Loan stock valuation 200 100 earnings multiple using comparable companies analysis Total valuation 300 150 Voting rights 1.86% 0.91% Secure Electrans Limited ("Secure") Secure, founded in 2000, develops internationally patented systems that provide solutions to card payment fraud for 'card not present' ("CNP") transactions. The adoption of chip and pin technology in retail environments has specifically reduced instore card fraud which has migrated to CNP transactions. Secure's solution takes chip and pin technology from the retail sector and applies it to internet-based CNP transactions. The company has developed an end-to-end payment and security infrastructure which incorporates chip and pin and has received certification from leading industry bodies and participants. In April 2012, the Ordinary Share Fund made an equity investment of Â£100,000 and the C Share Fund invested Â£50,000 in equity. Ordinary C Share Share 2012 2011 Fund Fund Latest Audited Results Â£'000 Â£'000 Investment Information Â£'000 Â£'000 Year ended 31 Dec 31 Dec Turnover 61 111 Total cost 100 50 Pre-tax loss (1,953) (2,146) Income recognised in year/period - - Net assets (34) 259 Equity valuation 100 50 Valuation basis: Cost Loan stock valuation - - Total valuation 100 50 Voting rights* 0.46% 0.23 * Other funds managed by Calculus Capital have combined voting rights of 14.5 per cent. Tollan Energy Limited ("Tollan") In late January 2013, Â£300,000 was invested in Tollan by the Ordinary Share Fund, of which Â£150,000 was ordinary equity and Â£150,000 was loan stock. A Â£60,000 follow on investment was made by the Ordinary Share Fund in February 2013, all of which was loan stock. Tollan has been set up to generate electricity from renewable micro-generation facilities. In February 2013, Tollan entered into an agreement to acquire a portfolio of installed solar PV panels on residential and commercial roofs in Northern Ireland and will benefit from Northern Ireland Renewable Obligation Certificates ("NIROCs"). Ordinary Share C Share Fund Fund Latest Audited Results Investment Information Â£'000 Â£'000 No results available Total cost 360 - Income recognised in year/period 1 - Equity valuation 150 - Valuation basis: Cost Loan stock valuation 210 - Total valuation 360 - Voting rights* 6.38% - Venn Life Science Holdings plc (formerly Armscote Investment Company Plc) ("Venn") In December 2012, Â£120,000 was invested as ordinary equity in Venn by the Ordinary Share Fund, and Â£80,000 by the C Share Fund. Venn is a Clinical Research Organisation ("CRO") with operations in France, the Netherlands and Ireland and a branch office in Switzerland. The Company's near-term objective is the consolidation of a number of small European CROs to build a mid-sized CRO focused on the European market, offering clients a full service, multi-centred capability in Phase II-IV trials across a range of principal disease areas. Ordinary C Share Share Fund Fund Latest Audited Results Investment Information Â£'000 Â£'000 No results available Total cost 120 80 Income recognised in year/period - - Equity valuation 120 80 Valuation basis: Bid Loan stock valuation - - Total valuation 120 80 Voting rights* 1.99% 1.33% * Other funds managed by Calculus Capital have combined voting rights of 9.1 per cent. Existing Holdings Terrain Energy Limited ("Terrain") Terrain was established in October 2009 to develop a portfolio of onshore oil and gas production and development assets, predominantly in the UK. Terrain has interests in six petroleum licences: Keddington, Kirklington, Dukes Wood, Kelham Hills and Burton on the Wolds in the East Midlands and Larne in Northern Ireland. Terrain is currently producing from wells at Keddington, Dukes Wood and Kirklington. On average 60 barrels of oil and 300,000 standard cubic feet of gas per day are being produced (gross). The company is currently in negotiations with several parties to acquire interests in additional onshore UK producing licences. In January, the company appointed Steve Jenkins as non-executive chairman. Steve was previously Chief Executive of Nautical Petroleum which was acquired by Cairn Energy in 2012. The company's most exciting prospect is the PL1/10 licence located in the Larne-Lough Neagh Basin, onshore Northern Ireland. It is estimated that the licence contains a total unrisked P50 prospective resource of 450 million barrels of oil should all structures prove to be successful (45 million barrels net to Terrain). An appraisal well is planned for early 2014. Ordinary C Share Share 2011 2010 Fund Fund Latest Audited Results Â£'000 Â£'000 Investment Information Â£'000 Â£'000 Year ended 31 Dec 31 Dec Turnover 308 271 Total cost 300 90 Pre-tax loss (72) (158) Income recognised in year/period 14 3 Net assets 3,435 1,953 Equity valuation 113 47 Loan stock valuation 200 45 Valuation basis: Discounted cash flow and Total valuation 312 93 comparable companies analysis Voting rights* 2.5% 1.1% * Other funds managed by Calculus Capital have combined voting rights of 19.3 per cent. MicroEnergy Generation Services Limited ("MicroEnergy") MicroEnergy owns a portfolio of small onshore wind turbines. As at 31 March 2013, 154 turbines had been installed in East Anglia and Yorkshire (out of the entire fleet of 160 turbines). The portfolio will provide MicroEnergy with sufficient scale to mitigate against concerns of poor short-term performance at any particular site. The revenues from the fleet of installed turbines come from two sources, both of which are inflation protected, being directly linked to RPI. Firstly there is the Government backed feed-in tariff ("FIT") paid by the electricity suppliers for every kilowatt of electricity generated for twenty years. Secondly there is the export tariff for any surplus electricity not used by the site owner that is exported to the grid. Ordinary C Share Share 2011 Fund Fund Latest Audited Results Â£'000 Investment Information Â£'000 Â£'000 Year ended 31 Mar Turnover 7 Total cost 300 - Pre-tax loss (107) Income recognised in year/period 10 - Net assets 1,623 Equity valuation 150 - Valuation basis: Last price paid Loan stock valuation 150 - Total valuation 300 - Voting rights* 5.1% - * Other funds managed by Calculus Capital have combined voting rights of 5.8 per cent. Lime Technology Limited ("Lime Technology") The group comprises three main activities. 'Projects' which supplies panels for external wall construction. The main product is Hembuild which is sustainable and thermally efficient and is constructed of lime, hemp and linseed. Hembuild was recently used in the construction of the Science Museum's archives in the West of England. Lime Technology supplies proprietary lime mortars and renders and has an External Wall Insulation ("EWI") business which addresses the insulation needs of the older existing housing stock. Hemp Technology operates a fibre processing plant for hemp and linseed, thus giving Lime Technology visibility over its supply chain from field to construction site. More recently, new markets, including the paper and automotive sectors have been developed. The group is going through a turnaround phase with a new management team, product lines and direction. Whilst the building products industry remains depressed, the 'green' sector shows a modest upward trend. Ordinary C Share Share 2012 2011 Fund Fund Latest Audited Results (group) Â£'000 Â£'000 Investment information Â£'000 Â£'000 Year ended 31 Oct 31 Oct Turnover 5,997 4,507 Total cost 307 - Pre-tax loss (2,055) (2,020) Income recognised in year/period 20 - Net assets (499) (157) Equity valuation 8 - Valuation basis: Last price paid Loan stock valuation 250 - Total valuation 258 - Voting rights* 0.2% - * Other funds managed by Calculus Capital have combined voting rights of 3.9 per cent. Metropolitan Safe Custody Limited ("Metropolitan") (formerly Viscount Safe Custody Services Limited) Metropolitan provides safe custody services in central London. In February 2012, Calculus Capital invested Â£1.85m in Metropolitan. Metropolitan currently runs two safe custody sites, one in Knightsbridge, the other in St. Johns Wood. These profitable, stable businesses serve around 4,500 customers providing access to the vaults seven days a week. In June this year, Metropolitan purchased the trade and certain assets of London Safe Deposit ("LSD"), one of the oldest providers in Central London, which had closed due to the redevelopment of its site. Ordinary C Share Share 2012 2011 Fund Fund Latest Audited Results Â£'000 Â£'000 Investment Information Â£'000 Â£'000 Year ended 30 Jun 30 Jun Turnover 1,447 1,330 Total cost 190 90 Pre-tax profit 270 240 Income recognised in year/period 8 4 Net assets 4,118 800 Equity valuation 103 46 Loan stock valuation 100 50 Valuation basis: Discounted cash flow and Total valuation 203 96 earnings multiple Voting rights* 2.0% 0.9% *Other funds managed by Calculus Capital have combined voting rights of 35.3 per cent. Qualifying Investments At the beginning of May 2013, Â£50,000 was invested in Benito's Hat, a Mexican-themed fast casual restaurant. This investment will fund the roll-out of restaurant openings to reach new customers across London and the UK. In mid-May, a further Â£50,000 was invested in Horizon Discovery Limited, a translational genomics company. Both of these investments were for the C Share Fund. Developments since the Year End There have been no significant developments since the year end other than those disclosed above. Outlook 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. Calculus Capital Limited 22 May 2013 Investment Manager's Review (Structured Products) Our non-Qualifying Investments are managed by Investec Structured Products. As at the date of this report, the Company held a portfolio of Structured Products based on the FTSE 100 Index. The products differ by duration and counterparty. In line with the Company's strategy set out in the original offer documents, part of the initial cash raised has been used to build a portfolio of Structured Products. The portfolio of Structured Products was constructed with different issuers and differing maturity periods to minimise risk and create a diversified portfolio. Part of this portfolio has now reached full term; all products purchased which have reached maturity have returned their maximum payoff. The recent changes are listed below. Over the last year, two of the investments reached full term within the Ordinary Share Fund: the HSBC investment matured on 6 July 2012 paying a 25.1 per cent. return, and the RBS Autocallable matured on 19 March 2012, paying 10.5 per cent. The Morgan Stanley product was sold on 31 October 2012 at a price of 132.2 per cent., resulting in a positive return of Â£161,200 on the original Â£500,000 investment. The product was sold to release cash flow for further Qualifying Investments. Within the C Share Fund, the RBS Autocallable, paying 10.5 per cent., matured on 19 March 2012, paying out fully. The Nomura product, which was bought from the Ordinary Share Fund, matured on 20 February 2013, paying a return of 8.5 per cent. over the 11 months that the product was held. The strong performance of the FTSE 100 has supported valuations in the Structured Products portfolio. The FTSE 100 has rallied since the New Year and is far above all of the products' strike levels. The highest strike level remaining in both the Ordinary and C Share Funds is 5,584.5 and as at 28 February the FTSE 100 was 6,360.8. Over the past three months, swap rates have remained low and market volatility has declined. No new investments were made in Structured Products during the period. The Structured Products will achieve their target return subject to the Final Index Level of the FTSE 100 being higher than the Initial Index Level. The capital is at risk on a one-for-one basis ("CAR") if the FTSE 100 Index falls more than 50 per cent at any time during the investment term and fails to fully recover at maturity such that the Final Index Level is below the Initial Index Level. As at 28 February 2013, the following investments had been made in Structured Products: Ordinary Share Fund: FTSE 100 Strike Initial Notional Purchase Price as at Maturity Return/Capital at Risk Issuer Date Index Level Investment Price 28 February Date (CAR) 2013 The Royal 05/05/ 5,341.93 Â£275,000 Â£0.96 Â£1.3977 12/05/ 162.5% if FTSE 100* Bank of 2010 2015 higher; CAR if FTSE 100 Scotland plc falls more than 50% Investec Bank 14/05/ 5,262.85 Â£500,000 Â£0.98 Â£1.4740 19/11/ 185% if FTSE 100* higher; plc 2010 2015 CAR if FTSE 100 falls more than 50% Abbey 25/05/ 4,940.68 Â£350,000 Â£0.99 Â£1.5789 18/11/ 185% if FTSE 100* higher; National 2010 2015 CAR if FTSE 100 falls more Treasury than 50% Services Abbey 03/08/ 5,584.51 Â£50,000 Â£1.00 Â£1.1954 05/02/ 126% if FTSE 100* higher; National 2011 2014 CAR if FTSE 100 falls more Treasury than 50% Services Matured/sold FTSE 100 Initial Index Price at Maturity Strike Level at Notional Purchase Maturity/ Date/Date Return/Capital at Risk Issuer Date Maturity Investment Price Sale Sold (CAR) HSBC Bank plc 01/07/ 4,805.75 Â£500,000 Â£1.00 Â£1.2510 06/07/ 125.1% if FTSE 100* 2010 2012 higher; CAR if FTSE 100 falls more than 50% The Royal 18/03/ 5,718.13 Â£50,000 Â£1.00 Â£1.1050 19/03/ Autocallable 10.5% p.a.; Bank of 2011 2012 CAR if FTSE 100 falls Scotland plc more than 50% Nomura Bank 28/05/ 5,188.43 Â£350,000 Â£0.98 Â£1.2625 30/03/ 137% if FTSE 100* higher; International 2010 2012 CAR if FTSE 100 falls ** more than 50% Morgan 10/06/ 5,132.50 Â£500,000 Â£1.00 Â£1.3224 31/10/ 134% if FTSE 100* higher; Stanley 2010 2012 CAR if FTSE 100 falls International more than 50% The total valuation of the amount invested in Structured Products in the Ordinary Share Fund as at 28 February 2013 was Â£1,733,752. C Share Fund: FTSE 100 Strike Initial Notional Purchase Price as at Maturity Return/Capital at Risk Issuer Date Index Level Investment Price 28 February Date (CAR) 2013 Investec Bank 05/08/ 5,246.99 Â£328,000 Â£1.00 Â£1.3661 10/03/ 182% if FTSE 100* higher; plc 2011 2017 CAR if FTSE 100 falls more than 50% Abbey 03/08/ 5,584.51 Â£200,000 Â£1.00 Â£1.1954 05/02/ 126% if FTSE 100* higher; National 2011 2014 CAR if falls more than 50% Treasury Services Matured/sold FTSE 100 Initial Maturity Strike Index Level at Notional Purchase Price at Date/Date Return/Capital at Risk Issuer Date Maturity Investment Price Maturity/ Sold (CAR) Sale The Royal 18/03/ 5,718.13 Â£200,000 Â£1.00 Â£1.1050 19/03/ Autocallable 10.5% p.a.; Bank of 2011 2012 CAR if FTSE 100 falls Scotland plc more than 50% Nomura Bank 28/05/ 5,188.43 Â£350,000 Â£1.2625 Â£1.3700 20/02/ 137% if FTSE 100* International 2010 2013 higher; CAR if FTSE 100 falls more than 50% The total valuation of the amount invested in Structured Products in the C Share Fund as at 28 February 2013 was Â£687,147. *The Final Index Level is calculated using 'averaging', meaning that the average of the closing levels of the FTSE 100 is taken on each Business Day over the last 2-6 months of the Structured Product plan term (the length of the averaging period differs for each plan). The use of averaging to calculate the return can reduce adverse effects of a falling market or sudden market falls shortly before maturity. Equally, it can reduce the benefits of an increasing market or sudden market rises shortly before maturity. ** The Nomura Structured Product was sold prior to maturity with a return on initial investment of 28.8 per cent. This was sold to the C Share Fund. Investec Structured Products 22 May 2013 INVESTMENT PORTFOLIO AS AT 28 FEBRUARY 2013 Ordinary Share Fund Net assets % of Net Assets Structured Products 38% Unquoted - loan stock 31% Unquoted - ordinary and preference shares 31% Unquoted - liquidity funds 0% Net current assets 0% 100% Sector % of Portfolio Structured Products 38% Unquoted - Qualifying Investments 62% Unquoted - other non-Qualifying Investments 0% 100% Book % of Nature of Cost Valuation Net % of Company Business Â£'000 Â£'000 Assets Portfolio Structured Products Investec Bank plc Banking 490 738 16% 16% Abbey National Treasury Services Banking 396 612 14% 14% The Royal Bank of Scotland plc Banking 264 384 8% 8% Total Structured Products 1,150 1,734 38% 38% Qualifying Investments Tollan Energy Limited Energy 360 360 8% 8% Terrain Energy Limited Onshore oil and gas production 300 312 8% 8% Human Race Group Limited Leisure 300 300 7% 7% MicroEnergy Services Limited Energy 300 300 7% 7% AnTech Limited Oil services 270 270 7% 7% Lime Technology Limited Construction 307 258 6% 6% Hampshire Cosmetics Limited Cosmetics 250 250 5% 5% Safe depository Metropolitan Limited services 190 203 4% 4% Oil and gas Brigantes Energy exploration and Limited production 125 140 2% 2% Venn Life Sciences Clinical Holdings plc research 120 120 2% 2% Dryden Human Capital Group Limited Human resources 100 100 2% 2% Secure Electrans E-commerce Limited security 100 100 2% 2% Oil and gas exploration and Corfe Energy Limited production 75 96 2% 2% Publishing and Heritage House Limited media services 127 - - - Total Qualifying Investments 2,924 2,809 62% 62% Other non-Qualifying Investments Fidelity Liquidity Fund Liquidity fund 1 1 - - Scottish Widows Liquidity Fund Liquidity fund 1 1 - - Total Other non-Qualifying Investments 2 2 - - Total Investments 4,076 4,545 100% 100% Net Current Assets less Creditors due after one year 17 - Net Assets 4,562 100% C Share Fund Net assets % of Net Assets Structured Products 38% Unquoted - loan stock 11% Unquoted - ordinary and preference shares 15% Unquoted - liquidity funds 6% Net current assets 30% 100% Sector % of Portfolio Structured Products 55% Unquoted - Qualifying Investments 37% Unquoted - other non-Qualifying Investments 8% 100% Book % of Nature of Cost Valuation Net % of Company Business Â£'000 Â£'000 Assets Portfolio Structured Products Investec Bank plc Banking 328 448 25% 36% Abbey National Treasury Services Banking 200 239 13% 19% Total Structured Products 528 687 38% 55% Qualifying Investments Human Race Group Limited Leisure 150 150 9% 12% Safe depository Metropolitan Limited services 90 96 5% 8% Terrain Energy Limited Onshore oil and gas production 90 93 5% 7% Venn Life Sciences Clinical Holdings plc research 80 80 4% 6% E-commerce Secure Electrans Limited security 50 50 3% 4% Publishing and Heritage House Limited media services 64 - - - 524 469 26% 37% Other non-Qualifying Investments Fidelity Liquidity Fund Liquidity fund 101 101 6% 8% Scottish Widows Liquidity Fund Liquidity fund 1 1 - - Total Other non-Qualifying Investments 102 102 6% 8% Total Investments 1,154 1,258 70% 100% Net Current Assets less Creditors due after one year 547 30% Net Assets 1,805 100% Board of Directors The Board comprises four non-executive Directors, three of whom are independent of the Investment Managers. John Glencross is Chief Executive and a director of Calculus Capital, and is accordingly not independent. The Board has substantial experience of venture capital businesses and overall responsibility for the Company's affairs, including determining the investment policy of the Company. Michael O'Higgins - Chairman* Kate Cornish-Bowden* John Glencross Steve Meeks * * independent of the Investment Managers Investment Managers Calculus Capital Calculus Capital Limited is the Venture Capital Investments portfolio manager (VCT Qualifying Investments). Investec Structured Products Investec Structured Products (a trading name of Investec Bank plc) is the Structured Products portfolio manager (non VCT Qualifying Investments). EXTRACTS FROM THE DIRECTORS' REPORT Business Review Activities and status The Company is registered as a public limited company and incorporated in England and Wales with registration number 07142153. Its shares have a premium listing and are traded on the London Stock Exchange. The Company carries on business as a venture capital trust ("VCT") and its affairs are conducted in a manner to satisfy the conditions to enable it to obtain approval as a VCT under sections 258-332 of the Income Tax Act 2007 ("ITA 2007"). Details of the Company's investment policy are set out below. On incorporation, the Company was an investment company under section 833 of the Companies Act 2006. On 18 May 2011 investment company status was revoked by the Company. This was done in order to allow the Company to pay dividends to shareholders using the special reserve (a distributable capital reserve), which had been created on the cancellation of the share premium account on 20 October 2010. This Business Review should be read in conjunction with the Chairman's Statement, the Investment Managers' Reviews and the portfolio analysis above. Performance The Board reviews performance by reference to a number of key performance indicators ("KPIs") and considers that the most relevant KPIs are those that communicate the financial performance and strength of the Company as a whole: - total return per share - net asset value per share - share price and discount/premium to net asset value Further KPIs are those which show the Company's position in relation to the VCT tests which it is required to meet in order to maintain its VCT status. These tests are set out in the full Annual Report. The Company has received provisional approval as a VCT from HM Revenue & Customs. The financial performance of the Company is set out below: 28 February 29 February 2013 2012 Ordinary Share Fund Fair value portfolio valuation Â£4.5m Â£4.4m Total return/(loss) (after tax) Â£309,000 (Â£80,000) Total return/(loss) per ordinary share 6.5p (1.7)p NAV per ordinary share 96.3p 95.0p Ordinary share price 92.5p 97.5p Ordinary share price (discount)/ premium to NAV (3.9)% 2.6% C Share Fund Fair value portfolio valuation Â£1.3m Â£1.7m Total return/(loss) (after tax) Â£104,000 (Â£33,000) Total return/loss per C share 5.4p (1.7)p NAV per C share 93.5p 92.6p C share price 90.0p 94.0p C share price (discount)/premium to NAV (3.7)% 1.5% To maintain its qualifying status as a VCT, each of the Ordinary Share Fund and the C Share Fund needs to be at least 70 per cent. invested in Qualifying Investments by the end of the relevant third accounting period. The relevant date for the ordinary shares was 28 February 2013, at which date the qualifying percentage was 71.4 per cent. The relevant date for the C shares is 28 February 2014; the qualifying percentage for the C shares as at 28 February 2013 was 30.8 per cent. Dividend The Directors are recommending final dividends of 5.25p per ordinary share and 4.5p per C share. Subject to approval by shareholders at the Annual General Meeting, these dividends will be paid on 24 July 2013 to shareholders on the register on 31 May 2013. Share capital At the year end and at the date of this report, the issued share capital comprised 4,738,463 ordinary shares (representing 71.05 per cent. of total voting rights) and 1,931,095 C shares (representing 28.95 per cent. of total voting rights). No shares were held in Treasury. The ordinary shares and C shares have equal voting rights, and at general meetings of the Company, holders are entitled to one vote on a show of hands and on a poll to one vote for every share held. There are no restrictions concerning the transfer of securities in the Company; no restrictions on voting rights; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements to which the Company is party that might affect its control following a successful takeover bid. The authority to issue or buy back the Company's shares and amendment of the Company's Articles of Association require a relevant resolution to be passed by shareholders. At the Annual General Meeting held on 17 July 2012, the Directors were granted authority to allot shares up to an aggregate nominal amount of Â£206,700, and this authority will expire at the Annual General Meeting to be held in 2017. The Directors were also authorised to issue shares for cash (without rights of pre-emption applying) (i) up to Â£100,000 of each class of share by way of offer for subscription and (ii) up to 10 per cent. of each class of share for general purposes, and to buy back up to 14.99 per cent. of each of the ordinary and C shares in issue. The Board's proposals for the renewal of these authorities are detailed in the full Annual Report. Investment policy At launch, it was intended that approximately 75 per cent. of the monies raised by the Company would be invested within 60 days in a portfolio of Structured Products, the balance being used to meet initial costs and invested in cash or near cash assets (as directed by the Board) and will be available to invest in Venture Capital Investments and to fund ongoing expenses. In order to qualify as a VCT, at least 70 per cent. of the Company's assets must be invested in Venture Capital Investments within approximately three years. Thus there will be a phased reduction in the Structured Products portfolio and corresponding build up in the portfolio of Venture Capital Investments to achieve and maintain this 70 per cent. threshold along the following lines: Average Exposure per Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6+ Structured Products and cash/near cash 85% 75% 35% 25% 25% 0% Venture Capital Investments 15% 25% 65% 75% 75% 100% Note: the investment allocation set out above is only an estimate and the actual allocation will depend on market conditions, the level of opportunities and the comparative rates of returns available from Venture Capital Investments and Structured Products. The combination of Venture Capital Investments and the Structured Products will be designed to produce ongoing capital gains and income that will be sufficient to maximise both annual dividends for the first five years from funds being raised and an interim return by an interim return date by way of a special dividend or cash tender offer for shares. After the interim return date, unless Investec Structured Products is requested to make further investments in Structured Products, the relevant fund will be left with a portfolio of Venture Capital Investments managed by Calculus Capital with a view to maximising long-term returns. Such returns will then be dependent, both in terms of amount and timing, on the performance of the Venture Capital Investments, but with the intention to source exits as soon as possible. The portfolio of Structured Products will be constructed with different issuers and differing maturity periods to minimise risk and create a diversified portfolio. The Structured Products may also be collateralised whereby notes are issued by one issuer (such as Investec Bank plc) but with the underlying investment risk being linked to more than one issuer (as approved by the Board) reducing insolvency risks, creating diversity and potentially increasing returns for shareholders. If the Company invests in a collateralised Structured Product, the amount of the exposure to an underlying issuer will be taken into account when reviewing investments for diversification. The maximum exposure to any one issuer (or underlying issuer) will be limited, in aggregate, to 15 per cent. of the assets of the Company at the time of investment. Structured Products can and may be sold before their maturity date if required for the purposes of making Venture Capital Investments and Investec Structured Products has agreed to make a market in the Structured Products, should this be required by the Company. The intention for the portfolio of Venture Capital Investments is to build a diverse portfolio of primarily established unquoted companies across different industries. In order to generate income and where it is felt it would enhance shareholder return, investments may be structured to include loan stock and/or redeemable preference shares as well as ordinary equity. It is intended that the amount invested in any one sector and any one company will be no more than approximately 20 per cent. and 10 per cent. respectively of the Venture Capital Investments portfolio (in both cases at the date of the investment). The Board and its Managers review the portfolio of investments on a regular basis to assess asset allocation and the need to realise investments to meet the Company's objectives or maintain VCT status. Where investment opportunities arise in one asset class which conflicts with assets held or opportunities in another asset class, the Board will make the investment/divestment decision. Under its Articles, the Company has the ability to borrow a maximum amount equal to 25 per cent. of the gross assets of the Company. The Board will consider borrowing if it is in the shareholders' interests to do so. In particular, because the Board intends to minimise cash balances, the Company may borrow on a short-term to medium-term basis (in particular, against Structured Products) for cashflow purposes and to facilitate the payment of dividends and expenses in the early years. The Company will not vary the investment objective or the investment policy, to any material extent, without the approval of shareholders. The Company intends to be a generalist VCT investing in a wide range of sectors. Risk diversification The Board controls the overall risk of the Company. Calculus Capital will ensure the Company has exposure to a diversified range of Venture Capital Investments from different sectors. Investec Structured Products will ensure the Company has exposure to a diversified range of Structured Products. The Board believes that investment in these two asset classes provides further diversification. Co-investment policy Calculus Capital has a co-investment policy between its various funds whereby investment allocations are generally offered to each party in proportion to their respective funds available for investment, subject to: (i) a priority being given to any of the funds in order to maintain their tax status; (ii) the time horizon of the investment opportunity being compatible with the exit strategy of each fund; and (iii) the risk/reward profile of the investment opportunity being compatible with the target return for each fund. The terms of the investments may differ between the parties. In the event of any conflicts between the parties, the issues will be resolved at the discretion of the independent directors, designated members and committees. It is not intended that the Company will co-invest with directors or members of the Calculus Capital management team (including family members). In respect of the Venture Capital Investments, funds attributable to separate share classes will co-invest (i.e. pro rata allocation per fund, unless one of the funds has a pre-existing investment where the incumbent fund will have priority, or as otherwise approved by the Board). Any potential conflict of interest arising will be resolved on a basis which the Board believes to be equitable and in the best interests of all shareholders. A co-investment policy is not considered necessary for the Structured Products. Policy on Qualifying Investments Calculus Capital follows a disciplined investment approach which focuses on investing in more mature unquoted companies where the risk of capital loss is reduced and prospects for exit enhanced, typically by the cash generative characteristics and/or strong asset bases of the investee companies. Calculus Capital, therefore, intends to: â€¢ invest in a diversified portfolio from a range of different sectors; â€¢ focus on companies which are cash generative and/or with a strong asset base; â€¢ structure investments to include loans and preference shares where it is felt this would enhance shareholder return; â€¢ invest in companies which operate in sectors with a high degree of predictability and a defensible market position; and â€¢ invest in companies which can benefit both from the capital provided by Calculus Capital but also from the many years of operating and financial experience of the Calculus Capital team. It is intended that the Venture Capital Investments portfolio will be spread across a number of investments and the amount invested in any one sector and any one company will be no more than approximately 20 per cent. and 10 per cent. respectively (in both cases at the date of investment). VCT regulation The Company's investment policy is designed to ensure that it will meet, and continue to meet, the requirements for approved VCT status from HM Revenue & Customs. Amongst other conditions, the Company may not invest more than 15 per cent. (by value at the time of investment) of its investments in a single company and must have at least 70 per cent. by value of its investments throughout the period in shares or securities in qualifying holdings, of which 30 per cent. by value must be ordinary shares which carry no preferential rights ("eligible shares"). For funds raised from 6 April 2011, the requirement for 30 per cent. to be invested in eligible shares was increased to 70 per cent. Principal risks and uncertainties facing the Company The Company is exposed to a variety of risks. The principal financial risks and the Company's policies for managing these risks and the policy and practice with regard to financial instruments are summarised in note 15 to the Accounts. The Board has also identified the following additional risks and uncertainties: Loss of approval as a VCT and other regulatory breaches The Company has received provisional approval as a VCT under ITA 2007. Failure to meet and maintain the qualifying requirements for VCT status could result in the loss of tax reliefs previously obtained, resulting in adverse tax consequences for investors, including a requirement to repay the income tax relief obtained, and could also cause the Company to lose its exemption from corporation tax on chargeable gains. The Board receives regular updates from the Managers and financial information is produced on a monthly basis. The Board has appointed an independent adviser to monitor and advise on the Company's compliance with the VCT rules. The Company is subject to compliance with the Companies Act 2006, the rules of the UK Listing Authority and ITA 2007. A breach of any of these could lead to suspension of the listing of the Company's shares on the London Stock Exchange and/or financial penalties, with the resulting reputational implications. Venture Capital Investments There are restrictions regarding the type of companies in which the Company may invest and there is no guarantee that suitable investment opportunities will be identified. Investment in unquoted companies, AIM-traded and PLUS Markets-traded companies involves a higher degree of risk than investment in companies traded on the main market of the London Stock Exchange. These companies may not be freely marketable and realisations of such investments can be difficult and can take a considerable amount of time. There may also be constraints imposed upon the Company with respect to realisations in order to maintain its VCT status which may restrict the Company's ability to obtain the maximum value from its investments. Calculus Capital has been appointed to manage the Qualifying Investments portfolio, and has extensive experience of investing in this type of investment. Regular reports are provided to the Board. Risks attaching to investment in Structured Products Structured Products are subject to market fluctuations and the Company may lose some or all of its investment. In the event of a long-term decline in the FTSE 100 Index, or, in the case of the C Share Fund, in such other index as this fund may be invested, there will be no gains from the Structured Products. In the event of a fall in the relevant index of more than 50 per cent. at any time during the Structured Product term, and where the Final Index Level is below the Initial Index Level, there will be losses on the Structured Products. There may not be a liquid market in the Structured Products and there may never be two competitive market makers, making it difficult for the Company to realise its investment. Risk is increased further where there is a single market maker who is also the issuer of the Structured Product. Investec Structured Products has agreed to make a market in the Structured Products, should this be required by the Company. Factors which may influence the market value of Structured Products include interest rates, changes in the method of calculating the relevant underlying index from time to time and market expectations regarding the future performance of the relevant underlying index, its composition and such Structured Products. Investec Structured Products has been appointed to manage the Structured Products portfolio for its expertise in these types of financial products. Restrictions have been agreed with Investec Structured Products relating to approved counterparties and maximum exposure to any one counterparty. Liquidity/marketability risk Due to the holding period required to maintain up-front tax reliefs, there is a limited secondary market for VCT shares and investors may therefore find it difficult to realise their investments. As a result, the market price of the shares may not fully reflect, and will tend to be at a discount to, the underlying net asset value. The level of discount may also be exacerbated by the availability of income tax relief on the issue of new VCT shares. The Board recognises this difficulty, and has taken powers to buy back shares, which could be used to enable investors to realise investments. Changes to legislation/taxation Changes in legislation or tax rates concerning VCTs in general, and Venture Capital Investments and qualifying trades in particular, may limit the number of new Venture Capital Investment opportunities, and thereby adversely affect the ability of the Company to achieve or maintain VCT status, and/or reduce the level of returns which would otherwise have been achievable. Engagement of third party advisers The Company has no employees and relies on services provided by third parties. The Board has appointed Calculus Capital as Investment Manager of the Qualifying Investments portfolio and Investec Structured Products as Investment Manager of the Structured Products portfolio. Capita Sinclair Henderson Limited provides administration, accounting and company secretarial services, and Investec Wealth & Investments acts as custodian. C shares versus ordinary shares The assets relating to the C shares are managed and accounted for separately from the assets attributable to the ordinary shares. However, a number of company regulations and VCT requirements are assessed at company level and, therefore, the performance of one fund may impact adversely on the other. The Board monitors the performance of each separate fund as well as requirements at a company level to reduce the risk of this occurring. Future developments As set out in the Chairman's Statement, the Directors believe that the Company's strategy is proving effective. The success of the Structured Products portfolio thus far provides the basis for dividend returns to shareholders whilst enabling the construction of a portfolio of companies to generate longer-term returns. Calculus Capital continues to find that there are a number of attractive investment opportunities available to the Company. Corporate social responsibility The Company has no employees and the Board is comprised entirely of non-executive Directors. Day-to-day management of the Company's business is delegated to the Investment Managers (details of the respective management agreements are set out in the full Annual Report) and the Company itself has no environmental, social or community policies. In carrying out its activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly. GOING CONCERN After making enquiries, in view of the liquidity of the Structured Products portfolio, and having reviewed the portfolio, balance sheet and projected income and expenditure for the next twelve months, the Directors have a reasonable expectation that the Company has adequate resources to continue in operation for the foreseeable future. The Directors have therefore adopted the going concern basis in preparing the Accounts. The full Annual Report and Accounts contains the following statements regarding responsibility for the Accounts. Directors' Responsibilities Statement Statement of Directors' Responsibilities in respect of the Annual Report and the Accounts The Directors are responsible for preparing the Annual 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 they have elected 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: â€¢ select suitable accounting policies and then apply them consistently; â€¢ make judgments and accounting estimates that are reasonable and prudent; â€¢ state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Accounts; and â€¢ 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 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. Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report (including Business Review), Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority. The Accounts are published on the www.calculuscapital.com website, which is a website maintained by one of the Company's Investment Managers, Calculus Capital Limited. The maintenance and integrity of this website 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 Auditor accepts 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 jurisdiction. We confirm that to the best of our knowledge: â€¢ the Accounts, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and â€¢ the Annual Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces. On behalf of the Board Michael O'Higgins Chairman 22 May 2013 NON-STATUTORY ACCOUNTS The financial information set out below does not constitute the Company's statutory accounts for the year ended 28 February 2013 and the year ended 29 February 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies, and those for 2013 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (ii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts at www.calculuscapital.com. Income Statement for the year ended 28 February 2013 Year Ended 28 February 2013 Year Ended 29 February 2012 Revenue Capital Revenue Capital Return Return Total Return Return Total Note Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Ordinary Share Fund Investment holding (losses)/gains 8 - (3) (3) - 26 26 Gain on disposal of investments 8 - 391 391 - - - Income 2 71 - 71 48 - 48 Investment management fee 3 (11) (33) (44) (12) (35) (47) Other operating expenses 4 (106) - (106) (107) - (107) (Loss)/profit on ordinary activities before tax (46) 355 309 (71) (9) (80) Taxation on ordinary activities 5 - - - - - - (Loss)/profit for the year (46) 355 309 (71) (9) (80) Basic and diluted earnings per ordinary share 7 (1.0)p 7.5p 6.5p (1.5)p (0.2)p (1.7)p C Share Fund Investment holding gains 8 - 80 80 - 24 24 Gain on disposal of investments 8 - 72 72 - - - Income 2 13 - 13 7 - 7 Investment management fee 3 (4) (13) (17) (4) (12) (16) Other operating expenses 4 (44) - (44) (48) - (48) (Loss)/profit on ordinary activities before tax (35) 139 104 (45) 12 (33) Taxation on ordinary activities 5 - - - - - - (Loss)/profit for the year (35) 139 104 (45) (12) (33) Basic and diluted earnings per C share 7 (1.8)p 7.2p 5.4p (2.3)p 0.6p (1.7)p The total column of these statements represents the Income Statement of the Ordinary Share Fund and C Share Fund. The supplementary revenue return and capital return columns are both prepared in accordance with the Association of Investment Companies' ("AIC") Statement of Recommended Practice ("SORP"). No operations were acquired or discontinued during the year. All items in the above statement derive from continuing operations. There were no recognised gains or losses other than those passing through the Income Statement. The notes form an integral part of these Accounts. Year Ended 28 February 2013 Year Ended 29 February 2012 Revenue Capital Revenue Capital Return Return Total Return Return Total Note Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Total Investment holding gains 8 - 77 77 - 50 50 Gain on disposal of investments 8 - 463 463 - - - Income 2 84 - 84 55 - 55 Investment management fee 3 (15) (46) (61) (16) (47) (63) Other operating expenses 4 (150) - (150) (155) - (155) (Loss)/profit on ordinary activities before tax (81) 494 413 (116) 3 (113) Taxation on ordinary activities 5 - - - - - - (Loss)/profit for the year (81) 494 413 (116) 3 (113) Basic and diluted earnings per ordinary share 7 (1.0)p 7.5p 6.5p (1.5)p (0.2)p (1.7)p Basic and diluted earnings per C share 7 (1.8)p 7.2p 5.4p (2.3)p 0.6p (1.7)p The total column of this statement represents the Company's Income Statement. The supplementary revenue return and capital return columns are both prepared in accordance with the AIC's SORP. No operations were acquired or discontinued during the year. All items in the above statement derive from continuing operations. There were no recognised gains or losses other than those passing through the Income Statement. The notes form an integral part of these Accounts. Reconciliation of Movements in Shareholders' Funds for the year ended 28 February 2013 Share Capital Capital Share Premium Special Reserve Reserve Revenue Capital Account Reserve Realised Unrealised Reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Ordinary Share Fund For the year ended 28 February 2013 1 March 2012 47 - 4,226 (61) 472 (183) 4,501 Change in accrual of IFA trail commission - - 1 - - - 1 Investment holding losses - - - - (3) - (3) Gain on disposal of investments - - - 391 - - 391 Management fee allocated to capital - - - (33) - - (33) Revenue return on ordinary activities after tax - - - - - (46) (46) Dividend paid - - (249) - - - (249) Closing balance 47 - 3,978 297 469 (229) 4,562 For the year ended 29 February 2012 1 March 2011 47 752 3,729 (26) 446 (112) 4,836 Cancellation of share premium - (747) 747 - - - - Expenses of share issue - (5) (1) - - - (6) Investment holding gains - - - - 26 - 26 Management fee allocated to capital - - - (35) - - (35) Revenue return on ordinary activities after tax - - - - - (71) (71) Dividend paid - - (249) - - - (249) 29 February 2012 47 - 4,226 (61) 472 (183) 4,501 The notes form an integral part of these Accounts. Share Capital Capital Share Premium Special Reserve Reserve Revenue Capital Account Reserve Realised Unrealised Reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 C Share Fund For the year ended 28 February 2013 1 March 2012 19 - 1,802 (12) 24 (45) 1,788 Investment holding gains - - - - 80 - 80 Gain on disposal of investments - - - 72 - - 72 Management fee allocated to capital - - - (13) - - (13) Revenue return on ordinary activities after tax - - - - - (35) (35) Dividend paid - - (87) - - - (87) Closing balance 19 - 1,715 47 104 (80) 1,805 For the year ended 29 February 2012 1 March 2011 - - - - - - - Increase in share capital in issue 19 1,912 - - - - 1,931 Cancellation of share premium - (1,802) 1,802 - - - - Expenses of share issue - (110) - - - - (110) Investment holding gains - - - - 24 - 24 Management fee allocated to capital - - - (12) - - (12) Revenue return on ordinary activities - - - - - (45) (45) after tax 29 February 2012 19 - 1,802 (12) 24 (45) 1,788 The notes form an integral part of these Accounts. Share Capital Capital Share Premium Special Reserve Reserve Revenue Capital Account Reserve Realised Unrealised Reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Total For the year ended 28 February 2013 1 March 2012 66 - 6,028 (73) 496 (228) 6,289 Change in accrual of IFA trail commission - - 1 - - - 1 Investment holding gains - - - - 77 - 77 Gain on disposal of investments - - - 463 - - 463 Management fee allocated to capital - - - (46) - - (46) Revenue return on ordinary activities after tax - - - - - (81) (81) Dividend paid - - (336) - - - (336) Closing balance 66 - 5,693 344 573 (309) 6,367 For the year ended 29 February 2012 1 March 2011 47 752 3,729 (26) 446 (112) 4,836 Increase in 19 1,912 - - - - 1,931 share capital in issue Cancellation of - (2,549) 2,549 - - - - share premium Expenses of - (115) (1) - - - (116) share issue Investment - - - - 50 - 50 holding gains Management fee - - - (47) - - (47) allocated to capital Revenue return - - - - - (116) (116) on ordinary activities after tax Dividend paid - - (249) - - - (249) 29 February 66 - 6,028 (73) 496 (228) 6,289 2012 The notes form an integral part of these Accounts. Balance Sheet as at 28 February 2013 28 February 29 February 2013 2012 Note Â£'000 Â£'000 Ordinary Share Fund Fixed assets Investments 8 4,545 4,435 Current assets Debtors 9 110 119 Cash at bank and on deposit 4 28 114 147 Creditors: amounts falling due within one year Creditors 10 (87) (66) Net current assets 27 81 Non-current liabilities IFA trail commission (10) (15) Total net assets 4,562 4,501 Capital and reserves Called-up share capital 11 47 47 Share premium account - - Special reserve 3,978 4,226 Capital reserve - realised 297 (61) Capital reserve - unrealised 469 472 Revenue reserve (229) (183) Equity shareholders' funds 4,562 4,501 Net asset value per ordinary share - basic 12 96.3p 95.0p The notes form an integral part of these Accounts. 28 February 29 February 2013 2012 Note Â£'000 Â£'000 C Share Fund Fixed assets Investments 8 1,258 1,691 Current assets Debtors 9 35 51 Cash at bank and on deposit 556 104 591 155 Creditors: amounts falling due within one year Creditors 10 (36) (48) Net current assets 555 107 Non-current liabilities IFA trail commission (8) (10) Net assets 1,805 1,788 Capital and reserves Called-up share capital 11 19 19 Share premium account - - Special reserve 1,715 1,802 Capital reserve - realised 47 (12) Capital reserve - unrealised 104 24 Revenue reserve (80) (45) Equity shareholders' funds 1,805 1,788 Net asset value per C share - basic 12 93.5p 92.6p The notes form an integral part of these Accounts. 28 February 29 February 2013 2012 Note Â£'000 Â£'000 Total Fixed assets Investments 8 5,803 6,126 Current assets Debtors 9 145 170 Cash at bank and on deposit 560 132 705 302 Creditors: amounts falling due within one year Creditors 10 (123) (114) Net current assets 582 188 Non-current liabilities IFA trail commission (18) (25) Total net assets 6,367 6,289 Capital and reserves Called-up share capital 11 66 66 Share premium account - - Special reserve 5,693 6,028 Capital reserve - realised 344 (73) Capital reserve - unrealised 573 496 Revenue reserve (309) (228) Equity shareholders' funds 6,367 6,289 Net asset value per ordinary share - basic 12 96.3p 95.0p Net asset value per C share - basic 12 93.5p 92.6p These Accounts were approved by the Board of Directors of Investec Structured Products Calculus VCT plc and were authorised for issue on 22 May 2013 and were signed on its behalf by: Michael O'Higgins Chairman Registered No. 07142153 England & Wales The notes form an integral part of these Accounts. Cash Flow Statement for the year ended 28 February 2013 28 February 29 February 2013 2012 Note Â£'000 Â£'000 Ordinary Share Fund Operating activities Investment income received 56 24 Deposit interest received 2 2 Investment management fees (22) (46) Other cash payments (85) (104) Cash expended from operations 13 (49) (124) Cash flow from investing activities Purchase of investments (1,700) (755) Sale of investments 1,978 855 Net cash flow from investing activities 278 80 Net cash flow before financing 229 (44) Cash flow from financing activities Expenses of share issues (4) (5) Net cash flow from financing activities (4) (5) Equity dividend paid (249) (249) Decrease in cash at bank and on deposit (24) (298) The notes form an integral part of these Accounts. Year Ended Year Ended 28 February 29 February 2013 2012 Note Â£'000 Â£'000 C Share Fund Operating activities Investment income received 8 4 Deposit interest received - - Investment management fees (9) (12) Other cash payments (20) (79) Cash expended from operations 13 (21) (87) Cash flow from investing activities Purchase of investments (722) (2,594) Sale of investments 1,307 928 Net cash flow from investing activities 585 (1,666) Net cash flow before financing 564 (1,753) Cash flow from financing activities Shares issued - 1,931 Expenses of share issues (25) (74) Net cash flow from financing activities (25) 1,857 Equity dividend paid (87) - Increase in cash at bank and on deposit 452 104 The notes form an integral part of these Accounts. Year Ended Year Ended 28 February 29 February 2013 2012 Note Â£'000 Â£'000 Total Operating activities Investment income received 64 28 Deposit interest received 2 2 Investment management fees (31) (58) Other cash payments (105) (183) Cash expended from operations 13 (70) (211) Cash flow from investing activities Purchase of investments (2,422) (3,369) Sale of investments 3,285 1,783 Net cash flow from investing activities 863 (1,586) Net cash flow before financing 793 (1,797) Cash flow from financing activities Shares issued - 1,931 Expenses of share issues (29) (79) Net cash flow from financing activities (29) 1,852 Equity dividend paid (336) (249) Increase/(decrease) in cash at bank and on deposit 428 (194) The notes form an integral part of these Accounts. NOTES TO THE ACCOUNTS 1. Accounting Policies Basis of accounting These Accounts cover the 12 month period 1 March 2012 to 28 February 2013, and have been prepared under the historical cost convention, except for the valuation of financial assets at fair value through profit or loss, in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") and the Statement of Recommended Practice, Financial Statements of Investment Trust Companies and Venture Capital Trusts ("the SORP") issued by the Association of Investment Trust Companies ("AIC") in January 2009. These Accounts are prepared on the going concern basis. In determining the analysis of total income and expenses as between capital return and revenue return, the Directors have followed the guidance contained in the AIC SORP, as revised in 2009, and on the assumption that the Company maintains VCT status. Expenses are allocated between the Ordinary Share Fund and the C Share Fund on the basis of the ratio of the number of shares held by the respective fund to the total number of ordinary and C shares where the expense is a shared expense. Where expenses are not shared in this proportion, they are applied on the basis of the most accurate method. The Ordinary Share Fund and C Share Fund share bank accounts. Each funds' share of the bank accounts is based on actual receipts and payments. These cash flows are allocated according to the accounting policy for income and expenses respectively. The Company has not prepared consolidated accounts and has accounted for its subsidiary, Investec SPV Limited, as an investment on the grounds that its results are immaterial to the Company. The Company's Accounts are presented in Sterling. Investments at fair value through profit or loss The Company aims to invest in portfolios of Structured Products and Venture Capital Investments that will provide sufficient total returns to allow the Company to pay annual dividends and provide long-term capital returns for investors. As a result, all investments held by the Company are designated, upon initial recognition, as held at fair value through profit or loss, in accordance with Financial Reporting Standard 26 'Financial Instruments: Recognition and Measurement' and the AIC SORP. 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 portfolio is provided internally on this basis to the Board. Fair value is the amount for which an asset can be exchanged between knowledgeable, willing parties in an arm's length transaction. Investments held at fair value through profit or loss are initially recognised at cost, 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. Subsequently, investments are measured at fair value, with gains and losses on investments recognised in the Income Statement and allocated to capital. All purchases and sales of investments are accounted for on trade date basis. For investments actively traded in organised financial markets, fair value is generally determined by reference to quoted market bid, or last, prices, depending on the convention of the exchange on which the investment is quoted, at the close of business on the Balance Sheet date. Structured Products are valued by reference to the FTSE 100 Index, with midprices for the Structured Products provided by the product issuers. An adjustment is made to these prices to take into account any bid/offer spreads prevalent in the market at each valuation date. These spreads are either determined by the issuer or recommended by the Structured Products Manager, Investec Structured Products (a trading name of Investec Bank plc). 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 International Private Equity and Venture Capital Association (''IPEVCA") guidelines. Primary indicators of fair value are derived from earnings multiples, recent arm's length market transactions, net assets or, where appropriate, at cost for recent investments or the discounted cash flow valuation as at the previous reporting date. Income Dividends receivable on equity shares are recognised as revenue on the date on which the shares or units are marked as ex-dividend. Where no ex-dividend date is available, the revenue is recognised when the Company's right to receive it has been established. 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. The gains and losses arising on investments in Structured Products are allocated between revenue and capital according to the nature of each Structured Product. This is dependent on the extent to which the return on the Structured Product is capital or revenue based. Other revenue is credited to the revenue column of the Income Statement when the Company's right to receive the revenue has been established. Expenses All expenses are accounted for on an accruals basis. Expenses are charged to the Income Statement as follows: â€¢ expenses, except as stated below, are charged to the revenue column of the Income Statement; â€¢ expenses incurred on the acquisition or disposal of an investment are taken to the capital column of the Income Statement; â€¢ expenses are charged to the capital column of 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 of the Income Statement, being in line with the Board's expected long-term split of returns, in the form of capital gains and revenue respectively, from the investment portfolio of the Company; and â€¢ expenses associated with the issue of shares are deducted from the share premium account. Annual IFA trail commission covering a five year period since share allotment has been provided for in the Accounts as, due to the nature of the Company, it is probable that this will be payable. The commission is apportioned between current and non-current liabilities. Expenses incurred by the Company in excess of the agreed cap, currently 3 per cent. of the gross amount raised from the offer for subscription of ordinary shares and C shares respectively for the 2009/2010, 2010/2011 and 2011/2012 tax years (excluding irrecoverable VAT, annual trail commission and performance incentive fees), can be clawed back from Investec Structured Products until the Ordinary Share Interim Return Date. Any clawback is treated as a credit against the expenses of the Company. Investment management and performance fees Calculus Capital, as Investment Manager of the VCT qualifying portfolio, receives an annual investment management fee of an amount equivalent to 1.0 per cent. of the net assets of the respective share fund. Investec Structured Products, as Investment Manager of the Structured Products portfolio, does not receive any annual management fees from the Company. Investec Structured Products is entitled to an arrangement fee from the providers of Structured Products as detailed in note 17. The Investment Managers will each receive a performance incentive fee payable in cash of an amount equal to 10 per cent. of dividends and distributions paid (including the relevant distribution being offered) to holders of ordinary shares over and above 105 pence per ordinary share (this being a 50 per cent. return on an initial net investment of 70 pence per ordinary share taking into account upfront income tax relief) provided holders of ordinary shares have received or been offered an interim return of at least 70 pence per share for payment on or before 14 December 2015. Such performance incentive fees will be paid within 10 business days of the date of payment of the relevant dividend or distribution. For the C Shares Fund, Investec Structured Products and Calculus Capital will be entitled to performance incentive fees as set out below: * 10 per cent. of C Shareholder Proceeds in excess of 105p up to and including Proceeds of 115p per C share, such amount to be paid within ten business days of the date of payment of the relevant dividend or distribution pursuant to which a return of 115p per C share is satisfied; and * 10 per cent. of C Shareholder Proceeds in excess of 115p per C share, such amounts to be paid within ten business days of the date of payment of the relevant dividend or distribution; provided in each case that C shareholders have received or been offered the C Share Interim Return of at least 70p per C share on or before 14 March 2017 and at least a further 45p per C share having being received or offered for payment on or before the 14 March 2019. Capital reserve The capital return component of the return for the year is taken to the non-distributable capital reserves within the Reconciliation of Movements in Shareholders' Funds. Special reserve The special reserve was created by the cancellation of the Ordinary Share Fund's share premium account on 20 October 2010. A further cancellation of the share premium account occurred on 23 November 2011 for both the Ordinary Share Fund and C Share Fund. The special reserve is a distributable reserve created to be used by the Company inter alia to write off losses, fund market purchases of its own ordinary and C shares, make distributions and/or for other corporate purposes. The Company was formerly an investment company under section 833 of the Companies Act 2006. On 18 May 2011 investment company status was revoked by the Company. This was done in order to allow the Company to pay dividends to shareholders using the special reserve. Taxation 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. Dividends Dividends to shareholders are accounted for in the period 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. 2. Income Year Ended Year Ended 28 February 29 February 2013 2012 Â£'000 Â£'000 Ordinary Share Fund UK unfranked loan stock interest 68 44 Liquidity fund interest 1 2 Bank interest 2 2 71 48 Total income comprises: Interest 71 48 71 48 C Share Fund UK unfranked loan stock interest 12 4 Liquidity fund interest 1 3 13 7 Total income comprises: Interest 13 7 13 7 Total UK unfranked loan stock interest 80 48 Liquidity fund interest 2 5 Bank interest 2 2 84 55 Total income comprises: Interest 84 55 84 55 3. Management Fee Year Ended Year Ended 28 February 2013 29 February 2012 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Ordinary Share Fund Investment management fee 11 33 44 12 35 47 C Share Fund Investment management fee 4 13 17 4 12 16 Total Investment management fee 15 46 61 16 47 63 No performance fee was paid during the year. 4. Other Expenses Year Ended Year Ended 28 February 29 February 2013 2012 Â£'000 Â£'000 Ordinary Share Fund Directors' fees 47 60 Secretarial and accounting fees 59 57 Auditor's remuneration - audit services 15 14 - taxation compliance services 3 3 Other 44 54 Clawback of expenses in excess of 3% cap (62) (81) 106 107 C Share Fund Directors' fees 19 20 Secretarial and accounting fees 24 19 Auditor's remuneration - audit services 6 5 - taxation compliance services 1 1 Other 22 52 Clawback of expenses in excess of 3% cap (28) (49) 44 48 Year Ended Year Ended 28 February 29 February 2013 2012 Â£'000 Â£'000 Total Directors' fees 66 80 Secretarial and accounting fees 83 76 Auditor's remuneration - audit services 21 19 - taxation compliance services 4 4 Other 66 106 Clawback of expenses in excess of 3% cap (90) (130) 150 155 Further details of Directors' fees can be found in the Directors' Remuneration Report in the full Annual Report. 5. Taxation Year Ended 28 February Year Ended 29 February 2013 2012 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Ordinary Share Fund (Loss)/profit on ordinary activities before tax (46) 355 309 (71) (9) (80) Theoretical tax at UK Corporation Tax rate of 24.2% (2012: 26.5%) (11) 86 75 (19) (2) (21) Timing differences: Loss not recognised, carried forward 11 8 19 19 9 28 Effects of non-taxable gains - (94) (94) - (7) (7) Tax on (loss)/profit for the period - - - - - - C Share Fund (Loss)/profit on ordinary activities before tax (35) 139 104 (45) 12 (33) Theoretical tax at UK Corporation Tax rate of 24.2% (2012: 26.5%) (9) 34 25 (12) 3 (9) Timing differences: Loss not recognised, carried forward 9 3 12 12 3 15 Effects of non-taxable gains - (37) (37) - (6) (6) Tax on (loss)/profit for the period - - - - - - Total (Loss)/profit on ordinary activities before tax (81) 494 413 (112) 420 308 Theoretical tax at UK Corporation Tax rate of 24.2% (2012: 26.5%) (20) 120 100 (31) 118 87 Timing differences: Loss not recognised, carried forward 20 11 31 31 31 Effects of non-taxable gains - (131) (131) - (118) (118) Tax on (loss)/profit for the period - - - - - - At 28 February 2013, the Company had Â£428,064 (29 February 2012: Â£298,783) of excess management expenses to carry forward against future taxable profits. The Company's deferred tax asset of Â£103,591 (29 February 2012: Â£73,202) has not been recognised due to the fact that it is unlikely the excess management expenses will be set off in the foreseeable future. 6. Dividends Year Year Ended Ended 28 29 February February 2013 2012 Â£'000 Â£'000 Ordinary Share Fund Declared and paid: 5.25p per ordinary share in respect of the year ended 29 February 2012 (2012: 5.25p) 249 249 Proposed final dividend: 5.25p per ordinary share in respect of the year ended 28 February 2013 249 249 C Share Fund Declared and paid: 4.5p per C share in respect of the period ended 29 February 2012 87 - Proposed final dividend: 4.5p per C share in respect of the year ended 28 February 2013 (2012: 4.5p) 87 87 The proposed dividends are subject to approval by shareholders at the forthcoming Annual General Meeting and have not been included as a liability in these Accounts. 7. Return per Share Year Ended Year Ended 28 February 2013 29 February 2012 Revenue Capital Total Revenue Capital Total pence pence pence pence pence pence Return per ordinary share (1.0) 7.5 6.5 (1.5) (0.2) (1.7) Return per C share (1.8) 7.2 5.4 (2.3) 0.6 (1.7) Ordinary Share Fund Revenue return per ordinary share is based on the net revenue loss on ordinary activities after taxation of Â£46,000 (29 February 2012: Â£71,000) and on 4,738,463 ordinary shares (29 February 2012: 4,738,463), being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on the net capital gain for the year of Â£355,000 (29 February 2012: Â£9,000 loss) and on 4,738,463 ordinary shares (29 February 2012: 4,738,463), being the weighted average number of ordinary shares in issue during the year. Total return per ordinary share is based on the total gain on ordinary activities after taxation of Â£309,000 (29 February 2012: Â£80,000 loss) and on 4,738,463 ordinary shares (29 February 2012: 4,738,463), being the weighted average number of ordinary shares in issue during the year. C Share Fund Revenue return per C share is based on the net revenue loss on ordinary activities after taxation of Â£35,000 (29 February 2012: Â£45,000) and on 1,931,095 C shares (29 February 2012: 1,919,142), being the weighted average number of C shares in issue during the year. Capital return per C share is based on the net capital gain for the year of Â£139,000 (29 February 2012: Â£12,000) and on 1,931,095 C shares (29 February 2012: 1,919,142), being the weighted average number of C shares in issue during the year. Total return per C share is based on the total gain for the year of Â£104,000 (29 February 2012: Â£33,000 loss) and on 1,931,095 C shares (29 February 2012: 1,919,142), being the weighted average number of C shares in issue during the year. 8. Investments Year Ended 28 February 2013 Structured Product Unquoted Other Investments Investments Investments Total Â£'000 Â£'000 Â£'000 Â£'000 Ordinary Share Fund Opening bookcost 2,543 1,224 196 3,963 Opening unrealised appreciation/ (depreciation) 613 (141) - 472 Opening valuation 3,156 1,083 196 4,435 Movements in year: Purchases at cost - 1,700 - 1,700 Sales proceeds (1,784) - (194) (1,978) Realised gains on sales 391 - - 391 (Decrease)/increase in unrealised appreciation (29) 26 - (3) Movements in year (1,422) 1,726 (194) 110 Closing valuation 1,734 2,809 2 4,545 Closing bookcost 1,150 2,924 2 4,076 Closing investment holding gains/ (losses) 584 (115) - 469 1,734 2,809 2 4,545 Unquoted investments include unquoted shares valued at Â£nil (2012: Â£nil) in the Company's subsidiary, Investec SPV. These shares cost Â£1,834, resulting in an unrealised loss of Â£1,834 (2012: Â£1,834). Year Ended 28 February 2013 Structured Product Unquoted Other Investments Investments Investments Total Â£'000 Â£'000 Â£'000 Â£'000 C Share Fund Opening bookcost 850 244 573 1,667 Opening unrealised appreciation/ (depreciation) 85 (61) - 24 Opening valuation 935 183 573 1,691 Movements in year: Purchases at cost 442 280 - 722 Sales proceeds (836) - (471) (1,307) Realised gains on sales 72 - - 72 Increase in unrealised appreciation 74 6 - 80 Movements in year (248) 286 (471) (433) Closing valuation 687 469 102 1,258 Closing bookcost 528 524 102 1,154 Closing investment holding gains/(losses) 159 (55) - 104 687 469 102 1,258 Unquoted investments include unquoted shares valued at Â£nil (2012: Â£nil) in the Company's subsidiary, Investec SPV. The shares cost Â£917, resulting in an unrealised loss of Â£917 (2012: Â£917). Year Ended 28 February 2013 Structured Product Unquoted Other Investments Investments Investments Total Â£'000 Â£'000 Â£'000 Â£'000 Total Opening bookcost 3,393 1,468 769 5,630 Opening unrealised appreciation/ (depreciation) 698 (202) - 496 Opening valuation 4,091 1,266 769 6,126 Movements in year: Purchases at cost 442 1,980 - 2,422 Sales proceeds (2,620) - (665) (3,285) Realised gains on sales 463 - - 463 Increase in unrealised appreciation 45 32 - 77 Movements in year (1,670) 2,012 (665) (323) Closing valuation 2,421 3,278 104 5,803 Closing bookcost 1,678 3,448 104 5,230 Closing investment holding gains/ (losses) 743 (170) - 573 2,421 3,278 104 5,803 Note 15 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 no transaction costs on purchases in respect of ordinary shareholder activities or C shareholder activities. Investec SPV was incorporated on 29 November 2011. As at 28 February 2013, Investec SPV had share capital of Â£2,751 (2012: Â£2,751) and deficit and net loss of Â£2,751 (2012: Â£2,751) (note: this essentially values Investec SPV at Â£ nil). 9. Debtors Year Ended Year Ended 28 February 29 February 2013 2012 Â£'000 Â£'000 Ordinary Share Fund Prepayments and accrued income 48 38 Clawback of expenses in excess of 3% cap 62 81 110 119 C Share Fund Prepayments and accrued income 7 2 Clawback of expenses in excess of 3% cap 28 49 35 51 Total Prepayments and accrued income 55 40 Clawback of expenses in excess of 3% cap 90 130 145 170 10. Creditors Year Ended Year Ended 28 February 29 February 2013 2012 Â£'000 Â£'000 Ordinary Share Fund IFA trail commission 5 5 Management fees 33 11 Audit fees 16 14 Directors' fees 6 9 Administration fees 5 5 Other creditors 22 22 87 66 C Share Fund IFA trail commission 2 2 Management fees 13 4 Audit fees 7 6 Directors' fees 2 4 Administration fees 2 2 Other creditors 10 30 36 48 Total IFA trail commission 7 7 Management fees 46 15 Audit fees 23 20 Directors' fees 8 13 Administration fees 7 7 Other creditors 32 52 123 114 11. Share Capital 28 February 2013 29 February 2012 Number Â£'000 Number Â£'000 Ordinary Share Fund Number of shares in issue 4,738,463 47 4,738,463 47 C Share Fund 1 March 1,931,095 19 - - Shares issued in year - - 1,931,095 19 Number of shares in issue 1,931,095 19 1,931,095 19 Under the Articles of Association, a resolution for the continuation of the Company as a VCT will be proposed at the Annual General Meeting falling after the tenth anniversary of the last allotment (from time to time) of shares in the Company and thereafter at five-yearly intervals. 12. Net Asset Value per Share 28 February 29 February 2013 2012 Ordinary Share Fund Net asset value per ordinary share 96.3p 95.0p The basic net asset value per ordinary share is based on net assets (including current period revenue) of Â£4,562,000 (29 February 2012: Â£4,501,000) and on 4,738,463 ordinary shares (29 February 2012: 4,738,463), being the number of ordinary shares in issue at the end of the year. 28 February 29 February 2013 2012 C Share Fund Net asset value per C share 93.5p 92.6p The basic net asset value per C share is based on net assets (including current period revenue) of Â£1,805,000 (29 February 2012: Â£1,788,000) and on 1,931,095 C shares (29 February 2012: 1,931,095), being the number of C shares in issue at the end of the year. 13. Reconciliation of Net (Loss)/Profit before Tax to Cash Expended from Operating Activities Year Ended Year Ended 28 February 29 February 2013 2012 Â£'000 Â£'000 Ordinary Share Fund Gain/(loss) on ordinary activities before taxation 309 (80) Gains on investments (388) (26) Income reinvested - (1) Decrease in debtors 9 95 Increase/(decrease) in creditors 21 (112) Cash expended from operating activities (49) (124) C Share Fund Gain/(loss) on ordinary activities before taxation 104 (33) Gains on investments (152) (24) Income reinvested - (1) Decrease/(increase) in debtors 16 (51) Increase in creditors 11 22 Cash expended from operating activities (21) (87) The movement in the prior year creditors shown above does not agree with the movement shown in the Balance Sheet principally because of the effect of the liability for share issue expenses of Â£23,000 as at 29 February 2012 (28 February 2013: Â£nil) which are not part of operating activities. Year Ended Year Ended 28 February 29 February 2013 2012 Â£'000 Â£'000 Total Gain/(loss) on ordinary activities before taxation 413 (113) Gains on investments (540) (50) Income reinvested - (2) Decrease in debtors 25 44 Increase/(decrease) in creditors 32 (90) Cash expended from operating activities (70) (211) The movement in the prior year creditors shown above does not agree with the movement shown in the Balance Sheet principally because of the effect of the liability for share issue expenses of Â£23,000 as at 29 February 2012 which are not part of operating activities. 14. Financial Commitments At 28 February 2013 the Company did not have any financial commitments which had not been accrued for. 15. Financial Instruments The Company's objective is to produce ongoing capital gains and income that will provide investment returns sufficient to maximise annual dividends and to fund a special dividend or cash offer in year 6 sufficient to bring distributions per share to 70 pence. In order to qualify as a VCT, at least 70 per cent. of the Company's investments must be invested in Venture Capital Investments within approximately three years of the relevant funds being raised. Thus, there will be a phased reduction in the Structured Products portfolio and corresponding build up in the portfolio of Venture Capital Investments to achieve and maintain this 70 per cent. threshold along the following lines: Average Exposure per Year Year Year Year Year Year Year 1 2 3 4 5 6+ Structured Products and cash/near cash assets 85% 75% 35% 25% 25% 0% Venture Capital Investments 15% 25% 65% 75% 75% 100% As at 28 February 2013, the Company's investment portfolio comprised 42 per cent. Structured Products and 56 per cent. Qualifying Investments, by market value. This is split 38 per cent. and 62 per cent. for the ordinary share portfolio and 55 per cent. and 37 per cent. for the C share portfolio. To note, the above does not equate to the qualifying percentage for VCT shares. This is detailed in the Business Review above. The Company's financial instruments comprise securities and cash and liquid resources that arise directly from the Company's operations. The principal risks the Company faces in its portfolio management activities are: â— Market price risk â— Credit risk â— Liquidity risk The Company does not have exposure to foreign currency risk. With many years experience of managing the risks involved in investing in Structured Products and Venture Capital Investments respectively, both the Investec Structured Products team and the Calculus Capital team, together with the Board, have designed the Company's structure and its investment strategy to reduce risk as much as possible. The policies for managing these risks are summarised below and have been applied throughout the period under review. Market price risk Structured Products The return and valuation of the Company's investments in Structured Products is currently linked to the FTSE 100 Index by way of a fixed return that is payable as long as the Final Index Level is no lower than the Initial Index Level. All of the current investments in Structured Products will either be capital protected or capital at risk on a one-to-one basis where the FTSE 100 Index falls by more than 50 per cent. and the Final Index Level is below the Initial Index Level. If the FTSE 100 Index does fall by more than 50 per cent. at any time during the investment period and fails to recover at maturity, the capital will be at risk on a maximum one-to-one basis (Capital at Risk ("CAR")) (e.g. if the FTSE 100 Index falls by more than 50 per cent. during the investment period and on maturity is down 25 per cent., capital within that Structured Product will be reduced by 25 per cent.). The tables in the Investment Manager's Review (Structured Products) above provide details of the Initial Index Level at the date of investment and the maturity date for each of the Structured Products. On 28 February 2013, the FTSE 100 Index closed at 6,360.81. By 20 May 2013 being the last practicable date prior to the publication of these Accounts, the Index had increased by 6.2 per cent. to close at 6,755.63. The Final Index Level is calculated using 'averaging', meaning that the average is taken of the closing levels of the FTSE 100 on each business day over the last two to six months of the Structured Product plan term (the length of the averaging period differs for each plan). The Investment Manager of the Structured Products portfolio and the Board review this risk on a regular basis. The use of averaging to calculate the return can reduce adverse effects of a falling market or sudden market falls shortly before maturity. Equally, it can reduce the benefits of an increasing market or sudden market rises shortly before maturity. As at 28 February 2013, the Company's investments in Structured Products were valued at Â£2,421,000 (Ordinary Share Fund: Â£1,734,000; C Share Fund: Â£687,000). A 10 per cent. increase in the level of the FTSE 100 Index at 28 February 2013, given that all other variables remained constant, would have increased net assets by Â£132,842 (Ordinary Share Fund: Â£85,900; C Share Fund: Â£46,942). A 10 per cent. decrease would have reduced net assets by Â£185,050 (Ordinary Share Fund: Â£122,154; C Share Fund: Â£62,897). A 10 per cent. increase would increase the investment management fee due to Calculus Capital by Â£1,328 (Ordinary Share Fund: Â£859; C Share Fund: Â£469); a 10 per cent. decrease would reduce the fee by Â£1,851 (Ordinary Share Fund: Â£1,222; C Share Fund: Â£629). In recent years, the performance of the FTSE 100 Index has been volatile and the Directors consider that an increase or decrease in the aggregate value of investments by 10 per cent. or more is reasonably possible. Qualifying Investments Market risk embodies the potential for losses and includes interest rate risk and price risk. The management of market price risk is part of the investment management process. The portfolio is managed in accordance with policies in place as described in more detail in the Chairman's Statement and Investment Manager's Review (Qualifying Investments). The Company's strategy on the management of investment risk is driven by the Company's investment objective as outlined above. Investments in unquoted companies, AIM-traded and PLUS Markets-traded companies, by their nature, involve a higher degree of risk than investments in the main market. Some of that risk can be mitigated by diversifying the portfolio across business sectors and asset classes. 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 rates do not materially impact upon the value of the Qualifying Investments. The main risk arising on the loan stock instruments is credit risk. The Company does not have any interest bearing liabilities. 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 Company's financial assets comprise equity, loan stock, cash and debtors. The interest rate profile of the Company's financial assets is given in the table below: As at 28 February 2013 As at 29 February 2012 Fair Value Cash Flow Fair Value Cash Flow Interest Interest Interest Interest Rate Rate Rate Rate Risk Risk Risk Risk Â£'000 Â£'000 Â£'000 Â£'000 Ordinary Share Fund Loan stock 1,410 - 700 - Money market funds - 2 - 196 Cash - 4 - 28 1,410 6 700 224 C Share Fund Loan stock 195 - 95 - Money market funds - 102 - 573 Cash - 556 - 104 195 658 95 677 Total Loan stock 1,605 - 795 - Money market funds - 104 - 769 Cash - 560 - 132 1,605 664 795 901 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 28 February 2013. Any movement in interest rates is deemed to have an insignificant effect on the Structured Products. b) Credit risk Structured Products The failure of a counterparty to discharge its obligations under a transaction could result in the Company suffering a loss. In its role as the Investment Manager of the Structured Products portfolio and to diversify counterparty risk, Investec Structured Products will only invest in Structured Products issued by approved issuers. In addition, the maximum exposure to any one counterparty (or underlying counterparty) will be limited to 15 per cent. of the assets of the Company at the time of investment. Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amount of financial assets best represents the maximum credit risk exposure at the Balance Sheet date. Qualifying Investments Where an investment is made in loan stock issued by an unquoted company, it is made as part of an 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. Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk. All the assets of the Company which are traded on AIM or PLUS Markets are held by Investec Wealth & Investments, the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed or limited. The Board and the Investment Manager monitor the Company's risk by reviewing the custodian's internal control reports. As at 28 February 2013, the Company's credit risk exposure, by credit rating of the Structured Product issuer, was as follows: Credit Risk Rating 28 February 2013 29 February 2012 (Moody's unless otherwise indicated) Â£'000 % of Portfolio Â£'000 % of Portfolio Ordinary Share Fund A1 - - 518 11.7% A2 612 13.5% 978 22.1% Aa2 - - 611 13.8% A3 384 8.4% - - A - (Standard & Poor's) - - 437 9.9% Baa3 738 16.2% 612 13.8% 1,734 38.1% 3,156 71.3% Credit Risk Rating 28 February 2013 29 February 2012 (Moody's unless otherwise indicated) % of % of Â£'000 Portfolio Â£'000 Portfolio C Share Fund A1 - - 207 12.2% A2 239 19.0% 213 12.6% Baa3 448 35.8% 515 30.5% 687 54.8% 935 55.3% Credit Risk Rating 28 February 2013 29 February 2012 (Moody's unless otherwise indicated) Â£'000 % of Portfolio Â£'000 % of Portfolio Total A1 - - 725 11.8% A2 851 14.7% 1,191 19.4% Aa2 - - 611 10.0% A3 384 6.6% - - A - (Standard & Poor's) - - 37 7.1% Baa3 1,186 20.4% 1,127 18.4% 2,421 41.7% 4,091 66.7% c) Liquidity risk The Company's liquidity risk is managed on an ongoing basis by the Investment Managers. The Company's overall liquidity risks are monitored on a quarterly basis by the Board. The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses as they fall due. Structured Products If Structured Products are redeemed before the end of the term, the Company may get back less than the amount originally invested. The value of the Structured Products will be determined by the price at which the investments can actually be sold on the relevant dealing date. The Board does not consider this risk to be significant as the planned investment periods in Structured Products will range from six months to five and a half years and there is a planned transition from Structured Products to Qualifying Investments as detailed earlier in this note. There may not be a liquid market in the Structured Products and there may never be two competitive market makers, making it difficult for the Company to realise its investment. Risk is increased further where there is a single market maker who is also the issuer. The Board has sought to mitigate this risk by only investing in approved issuers of Structured Products, and by limiting exposure to any one issuer (or underlying issuer). Qualifying Investments The Company's financial instruments include investments in unlisted equity investments which are not traded in an organised public market and which may be illiquid. As a result, the Company may not be able to realise quickly some of its investments at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer. The Board seeks to ensure that an appropriate proportion of the Company's investment portfolio is invested in cash and readily realisable assets, which are sufficient to meet any funding commitments that may arise. Under its Articles of Association, the Company has the ability to borrow a maximum amount equal to 25 per cent. of its gross assets. As at 28 February 2013 the Company had no borrowings. d) Capital management The capital structure of the Company consists of cash held and shareholders' equity. Capital is managed to ensure the Company has adequate resources to continue as a going concern, and to maximise the income and capital return to its shareholders, while maintaining a capital base to allow the Company to operate effectively in the market place and sustain future development of the business. To this end the Company may use gearing to achieve its objectives. The Company's assets and borrowing levels are reviewed regularly by the Board. e) Fair value hierarchy Investments held at fair value through profit and loss are valued in accordance with IPEVCA guidelines. 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. As required by 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, we have categorised the measurement basis 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 money market funds are recognised within this category. - Valued using models with significant observable market parameters - "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's investments in Structured Products are classified within this category. - Valued using models with significant unobservable market parameters - "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 and loan stock are classified within this category. As explained in note 1, unquoted investments are valued in accordance with the IPEVCA guidelines. 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. Ordinary Share Fund Financial Assets at Fair Value through Profit or Loss At 28 February 2013 Level 1 Level 2 Level 3 Total Â£'000 Â£'000 Â£'000 Â£'000 Structured Products - 1,734 - 1,734 Unquoted equity - - 1,399 1,399 Money market funds 2 - - 2 Loan stock - - 1,410 1,410 2 1,734 2,809 4,545 Financial Assets at Fair Value through Profit or Loss At 29 February 2012 Level 1 Level 2 Level 3 Total Â£'000 Â£'000 Â£'000 Â£'000 Structured Products - 3,156 - 3,156 Unquoted equity - - 383 383 Money market funds 196 - - 196 Loan stock - - 700 700 196 3,156 1,083 4,435 C Share Fund Financial Assets at Fair Value through Profit or Loss At 28 February 2013 Level 1 Level 2 Level 3 Total Â£'000 Â£'000 Â£'000 Â£'000 Structured Products - 687 - 687 Unquoted equity - - 274 274 Money market funds 102 - - 102 Loan stock - - 195 195 102 687 469 1,258 Financial Assets at Fair Value through Profit or Loss At 29 February 2012 Level 1 Level 2 Level 3 Total Â£'000 Â£'000 Â£'000 Â£'000 Structured Products - 935 - 935 Unquoted equity - - 88 88 Money market funds 573 - - 573 Loan stock - - 95 95 573 935 183 1,691 Total Financial Assets at Fair Value through Profit or Loss At 28 February 2013 Level 1 Level 2 Level 3 Total Â£'000 Â£'000 Â£'000 Â£'000 Structured Products - 2,421 - 2,421 Unquoted equity - - 1,673 1,673 Money market funds 104 - - 104 Loan stock - - 1,605 1,605 104 2,421 3,278 5,803 Financial Assets at Fair Value through Profit or Loss At 29 February 2012 Level 1 Level 2 Level 3 Total Â£'000 Â£'000 Â£'000 Â£'000 Structured Products - 4,091 - 4,091 Unquoted equity - - 471 471 Money market funds 769 - - 769 Loan stock - - 795 795 769 4,091 1,266 6,126 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 the unquoted investments. Applying the downside alternatives, the value of the unquoted investment portfolio for the Ordinary Share Fund would be Â£121,399 or 4.3 per cent. lower (2012: Â£21,601 or 2.0 per cent. lower), for the C Share Fund it would be Â£31,964 or 6.8 per cent. lower (2012: Â£6,211 or 3.4 per cent. lower), and in total it would be Â£153,363 or 4.7 per cent. lower (2012: Â£27,812 or 2.2 per cent. lower). Using the upside alternatives, the value of the unquoted investment portfolio for the Ordinary Share Fund would be increased by Â£132,073 or 4.7 per cent. (2012: Â£19,581 or 1.8 per cent.), for the C Share Fund it would be increased by Â£28,918 or 6.2 per cent. (2012: Â£6,900 or 3.8 per cent.), and in total it would be increased by Â£160,991 or 4.9 per cent. (2012: Â£26,481 or 21.0 per cent.). 16. Transactions with Related Parties John Glencross is considered to be a related party due to his position as Chief Executive and a director of Calculus Capital, one of the Company's Investment Managers. He does not receive any remuneration from the Company. He is a director of Terrain, Lime Technology and Human Race, companies in which the Company has invested. 17. Transactions with Investment Managers Investec Structured Products, an Investment Manager to the Company, is entitled to a performance incentive fee. Investec Structured Products will receive an arrangement fee of 0.75 per cent. of the amount invested in each Structured Product. This arrangement fee shall be paid to Investec Structured Products by the issuer of the relevant Structured Product. No arrangement fee will be paid to Investec Structured Products in respect of any decision to invest in Investec-issued Structured Products. Investec Structured Products has agreed not to earn an annual management fee from the Company. As at 28 February 2013, Â£nil was payable by the C Share Fund (2012: Â£23,000) to Investec Structured Products in relation to the initial fee of 5 per cent. of the gross funds raised pursuant to the original ordinary share offer. In addition, Â£90,000 (2012: Â£130,000) was owed by Investec Structured Products as claw back of costs in excess of the agreed expenses cap of 3 per cent. (Â£62,000 to the Ordinary Share Fund and Â£28,000 to the C Share Fund). Calculus Capital, an Investment Manager to the Company, is also entitled to a performance incentive fee. For the year ended 28 February 2013, fees of Â£61,000 (2012: Â£63,000) were payable to Calculus Capital (Â£44,000 payable by the Ordinary Share Fund and Â£17,000 by the C Share Fund), of which Â£46,000 (2012: Â£15,000) were outstanding (Â£33,000 by the Ordinary Share Fund and Â£13,000 by the C Share Fund) as at 28 February 2013. No incentive fee accrued to either Investment Manager during the year (2012: Â£nil). Calculus Capital receives an annual fee from Terrain, Lime Technology and Metropolitan for the provision of a director, as well as an annual monitoring fee which also covers the provision of certain administrative support services. Calculus Capital also receives an annual monitoring fee from MicroEnergy. In the year ended 28 February 2013, the amount payable to Calculus Capital which was attributable to the investment made by the Company was Â£3,951 (2012: Â£3,542) from Terrain, Â£5,695 (2012: Â£3,865) from Lime Technology, Â£2,899 (2012: Â£220) from Metropolitan and Â£2,728 (2012: Â£2,833) from MicroEnergy (all excluding VAT). Calculus Capital receives an annual fee from Brigantes and Corfe for the provision of a director. The amount payable to Calculus Capital in the year ended 28 February 2013 which was attributable to the investment made by the Company was Â£378 (2012: Â£nil) from Brigantes and Â£223 (2012: Â£nil) from Corfe (excluding VAT). In the year ended 28 February 2013, Calculus Capital received arrangement fees as a result of the Company's new investments. Calculus Capital received an arrangement fee of Â£8,100 (2012: Â£nil) as a result of the Company's investment in AnTech, Â£3,001 (2012: Â£nil) for the investment in Dryden, Â£7,500 (2012: Â£nil) for the investment in Secure Electrans Limited and Â£10,800 (2012: Â£nil) for the investment in Tollan. In the year ended 28 February 2013, Calculus Capital received an arrangement fee of Â£7,501 (2012: Â£nil) as a result of the Company's investment in Hampshire. Calculus Capital also receives an annual fee from Hampshire for monitoring services and for the provision of a director. In the year ended 28 February 2013, the amount paid to Calculus Capital which was attributable to the investment made by the Company was Â£112 (2012: Â£nil). In the year ended 28 February 2013, Calculus Capital received an arrangement fee of Â£13,500 (2012: Â£nil) as a result of the Company's investment in Human Race. Calculus Capital also receives an annual fee from Human Race for monitoring services and for the provision of a director. In the year ended 28 February 2013, the amount paid to Calculus Capital which was attributable to the investment made by the Company was Â£2,662 (2012: Â£nil). Annual General Meeting and Separate Class Meetings The Company's Annual General Meeting will be held at the offices of Investec Structured Products, 2 Gresham Street, London EC2V 7QP at 11.00 am on Tuesday, 2 July 2013. It will be followed by separate class meetings of the holders of ordinary shares and C shares. For further information, please contact: Investment Manager to the Structured Products Portfolio Investec Structured Products Gary Dale Telephone: 020 7597 4065 Investment Manager to the Venture Capital Portfolio Calculus Capital Limited Susan McDonald Telephone: 020 7493 4940 National Storage Mechanism A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/NSM ENDS Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

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