Annual Financial Report

RNS Number : 5628J

Hygea VCT plc

31 March 2010

FOR IMMEDIATE RELEASE 1 April 2010

Hygea VCT plc

("Hygea" or the "Company")

Annual Report and Accounts

Notice of Annual General Meeting

The directors are pleased to announce the audited results of the Company for the year ended 31 December 2009 and a copy of the Annual Report and Accounts is expected to be sent to Shareholders on 9 April 2010. Set out below are extracts of the audited Report and Accounts.

In addition the Notice of Annual General Meeting is attached at the end of the Report and Accounts and is set out below. The AGM will be held at the offices of Matrix Corporate Capital LLP, 1 Vine Street, London, W1J OAH on Thursday, 6 May 2010 at 11:30am. This will be sent out with the Report and Accounts.

A copy of both documents is available from the registered office of the Company at 39 Alma Road, St Albans AL1 3AT.

Financial Summary

	Year to 31 December 2009	Year to 31 December 2008

Net assets (£'000s)	7,404	5,155
Return on ordinary activities after tax (£'000s)	2,070	418
Net asset value per share	91.2p	66.2p
Earnings per share	25.8p	5.4p

Chairman's Statement

I am pleased to present the 2009 annual report to shareholders in Hygea VCT plc.

In these continuing difficult economic times, it is particularly satisfying to report a 38% increase in net asset value at 91.2p compared to 66.2p at 31 December 2008. As I have already reported in my letters of 17 November 2009 and 27 January 2010, we have satisfactorily realised two investments, BioAnaLab and DxS, during the year achieving a recognised profit of £3.85 million. This resulted in 55% of Hygea's net assets at 31 December 2009 being in cash. Conscious of the legal requirement for VCT's to have 70% of their net assets in qualifying investments, your Board has, since the year end, paid an interim dividend of 10p per share and made qualifying investments amounting to £1.63 million.

Your Board is delighted that the Company is seeing the fruits of its investment strategy of investing in companies in the MedTech sector offering better patient outcomes at lower total cost and which comply with our investment template. The Board considers this a particularly attractive focus even in challenging economic times and is working on the assumption that these conditions will continue for the foreseeable future. As I set out below, we are seeing an interesting deal flow from sources we know well and are pleased to be able to take part in new funding rounds for our existing portfolio companies.

Results and Dividends

During the period we disposed of BioAnaLab and DxS for a total capital consideration of £4.46 million realising an initial capital gain of £3.85 million of which £1.57 million had already been recognised in our published net assets. There remains the possibility of deferred consideration of up to £2.5 million based on performance from DxS over the next few years. The details of our larger holdings are set out in the Investment Review. Realised gains, together with the revaluation of both quoted and unquoted portfolio companies, have generated a capital return this year of 26.0p per share (2008: 7.0p).

The revenue return for the year is a much reduced loss of 0.2p per share (2008: (1.6p)). This is largely due to the receipt of interest on the loans to DxS on disposal. We are pleased to report that our running costs have remained largely in line with the previous year and represent a total expense ratio of 1.8% of year end net assets. The increased activity during 2010 will mean that expenses will increase both in absolute terms and also in terms of the ratio to net assets due to the payment of dividends during the year. However it remains our aim to keep annual expenses under 3% of net assets.

By the time you read this report you will have received an interim dividend of 10p per share and, as previously announced, the Directors are proposing a final dividend of 5p per share payable on 2 July 2010 to shareholders on the register at 4 June 2010, subject to shareholder approval at the annual general meeting. The Board will seek, where practicable, to maintain future annual final dividend payments of at least 5p per share. Total dividends now paid and proposed by the Company amount to 16.25p.

Portfolio Review

Investing in existing investee companies

In order to at least maintain Hygea's percentage shareholding and avoid dilution, follow-on investments have been made in investees that are making good progress. During the year we made investments in Arecor (£7,500), Glide (£100,000), Insense (£27,000), and Omega Diagnostics (£50,000).

Furthermore, £100,000 was invested in Prosurgics. This company has now undergone a reorganisation and is in the process of being hived up into Freehand Surgical into which we have invested £300,000 during the year. The reorganization was required to focus on the camera holding robot which has been developed for use by keyhole surgeons.

Since the year end we have invested a further £50,000 into Freehand Surgical, £100,000 into Glide, £200,000 into Hallmarq, £200,000 into Insense, £218,000 into Immunobiology, and £300,000 into Scancell.

New investments

We have made four investments into new qualifying companies since the year end, namely:

· Exosect (£250,000): a developer of biological pest control solutions;

· Quotient Diagnostics (£200,000): a developer of a point of care instrument for measuring glycosylated haemoglobin, the basis of measuring long term, average blood glucose levels in diabetics;

· ReNeuron (£50,000): a stem cell research company quoted on AIM - it is about to enter Phase I clinical trial for its treatment for stroke patients;

· Eykona Technologies (£60,000): a developer of a machine vision solution (based on an 'intelligent' camera) for measuring the volume of wounds (eg diabetic ulcers) in order to assist medical staff determine the most effective treatment.

Selected operational highlights

The principal highlight has been that the sales of BioAnaLab and DxS provide evidence that selecting and monitoring companies based on the investment template does produce companies which make attractive strategic purchases for major trade buyers. Other significant developments within the portfolio include:

· Epistem: achieving a significant collaborative agreement with Novartis, including, inter alia, an upfront payment of $4 million to Epistem;

· Hallmarq: achieving a position where recurring income from scan fees is expected to match costs in 2010 from the existing base of installations;

· Insense: has developed its first significant customer within the NHS, with others developing; and

· Scancell: expecting to start Phase I clinical trial of its melanoma product in Q2 2010.

VCT Qualifying Status

PricewaterhouseCoopers LLP continues to provide the Board with advice on the ongoing compliance with HMRC rules and regulations concerning VCTs. The Board has been advised that the Company continues to comply with the conditions laid down by HMRC for maintaining approval as a VCT.

VAT

Following protracted discussions on our behalf with HMRC, Octopus Investment Limited, formerly our Investment Manager, have now agreed with them an initial repayment of VAT previously paid on management charges. Discussions are ongoing in relation to certain ancillary matters and a further modest amount may be due.

Annual General Meeting

The Company's Annual General Meeting will take place on 6 May 2010 at 11.30a.m. I look forward to welcoming you to the meeting which will be held at the offices of Matrix, 1 Vine Street, London, W1J 0AH.

Outlook

This year has seen a significant change in your Company's fortunes and I am delighted that your patience is at last being rewarded. As I set out in my letter last November, your Board has decided that we should reinvest a significant portion of the proceeds of our successful disposals in order to maintain the 70% qualifying investment test and also recommence dividend payments. As I mentioned above and subject to shareholder approval, it is our intention to maintain an annual dividend policy of at least 5p per share, which will be free of higher rate tax to qualifying shareholders. We believe that this will assist in the marketing of Hygea shares to a wider audience. We are pleased to see that with the new measures in place, trade in the Company's shares has accelerated.

The portfolio contains companies with the potential to make significant contributions within their selected markets and success in doing so will over the medium term reflect in their values. We are confident that the MedTech sector, which is our focus, will perform well even if the overall economy is not growing. Now that we have achieved our qualifying position, it is our aim to follow the existing portfolio and supplement it with investments in new companies as cash resources allow.

James Otter

Chairman

30 March 2010

Investment Review

Investment Portfolio

Unquoted Investments	Investment at cost (£'000)	Unrealised profit/(loss) (£'000)	Carrying value at 31 December 2009 (£'000)	Movement in the year to 31 December 2009 (£'000)
ImmunoBiology Limited	600	244	844	-
Hallmarq Veterinary Imaging Limited	885	(285)	600	68
Glide Pharmaceutical Technologies Limited	205	215	420	3
Freehand Surgical Limited (holding company of Prosurgics Limited)	890	(537)	353	(222)
Insense Limited	309	(112)	197	-
Wound Solutions Limited	350	(175)	175	(175)
Arecor Limited	8	-	8	-
Purely Proteins Limited	372	(372)	-	-
Total unquoted investments	3,619	(1,022)	2,597	(326)

Quoted Investments
Scancell plc	760	(352)	408	(2)
EpiStem Holdings plc	62	150	212	108
Omega Diagnostics plc	126	7	133	37
Asset Realisation Company Limited (formerly Stem Cell Sciences plc)	250	(241)	9	(11)
York Pharma plc	89	(89)	-	(4)
Total quoted investments	1,287	(525)	762	128
Total investments	4,906	(1,547)	3,359	(198)

Objective and Investment Policy

The Company's objective is to provide shareholders with an attractive income and capital return by investing its funds in a portfolio of unquoted and quoted UK MedTech companies which meet the relevant criteria under the VCT Rules.

The Company's investment policy is designed to deliver absolute returns on its investments rather than a performance measured against the market indices. On an ongoing basis, it is intended that at least 80% of the Company's assets will be invested in qualifying holdings, with the remainder held in cash and money market securities. The Board does not intend to vary the Company's investment policy. However, should a material change be deemed appropriate this will be done with shareholders' approval by the passing of an ordinary resolution and in accordance with the Listing Rules.

Valuation Methodology

Quoted and unquoted investments are valued in accordance with the accounting policy set out on page 34, which takes account of current industry guidelines for the valuation of venture capital portfolios and is compliant with International Private Equity and Venture Capital Valuations guidelines and current financial reporting standards.

If you would like to find out more regarding the International Private Equity and Venture Capital ('IPEVC') Valuation Guidelines, please visit their website at: www.privateequityvaluation.com.

Ten largest holdings (by value)

ImmunoBiology Limited

ImmunoBiology is a biotechnology company that is focused on developing treatment areas such as meningitis, tuberculosis, influenza and hepatitis C. The company's technology is based on a recent discovery that a group of proteins known as 'heat shock proteins' has a pivotal role in controlling the normal immune response to infections - it has also licensed in Scancell's immunobody technology for use in certain treatments - both approaches seek to educate the immune system how to respond.

Initial investment date: November 2005

Cost: £600,000

Valuation: £844,000

Equity held: 6%

Last audited accounts: 31 May 2009

Loss before tax: £1.2 million

Net assets: £(677,000)

Hallmarq Veterinary Imaging Limited

Hallmarq specialises in developing low cost magnetic resonance imaging systems. The first application is for equine vets to enable the diagnosis of causes of lameness in horses that are not identifiable by any other method. The key development has been the launch of version EQ 2 of the scanner, which has had a significant beneficial impact on growth in scan fees, the key performance indicator for the use of MRI by the vets. The unaudited management accounts for the five months to January 2010 showed an EBIT of £59,000.

Initial investment date: August 2005

Cost: £885,000

Valuation: £601,000

Equity held: 8%

Last audited accounts: 31 August 2009

Loss before tax: £239,000

Net assets: £1.9 million

Glide Pharmaceutical Technologies Limited

Glide Pharma has developed a needle-free drug delivery technology that is able to deliver a drug formulation in a solid form directly through the skin of a patient. The Glide technology has been shown to have a number of benefits when compared to other delivery mechanisms - for example, it is particularly suited for vaccines, enabling them to be delivered in solid rather than liquid form, delivering both better patient outcomes and also reduced supply chain costs. In trials on human volunteers, Glide's device was shown to be preferable to injection using a standard needle and syringe. The second product is undergoing a clinical trial, with the results due during H1 2010. In addition, there is a good pipeline of companies investigating the Glide technology in feasibility studies - the strategy is to convert the feasibility studies into funded development programs.

Initial investment date: November 2005

Cost: £205,400

Valuation: £419,900

Equity held: 2%

Last audited accounts: 31 March 2009

Loss before tax: £2.2 million

Net assets: £1.5 million

Scancell plc

Scancell is a Nottingham-based biotechnology company that is developing a pipeline of vaccines to target various types of cancer, with the first target being melanoma - Phase I trials of the latter are scheduled to start in the UK in Q2 2010. The platform technology, in effect, educates the immune system how to respond - this means that the technology can also be licensed to pharmaceutical companies to assist the development of their own therapeutic vaccines. Scancell listed on PLUS Markets in September 2008, raising £1.6 million - in March 2010 it launched a £2.3 million fundraising (100% underwritten/placed) to fund the Phase I/II trials on the melanoma product.

Initial investment date: December 2003

Cost: £760,000

Valuation: £408,500

Equity held: 7.4%

Last audited accounts: 30 April 2009

Loss before tax: £845,000

Net assets: £1.8 million

Freehand Surgical Limited

(holding company of Prosurgics Limited)

Prosurgics develops robots for assisting surgeons: its first product Freehand, which is a camera holding robot for keyhole surgery is now being commercialised. Freehand is a Version 2 product and is much cheaper and smaller than Version 1, with the added advantage of generating recurring revenue through incorporating a consumable. Commercialisation started in February 2009, with the benefit of Prosurgics already having an established position in this market: the reaction from surgeons to live demonstrations in patients has been very encouraging. With the focus now being entirely on Freehand and potential complementary products, the company is going through a restructuring, a successful outcome to which will result in the business being acquired by Freehand Surgical Ltd, in which Hygea will have a c.10% shareholding.

Initial investment date: January 2006

Cost: £890,000

Valuation: £352,800

Equity held: 2.3%

Last audited accounts: 31 December 2008

Loss before tax: £4.1 million

Net assets: £1.1 million

EpiStem Holdings plc

EpiStem listed on AIM in April 2007. Its knowledge is based on over 30 years research at Christies Hospital, Manchester on the behaviour of adult epithelial stem cells - epithelial cancers account for over 80% of adult cancers. It has the attractive business model of a profitable Contract Research Organisation division, a Biomarker division and a Novel Therapies division. In March 2009, a R&D collaboration agreement was signed with Novartis, under which Epistem received an upfront cash payment of $4 million and research funding for two years. The interim results to December 2009 showed a pre-tax profit of £5,000 (2008: £615,000 loss).

Initial investment date: April 2007

Cost: £61,700

Valuation: £212,000

Equity held: <1%

Last audited accounts: 30 June 2009

Loss before tax: £669,000

Net assets: £2.8 million

Insense Limited

Insense is working on the development of an innovative product range for the wound care market - commercial launch started in January 2008, against the background of trials showing significant improvement in patient outcomes at lower cost. The company has obtained its first significant customer within the NHS, with others in the pipeline.

Initial investment date: July 2003

Cost: £308,800

Valuation: £196,700

Equity held: 3%

Last audited accounts: 31 December 2008

Loss before tax: £1.4 million

Net assets: £548,000

Wound Solutions Limited

Wound Solutions is working on the development of a product that has applications in the treatment of difficult to heal wounds such as leg ulcers and foot ulcers.

Initial investment date: May 2006

Cost: £350,000

Valuation: £175,000

Equity held: 3%

Last audited accounts: 30 June 2009

Loss before tax: £3.5 million

Net assets: £(576,000)

Omega Diagnostics plc

Omega listed on AIM via a reverse acquisition in 2006. It is a healthcare diagnostics business providing IVD products for use in hospitals, blood banks, clinics and laboratories in over 100 countries - it specialises in the areas of Food Intolerance, Autoimmune Disease and Infectious Disease. One of its products is Food Detective for home testing of allergies brought about by 59 commonly eaten foods.

Initial investment date: August 2007

Cost: £125,300

Valuation: £133,000

Equity held: <1%

Last audited accounts: 31 March 2009

Profit before tax: £267,000

Net assets: £4.4 million

Asset Realisation Company Limited

(formerly Stem Cell Sciences plc)
The trading subsidiaries were sold in April 2009 to StemCells, Inc., following which Stem Cell Sciences changed its name to Asset Realisation Company Ltd and was placed in Member' Voluntary Liquidation.

Initial investment date: July 2005

Cost: £250,000

Valuation: £9,000

Equity held: <1%

Last audited accounts: 31 December 2007

Loss before tax: £3.6 million

Net assets: £4.0 million

Disposals

During the year, the Company disposed of in their entirety the holdings in DxS and BioAnaLab. With regard to DxS, the Company invested a total of £0.3 million in DxS in early-stage funding rounds led by NVM Private Equity in 2004 and 2006. The total income and capital proceeds to date (excluding contingent future payments) represent a money multiple of 11.2 times the original investment. Furthermore the Company may become entitled to receive up to a further £2.5 million over the period to 2012 subject to the achievement by DxS of specified objectives.

BioAnaLab was sold to Millipore Corporation which extends Millipore's biopharmaceutical services offering to the European market. Hygea crystallised a profit of £665,800 on the sale, representing a money multiple of 3.4 times the original investment.

Realisations	Carrying value at 31 December 2008 (£'000)	Cost of investment (£'000)	Proceeds of investment (£'000)	Total gain (£'000)
DxS Limited	1,440	326	3,511	3,185
BioAnaLab Limited	730	278	944	666
Total	2,170	604	4,455	3,851

Directors' Report

The Directors present their report and the audited financial statements for the year ended 31 December 2009.

This report has been prepared by the Directors in accordance with the requirements of s415 of the Companies Act 2006. The Company's independent auditor is required by law to report on whether the information given in the Directors' Report (including the Business Review) is consistent with the financial statements. The auditor's opinion is included in their report on page 28.

Principal Activity and Status

The principal activity of the Company is to provide shareholders with an attractive income and capital return by investing its funds in a portfolio of unquoted and quoted UK MedTech companies which meet the relevant criteria under the VCT Rules.

The Company has been granted full approval as a Venture Capital Trust by HMRC. In order to maintain approved status, the Company must comply on a continuing basis with the provisions of s274 of the Income Tax Act 2007; in particular, the Company is required at all times to hold at least 70% of its investments (as defined in the legislation) in VCT qualifying holdings, of which at least 30% must comprise eligible ordinary shares.

For this purpose, a "VCT qualifying holding" consists of up to £1 million invested in any one year in new shares or securities of a UK quoted company (which may be quoted on AIM) or unquoted company which is carrying on a qualifying trade, and whose gross assets and number of employees at the time of investment do not exceed a prescribed limit. The definition of "qualifying trade" excludes certain activities such as property investment and development, financial services and asset leasing.

The accounts have been drawn up to include a statutory Income Statement in accordance with Schedule 4 of the Companies Act 1985 and Financial Reporting Standard 3 (Reporting Financial Performance). The Directors are required by the articles of association to propose an ordinary resolution at the Company's annual general meeting in 2012 that the Company should continue as a Venture Capital Trust for a further three year period, and at three yearly intervals thereafter. If any such resolution is not passed, the Directors shall within four months convene a general meeting to consider the proposals for the reorganisation or winding-up of the Company.

Review of Business Activities

The Directors are required by s417 of the Companies Act 2006 to include a Business Review to shareholders. The Business Review is set out below and also includes the Chairman's Statement on pages 6 and 8, and the Investment Review on pages 9 to 12 by reference.

The purpose of this review is to provide shareholders with a snapshot summary setting out the business objectives of the Company, the Board's strategy to achieve those objectives, the risks faced, the regulatory environment and the key performance indicators used to measure performance.

Since the year end the following significant post balance sheet events have occurred;

· January 2010 - £50,000 investment in Freehand Surgical Limited

· January 2010 - £200,000 investment in Insense Limited

· January 2010 - £200,000 investment in Quotient Diagnostics Limited

· January 2010 - £250,000 investment in Exosect Limited

· February 2010 - £218,000 investment in Immunobiology Limited

· February 2010 - £100,000 investment in Glide Pharmaceutical Technologies Limited

· February 2010 - £300,000 investment in Scancell plc

· March 2010 - £200,000 investment in Hallmarq Veterinary Imaging Limited

· March 2010 - £50,000 investment in Reneuron plc

· March 2010 - £60,000 investment in Eykona Technologies Limited

· March 2010 - Interim dividend of 10p per Ordinary share paid

Performance and Key Performance Indicators

As a VCT, the Company's objective is to provide shareholders with an attractive income and capital return by investing its funds in a broad spread of unquoted UK companies which meet the relevant criteria for VCTs.

The Board has a number of performance measures to assess the Company's success in meeting its objectives. Performance, measured by the change in NAV and total return per share, is also measured against the FTSE All-Share index. This is shown in the graph on page 26 of the Directors' Remuneration Report. These indices have been adopted as an informal benchmark. Investment performance, cash returned to shareholders and share price are also measured against the Company's peer group of the other generalist VCTs.

The Chairman's Statement, on pages 6 to 8, includes a review of the Company's activities and future prospects; further details are also provided within the Investment Review on pages 9 to 12.

Results and dividend	Year ended	Year ended
	31 December 2009	31 December 2008
	£'000	£'000
Net return attributable to shareholders	2,070	418

Appropriations:
Interim dividend paid since the year end - 10p per share Final dividend proposed - 5p per share (2008 - 0p)	812 406	- -

The proposed final dividend will, if approved by shareholders, be paid on 2 July 2010 to shareholders on the register on 4 June 2010.

Objective and Investment Policy

The Company's investment strategy is designed to deliver absolute returns on its investments rather than a performance measured against the market indices. On an ongoing basis, it is intended that at least 80% of the Company's assets will be invested in qualifying holdings, with the remainder held in cash and money market securities. The Board does not intend to vary the Company's investment policy. However, should a material change be deemed appropriate this will be done with shareholders' approval by the passing of an ordinary resolution and in accordance with the Listing Rules.

The Directors control the overall risk of the portfolio by ensuring that the Company has exposure to a diversified range of quoted and unquoted companies from the MedTech sector. The Directors will continually monitor the investment process and ensure compliance with the investment policy. During the year, the Company had in place an overdraft facility with the Royal Bank of Scotland up to the amount of £100,000.

VCT regulation

Compliance with required rules and regulations is considered with all investment decisions made. The company is further monitored on a continual basis to ensure compliance. The main criteria to which the company must adhere include:

· At least 70% of investments must be made in qualifying shares or securities

· At least 30% of the 70% of qualifying investments must be invested into Ordinary shares with no preferential rights

· No single investment made can exceed 15% of the total company value

· A minimum of 10% of each qualifying investment must be in Ordinary shares with no preferential rights

Principal Risks, Risk Management and Regulatory Environment

The Board carries out a regular review of the risk environment in which the Company operates. The main areas of risk identified by the Board are as follows:

VCT qualifying status risk: the Company is required at all times to observe the conditions laid down in the Income Tax Act 2007 for the maintenance of approved VCT status. The loss of such approval could lead to the Company losing its exemption from corporation tax on capital gains, to investors being liable to pay income tax on dividends received from the Company and, in certain circumstances, to investors being required to repay the initial income tax relief on their investment.

The Board keeps the Company's VCT qualifying status under regular review. The Board has also retained PricewaterhouseCoopers LLP to undertake an independent VCT status monitoring role.

Investment risk: the majority of the Company's investments are in quoted and unquoted companies which are VCT qualifying holdings, which by their nature entail a higher level of risk and lower liquidity than investments in large quoted companies. The Directors aim to limit the risk attached to the portfolio as a whole by careful selection and timely realisation of investments, by carrying out due diligence procedures and by maintaining a spread of holdings in terms of financing stage. The Board reviews the investment portfolio on a regular basis.

Financial risk: by its nature, as a Venture Capital Trust, the Company is exposed to market price risk, credit risk, liquidity risk, fair value and cash flow interest rate risks. All of the Company's income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company is financed principally through equity and has a modest working capital facility which is used occasionally. The Company does not use derivative financial instruments.

Regulatory risk: the Company is required to comply with the Companies Acts, the rules of the UK Listing Authority and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.

Reputational: inadequate or failed controls might result in breaches of regulation or loss of shareholder trust.

Internal control risk: the Board reviews annually the system of internal controls, financial and non-financial, operated by the Company. These include controls designed to ensure that the Company's assets are safeguarded and that proper accounting records are maintained.

The Board seeks to mitigate the internal risks by setting policy, regular review of performance, enforcement of contractual obligations and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies rigorously the principles detailed in the 'Turnbull' guidance. Details of the Company's internal controls are contained in the Corporate Governance section on pages 21 to 24.

Due to the nature of the Company, environmental, social and employee issues do not apply and therefore no disclosures in respect of these have been included in the Directors report.

Further details of the Company's risk management policies are provided in note 15 to the financial statements.

Directors

The Directors of the Company during the period and their interests (in respect of which transactions are notifiable under Disclosure and Transparency Rule 3.1.2R) in the issued ordinary shares of 50p are shown in the table below:

	31 December 2009	31 December 2008
James Otter (Chairman)	14,050	8,050
John Hustler	92,500	50,000
Charles Breese	105,000	105,000

All of the Directors' shares were held beneficially. There have been no changes in the Director's share interests between 31 December 2009 and the date of this report.

Mr James Otter retires by rotation and, being eligible, offers himself for re-election. The Board has considered provision A.7.2 of the Combined Code 2008 and believes that Mr Otter continues to be effective and to demonstrate commitment to his role, the Board and the Company. The Board therefore has no hesitation in recommending him for re-election at the forthcoming Annual General Meeting.

Brief biographical notes on the Directors are given on page 13.

Directors' and Officers' Liability Insurance

The Company has maintained directors' and officers' liability insurance cover on behalf of the Directors and Company Secretary. The Company's Articles of Association provide, subject to provisions of UK legislation, an indemnity for directors in respect of costs which they may incur relating to the defence of any proceedings brought against them arising out of their positions as directors, in which they are acquitted or judgement is given in their favour by the Court.

Whistleblowing

The Board has considered and implemented arrangements in accordance with the Combined Code's recommendations, to encourage staff of the Administration Manager or Secretary of the Company to raise concerns, in confidence, within their organisation about possible improprieties in matters of financial reporting or other matters. It is therefore satisfied that adequate arrangements are in place to allow an independent investigation, and follow on action where necessary, to take place within the organisation.

Management

Since 30 July 2007 the Board has assumed responsibility for the management of the Company and its portfolio. The Board continues to review and evaluate the management of the company in the light of present circumstances whereby the resources of the company are fully invested in portfolio companies. It does not believe that it would be cost effective to seek to appoint a third party manager at the present time. The terms of the Board's remuneration are set out at the sections entitled, "Directors' Emoluments" and "Performance Fee", both of which appear in the Directors' Remuneration Report.

Share Issues and Open Offers

During the year, the Company issued 327,185 shares at a weighted average price of 54.6p per share.

Share Buy Backs

No buy backs were made during the year.

Share Capital, Rights Attaching to the Shares and Restrictions on Voting and Transfer

The Company's issued ordinary share capital as at 31 December 2009 is 8,115,376 ordinary shares of 50p each.

Subject to any suspension or abrogation of rights pursuant to relevant law or the Company's Articles of Association, the shares confer on their holders the following principal rights:

(a) the right to receive out of profits available for distribution such dividends as may be agreed to be paid (in the case of a final dividend in an amount not exceeding the amount recommended by the Board as approved by shareholders in a general meeting or in the case of an interim dividend in an amount determined by the Board). All dividends unclaimed for a period of 12 years after having become due for payment are forfeited automatically and cease to remain owing by the Company;

(b) the right, on a return of assets on a liquidation, reduction of capital or otherwise, to share in the surplus assets of the Company remaining after payment of its liabilities pari passu with the other holders of Ordinary shares; and

(c) the right to receive notice of and to attend and speak and vote in person or by proxy at any general meeting of the Company.

On a show of hands every member present or represented and voting has one vote and on a poll every member present or represented and voting has one vote for every share of which that member is the holder; the appointment of a proxy must be received not less than 48 hours before the time of the holding of the relevant meeting or adjourned meeting or, in the case of a poll taken otherwise than at or on the same day as the relevant meeting or adjourned meeting, be received after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll.

These rights can be suspended. If a member, or any other person appearing to be interested in shares held by that member, has failed to comply within the time limits specified in the Company's Articles of Association with a notice pursuant to s793 of the Companies Act 2006 (notice by the Company requiring information about interests in its shares), the Company can until the default ceases suspend the right to attend and speak and vote at a general meeting and if the shares represent at least 0.25% of their class the Company can also withhold any dividend or other money payable in respect of the shares (without any obligation to pay interest) and refuse to accept certain transfers of the relevant shares.

Shareholders, either alone or with other shareholders, have other rights as set out in the Company's Articles of Association and in company law.

A member may choose whether his shares are evidenced by share certificates (certificated shares) or held in electronic (uncertificated) form in CREST (the UK electronic settlement system). Any member may transfer all or any of his shares, subject in the case of certificated shares, to the rules set out in the Company's Articles of Association or in the case of uncertificated shares to the regulations governing the operation of CREST (which allow the Directors to refuse to register a transfer as therein set out); the transferor remains the holder of the shares until the name of the transferee is entered in the register of members.

The Directors may refuse to register a transfer of certificated shares in favour of more than four persons jointly or where there is no adequate evidence of ownership or the transfer is not duly stamped (if so required). The Directors may also refuse to register a share transfer if it is in respect of a certificated share which is not fully paid up or on which the Company has a lien provided that, where the share transfer is in respect of any share admitted to the Official List maintained by the UK Listing Authority, any such discretion may not be exercised so as to prevent dealings taking place on an open and proper basis, or if in the opinion of the Directors (and with the concurrence of the UK Listing Authority) exceptional circumstances so warrant, provided that the exercise of such power will not disturb the market in those shares.

Whilst there are no squeeze-out and sell out rules relating to the shares in the Company's Articles of Association, shareholders are subject to the compulsory acquisition provisions in s974 to s991 of the Companies Act 2006.

Appointment and Replacement of Directors

A person may be appointed as a Director of the Company by the shareholders in general meeting by Ordinary Resolution (requiring a simple majority of the persons voting on the relevant resolution) or by the Directors; no person, other than a Director retiring by rotation or otherwise, shall be appointed or reappointed a Director at any general meeting unless he is recommended by the Directors or, not less than seven nor more than 42 clear days before the date appointed for the meeting, notice is given to the Company of the intention to propose that person for appointment or re-appointment in the form and manner set out in the Company's Articles of Association.

Each Director who is appointed by the Directors (and who has not been elected as a Director of the Company by the members at a general meeting held in the interval since his appointment as a Director of the Company) is to be subject to election as a Director of the Company by the members at the first Annual General Meeting of the Company following his appointment. At each Annual General Meeting of the Company one third of the Directors for the time being, or if their number is not three or an integral multiple of three the number nearest to but not exceeding one-third, are to be subject to re-election.

The Companies Act allows shareholders in a general meeting by Ordinary Resolution (requiring a simple majority of the persons voting on the relevant Resolution) to remove any Director before the expiration of his or her period of office, but without prejudice to any claim for damages which the Director may have for breach of any contract of service between him or her and the Company.

A person also ceases to be a Director if he or she resigns in writing, ceases to be a Director by virtue of any provision of the Companies Act, becomes prohibited by law from being a Director, becomes bankrupt or is the subject of a relevant insolvency procedure, or becomes of unsound mind, or if the Board so decides following at least six months' absence without leave or if he or she becomes subject to relevant procedures under the mental health laws, as set out in the Company's Articles of Association.

Powers of the Directors

Subject to the provisions of the Companies Act, the Memorandum and Articles of Association of the Company and any directions given by shareholders by Special Resolution, the Articles of Association specify that the business of the Company is to be managed by the directors, who may exercise all the powers of the Company, whether relating to the management of the business or not. In particular the directors may exercise on behalf of the Company its powers to purchase its own shares to the extent permitted by shareholders.

International Financial Reporting Standards

As the Company is not part of a group it is not mandatory for it to comply with International Financial Reporting Standards. The Company does not anticipate that it will voluntarily adopt International Financial Reporting Standards.

Creditor Payment Policy

The Company's payment policy for the forthcoming financial year is to agree terms of payment before business is transacted and to settle accounts in accordance with those terms. The Company does not follow any code or standard with regard to creditor payment practice. At 31 December 2009 there were no trade creditors (2008: £nil).

Environmental Policy

The company always makes full effort to conduct its business in a manner that is responsible to the environment. This responsibility is always maintained in investment decisions where possible.

Going Concern

The Company's business activities and the factors likely to affect its future performance and position are set out in the Chairman's Statement and Investment Review on pages 6 to 12. Further details on the management of financial risk may be found in note 15 to the Financial Statements.

The Board receives regular reports from the Administration Manager and the Directors believe that, as no material uncertainties leading to significant doubt about going concern have been identified, it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

The assets of the Company consist mainly of cash resources and securities, some of which are readily realisable. The Company also has access to an overdraft facility. As such, the Company has adequate financial resources to continue in operational existence for the foreseeable future.

Substantial Shareholdings

As at the date of this report, no disclosures of major shareholdings had been made to the Company under Disclosure and Transparency Rule 5 (Vote Holder and Issuer Notification Rules).

Annual General Meeting

Notice convening the 2010 Annual General Meeting of the Company and a form of proxy in relation to the meeting can each be found at the end of this document.

Independent Auditor

Hyman Capital Services Limited offer themselves for reappointment as auditor. A Resolution to re-appoint Hyman Capital Services Limited will be proposed at the forthcoming Annual General Meeting.

Directors' Authority to Allot Shares, to Disapply Pre-emption Rights

The authority proposed under Resolution 7 is required so that the Directors may offer existing shareholders the opportunity to add to their investment or to offer to potential shareholders an opportunity to invest in the Company in a tax-efficient manner without the Company having to incur substantial costs. Any consequent modest increase in the size of the Company will, in the opinion of the Directors, be in the interests of shareholders generally. Any issue proceeds will be available for investment in line with the Company's investment policy.

Resolution 7 renews the Directors' authority to allot Ordinary shares. This would enable the Directors until May 2011, to allot up to 811,537 ordinary shares (representing approximately 10% of the Company's issued share capital as at 31 December 2009).

Resolution 8 renews and extends the Directors' authority to allot equity securities for cash without pre-emption rights applying in certain circumstances. This Resolution would authorise the Directors, until the date falling 15 months after the date of the passing of the Resolution or, if earlier, the conclusion of the next Annual General Meeting of the Company, to issue Ordinary shares for cash without pre-emption rights applying by way of an offer to existing shareholders, or re-issuing shares out of Treasury up to a maximum of 811,537 Ordinary shares (representing approximately 10% of the Company's issued share capital as at 31 December 2009). This power will be exercised only if, in the opinion of the Directors, it would be in the best interests of shareholders, as a whole.

By Order of the Board

Craig Hunter

Company Secretary

30 March 2010

Income Statement
		Year to 31 December 2009
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000

Gain on disposal of fixed asset investments	10	-	2,285	2,285

Loss on valuation of fixed asset investments	10	-	(198)	(198)

Income	2	113	-	113

Investment management fees	3	-	-	-
Other expenses	4	(130)	-	(130)

Return on ordinary activities before tax		(17)	2,087	2,070

Taxation on return on ordinary activities	6	-	-	-

Return on ordinary activities after tax		(17)	2,087	2,070
Earnings per share - basic and diluted	8	(0.2)p	26.0p	25.8p

· The 'Total' column of this statement is the profit and loss account of the Company; the supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies.

· All revenue and capital items in the above statement derive from continuing operations

· The accompanying notes are an integral part of the financial statements

· The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds

The Company has no recognised gains or losses other than the results for the year as set out above.

Income Statement

		Year to 31 December 2008
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000

Loss on valuation of fixed asset investments	10	-	(25)	(25)

Gain on valuation of current asset investments		-	547	547

Income	2	7	-	7

Investment management fees	3	-	-	-
VAT on management fees rebate		6	19	25

Other expenses	4	(136)	-	(136)

Return on ordinary activities before tax		(123)	541	418

Taxation on return on ordinary activities	6	-	-	-

Return on ordinary activities after tax		(123)	541	418
Earnings per share - basic and diluted	8	(1.6)p	7.0p	5.4p

· All revenue and capital items in the above statement derive from continuing operations.

· The accompanying notes are an integral part of the financial statements.

· The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds.

The Company has no recognised gains or losses other than the results for the year as set out above.

Reconciliation of Movements in Shareholders' Funds
	Year ended 31 December 2009	Year ended 31 December 2008
	£'000	£'000
Shareholders' funds at start of year	5,155	4,608
Return on ordinary activities after tax	2,070	418
Issue of equity (net of expenses)	179	129
Shareholders' funds at end of year	7,404	5,155

Balance Sheet
		As at 31 December 2009		As at 31 December 2008
	Notes	£'000	£'000	£'000	£'000

Fixed asset investments*	10		3,359		5,142
Current assets:
Debtors	11	29		79
Cash at bank		4,036		-
		4,065		79
Creditors: amounts falling due within one year	12	(20)		(32)
Overdraft	12	-		(34)
Net current assets			4,045		13

Net assets			7,404		5,155

Called up equity share capital	13	4,058		3,894
Share premium	14	1,737		1,722
Special distributable reserve	14	1,660		1,660
Capital redemption reserve	14	38		38
Capital reserve - gains and losses on disposals	14	2,256		(1,595)
- holding gains and losses	14	(1,547)		217
Revenue reserve	14	(798)		(781)
Total equity shareholders' funds			7,404		5,155
Net asset value per share	9		91.2p		66.2p

*At fair value through profit and loss

The accompanying notes are an integral part of the financial statements.

The statements were approved by the Directors and authorised for issue on 30 March 2010 and are signed on their behalf by:

James Otter

Chairman

Company No: 04221489

Cash Flow Statement
		Year to 31 December 2009	Year to 31 December 2008
	Notes	£'000	£'000

Net cash outflow from operating activities		21	(173)

Financial investment:
Purchase of fixed asset investments	10	(585)	(297)
Disposal of fixed asset investments	10	4,455	35

Financing:
Issue of shares		179	129
Increase in cash resources at bank		4,070	(306)

Reconciliation of Net Cash Flow to Movement in Net Funds
	Year to 31 December 2009	Year to 31 December 2008
	£'000	£'000
Increase/(decrease) in cash resources at bank	4,070	(306)
Opening net funds	(34)	272
Net funds at 31 December*	4,036	(34)

* Net funds at 31 December 2008 and 31 December 2009 comprised cash at bank

Reconciliation of Operating profit/(loss) before Taxation to Cash Flow from Operating Activities
	Year to 31 December 2009	Year to 31 December 2008
	£'000	£'000
Return on ordinary activities before tax	2,070	418
(Gain)/loss on disposal of fixed asset investments	(2,285)	25
Loss/(gain) on valuation of fixed asset investments	198	(547)
Decrease/(increase) in debtors	50	(76)
(Decrease)/increase in creditors	(12)	7
Outflow from operating activities	21	(173)

Notes to the Financial Statements

1. Principal Accounting Policies

Basis of accounting

The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice (UK GAAP), and the Statement of Recommended Practice (SORP) "Financial Statements of Investment Trust Companies" (revised 2009).

The principal accounting policies have remained unchanged from those set out in the Company's 2008 Annual Report and financial statements. A summary of the principal accounting policies is set out below.

The Company has designated all fixed asset investments as being held at fair value through profit and loss; therefore all gains and losses arising from investments held are attributable to financial assets held at fair value through profit and loss. Accordingly, all interest income, fee income, expenses and impairment losses are attributable to assets designated as being at fair value through profit and loss.

The preparation of the financial statements requires the Board to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Estimates and assumptions mainly relate to the fair valuation of the fixed asset investments particularly unquoted investments. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. The estimates and the assumptions are under continuous review with particular attention paid to the carrying value of the investments.

Capital valuation policies are those that are most important to the depiction of the Company's financial position and that requires the application of subjective and complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. The critical accounting policies that are declared will not necessarily result in material changes to the financial statements in any given period but rather contain a potential for material change. The main accounting and valuation policies used by the Company are disclosed below. Whilst not all of the significant accounting policies require subjective or complex judgements, the Company considers that the following accounting policies should be considered critical.

Investments are regularly reviewed to ensure that the fair values are appropriately stated. Quoted investments are valued in accordance with the bid-price on the relevant date. Unquoted investments are valued in accordance with current International Private Equity and Venture Capital ('IPEVC') valuation guidelines, although this does rely on subjective estimates such as appropriate sector earnings multiples, forecast results of investee companies, asset values of subsidiary companies and liquidity or marketability of the investments held.

Although the Company believes that the assumptions concerning the business environment and estimate of future cash flows are appropriate, changes in estimates and assumptions could require changes in the stated values. This could lead to additional changes in fair value in the future.

Investments

Purchases and sales of investments are recognised in the financial statements at the date of the transaction (trade date).

These investments will be managed and their performance evaluated on a fair value basis in accordance with a documented investment strategy and information about them has to be provided internally on that basis to the Board. Accordingly, as permitted by FRS 26, the investments will be designated as fair value through profit and loss (FVTPL) on the basis that they qualify as a group of assets managed, and whose performance is evaluated, on a fair value basis in accordance with a documented investment strategy. The Company's investments are measured at subsequent reporting dates at fair value.

In the case of investments quoted on a recognised stock exchange, fair value is established by reference to the closing bid price on the relevant date or the last traded price, depending upon convention of the exchange on which the investment is quoted. This is consistent with the International Private Equity and Venture Capital (IPEVC) guidelines.

In the case of unquoted investments, fair value is established by using measures of value such as the price of recent transactions, earnings multiple and net assets. This is consistent with IPEVC valuation guidelines.

Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the income statement and allocated to the capital reserve - holding gains/(losses).

In the preparation of the valuations of assets the Directors are required to make judgements and estimates that are reasonable and incorporate their knowledge of the performance of the investee companies.

Current asset investments

No current asset investments were held at 31 December 2009 or 31 December 2008. Should current assets be held, gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the capital reserve - gains/(losses) on disposal.

Income

Investment income includes interest earned on bank balances and from unquoted loan note securities. Fixed returns on debt are recognised on a time apportionment basis so as to reflect the effective yield, provided there is no reasonable doubt that payment will be received in due course.

Expenses

All expenses are accounted for on an accruals basis. Expenses are charged wholly to revenue with the exception of the investment management fee (should there be one), which has been charged 25% to the revenue account and 75% to the capital reserve to reflect, in the Directors' opinion, the expected long-term split of returns in the form of income and capital gains respectively from the investment portfolio.

Revenue and capital

The revenue column of the income statement includes all income and revenue expenses of the Company. The capital column includes gains and losses on disposal and holding gains and losses on investments. Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the income statement and allocated to the appropriate capital reserve on the basis of whether they are readily convertible to cash in full at the balance sheet date.

Taxation

Corporation tax payable is applied to profits chargeable to corporation tax, if any, at the current rate. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the "marginal" basis as recommended in the SORP.

Deferred tax is recognised on an undiscounted basis in respect of all timing differences that have originated but not reversed at the balance sheet date. Where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less tax, with the exception that deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing can be deducted.

Cash and liquid resources

Cash, for the purposes of the cash flow statement, comprises cash in hand and deposits repayable on demand, less overdrafts payable on demand. Liquid resources are current asset investments which are disposable without curtailing or disrupting the business and are either readily convertible into known amounts of cash at or close to their carrying values or traded in an active market. Liquid resources comprise term deposits of less than one year (other than cash), government securities, investment grade bonds and investments in money market managed funds, as well as OEICs. At the year end, no liquid resources were held by the Company.

Loans and receivables

The Company's loans and receivables are initially recognised at cost and subsequently measured at fair value, being amortised cost using the effective interest rate method.

Financing strategy and capital structure

FRS 29 'Financial Instruments: Disclosures' comprises disclosures' relating to financial instruments.

We define capital as shareholders' funds and our financial strategy in the medium term is to manage a level of cash that balances the risks of the business with optimising the return on equity. The Company currently has no borrowings but has access to a £100,000 overdraft facility provided by The Royal Bank of Scotland plc. At the 31 December 2009 this facility was unused (31 December 2008: £(34,000))

Financial instruments

The Company's principal financial assets are its investments and the policies in relation to those assets are set out above. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument.

Capital management is monitored and controlled using the internal control procedures set out on page 16 of this report. The capital being managed includes equity and fixed-interest investments, cash balances and liquid resources including debtors and creditors.

The Company does not have any externally imposed capital requirements.

Dividends

Dividends payable are recognised as distributions in the financial statements when the Company's liability to make payment has been established. This liability is established for interim dividends when they are declared by the Board, and for final dividends when they are approved by the shareholders.

2. Income

	Year to 31 December 2009	Year to 31 December 2008
	£'000	£'000
Money market securities	-	1
Bank interest receivable	10	-
Loan note interest receivable	103	6
	113	7

3. Investment Management Fees

	Year to 31 December 2009			Year to 31 December 2008
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment management fee	-	-	-	-	-	-
VAT on management fees rebate	-	-	-	6	19	25
Total fees	-	-	-	6	19	25

For the purposes of the revenue and capital columns in the income statement, the management fee has been allocated 25% to revenue and 75% to capital, in line with the Board's expected long-term return in the form of income and capital gains respectively from the Company's investment portfolio.

4. Other Expenses

	Year to 31 December 2009	Year to 31 December 2008
	£'000	£'000
Directors' remuneration	40	35
Fees payable to the Company's auditor for the audit of the financial statements	6	6
Fees payable to the Company's auditor for other services - tax compliance	2	1
Legal and professional expenses	42	52
Accounting and administration services	25	28
Other expenses	15	14
	130	136

For the year ended 31 December 2009 the running costs were 1.8% (2008: 2.6%) of net assets.

5. Directors' Remuneration

	Year to 31 December 2009	Year to 31 December 2008
	£'000	£'000
Directors' emoluments
James Otter (Chairman)	16	15
John Hustler	12	10
Charles Breese	12	10
	40	35

None of the Directors received any other remuneration from the Company during the year. The Company has no employees other than non-executive Directors. The average number of non-executive Directors in the year was three (2008: three).

6. Tax on Ordinary Activities

The corporation tax charge for the period was £nil (2008: £nill)

Factors affecting the tax charge for the current year:

The current tax charge for the period differs from the standard rate of corporation tax in the UK of 21% (2008: 20%).

The differences are explained below.

Current tax reconciliation:	Year to 31 December 2009	Year to 31 December 2008
	£'000	£'000
Return on ordinary activities before tax	(17)	(122)
Current tax at 21% (2008: 20%)	(4)	(24)
Unrecognised tax losses	4	24
Total current tax charge	-	-

Approved VCTs are exempt from tax on capital gains within the Company. Since the Directors intend that the Company will continue to conduct its affairs so as to maintain its approval as a VCT, no current deferred tax has been provided in respect of any capital gains or losses arising on the revaluation or disposal of investments.

7. Dividends

	Year to 31 December 2009	Year to 31 December 2008
	£'000	£'000
Recognised as distributions in the financial statements for the period
Previous year's final dividend	-	-
Current period's interim dividend	-	-
	-	-
Paid and proposed in respect of the period
Interim dividend paid (post-year end) - 10p per share	812	-
Proposed final dividend - 5p per share (2008: 0p per share)	406	-
	1,218	-

The final dividend of 5p per share for the year ended 31 December 2009, subject to shareholder approval at the annual general meeting, will be paid on 2 July 2010 to those shareholders on the register on 4 June 2010.

8. Earnings per Share

The total earnings per share is based on 8,017,636 (31 December 2008: 7,684,458) shares, being the weighted average number of shares in issue during the year, and a return for the year totalling £2,070,000 (31 December 2008: £418,000).

The revenue and capital earnings per share are based on 8,017,636 (31 December 2008: 7,684,458) shares, being the weighted average number of shares in issue during the year, and a revenue return for the year totalling £(17,000) (31 December 2008: £(123,000)) and a capital return for the year totalling £2,087,000 (31 December 2008: £541,000).

There are no potentially dilutive capital instruments in issue and, therefore no diluted returns per share figures are relevant. The basic and diluted earnings per share are therefore identical.

9. Net Asset Value per Share

The calculation of NAV per share as at 31 December 2009 is based on 8,115,376 (31 December 2008: 7,788,191) ordinary shares in issue at that date.

10. Fixed Asset Investments

	Unquoted investments	Quoted investments	Total
	£'000	£'000	£'000

Book cost as at 31 December 2008	3,689	1,236	4,925
Revaluation to 31 December 2008	870	(653)	217
Valuation at 31 December 2008	4,559	583	5,142



Opening valuation at 1 January 2009	4,559	583	5,142
Purchases at cost	534	51	585
Disposal proceeds	(4,455)	-	(4,455)
Gain on disposal of investments - current year	2,285	-	2,285
Revaluation in year	(326)	128	(198)
Closing valuation at 31 December 2009	2,597	762	3,359

Book cost at 31 December 2009	3,619	1,287	4,906
Revaluation to 31 December 2009	(1,022)	(525)	(1,547)
Valuation at 31 December 2009	2,597	762	3,359

Further details of the fixed asset investments held by the Company are shown within the Investment Review on pages 9 to 12.

All investments are designated as fair value through profit or loss at the time of acquisition, and all capital gains or losses on investments so designated. Given the nature of the Company's venture capital investments, the changes in fair value of such investments recognised in these financial statements are not considered to be readily convertible to cash in full at the balance sheet date and accordingly these gains are treated as holding gains or losses.

When the Company revalues the investments still held during the period, any gains or losses arising are credited / charged to the Capital reserve - holding gains/(losses).

When an investment is sold any balance held on the Capital reserve - holding gains/(losses) is transferred to the Capital reserve - gains/(losses) on disposal as a movement in reserves.

At 31 December 2009 there were no commitments in respect of investments approved by the Manager but not yet completed.

11. Debtors

	31 December 2009	31 December 2008
	£'000	£'000
Prepayments and accrued income	29	28
Other debtors*	-	51
	29	79

*Other debtors include an amount of £50,000 due from the pension fund of a Director in respect of the issue of shares which has subsequently been paid.

12. Creditors: Amounts Falling Due Within One Year

	31 December 2009	31 December 2008
	£'000	£'000
Bank overdraft	-	34
Accruals	18	30
Other creditors	2	2
	20	66

13. Share Capital

	31 December 2009	31 December 2008
	£'000	£'000
Authorised:
50,000,000 Ordinary shares of 50p	25,000	25,000
Allotted and fully paid up:
8,115,376 Ordinary shares of 50p (2008: 7,788,191)	4,058	3,894

The capital of the Company is managed in accordance with its investment policy with a view to the achievement of its investment objective as set on page 15. The Company is not subject to any externally imposed capital requirements.

During the year, the Company issued 327,185 Ordinary shares at a weighted average price of 54.6p per share. The nominal value of these shares was £163,592.50 and total consideration was £178,779.90.

14. Reserves

	Share Premium	Special distributable reserve	Capital redemption reserve	Capital reserve gains/(losses) on disposal	Capital reserve holding gains/(losses)	Revenue reserve
	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2009	1,722	1,660	38	(1,595)	217	(781)
Return on ordinary activities after tax	-	-	-	-	-	(17)
Issue of equity	15	-	-	-	-	-
Current period gains/losses on disposal	-	-	-	2,285	-	-
Prior period holding gains/losses now crystallised	-	-	-	1,566	(1,566)	-
Current period gains/losses on fair value of investments	-	-	-	-	(198)	-
Balance as at 31 December 2009	1,737	1,660	38	2,256	(1,547)	(798)

When the Company revalues its investments during the period, any gains or losses arising are credited/ charged to the income statement. Changes in fair value of investments held are then transferred to the capital reserve - holding gains/(losses). When an investment is sold any balance held on the capital reserve - holding gains/(losses) reserve is transferred to the capital reserve - gains/(losses) on disposal as a movement in reserves.

The purpose of the special distributable reserve was to create a reserve which will be capable of being used by the Company to pay dividends and for the purpose of making repurchases of its own shares in the market with a view to narrowing the discount at which the Company's shares trade to net asset value.

15. Financial Instruments and Risk Management

The Company's financial instruments comprise equity and loan note investments, cash balances and liquid resources including debtors and creditors. The Company holds financial assets in accordance with its investment policy of investing mainly in a portfolio of VCT-qualifying quoted and unquoted securities whilst holding a proportion of its assets in cash or near-cash investments in order to provide a reserve of liquidity.

Fixed asset investments (see note 10) are valued at fair value. Unquoted investments are carried at fair value as determined by the Directors in accordance with current venture capital industry guidelines. The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. The Directors believe that the fair value of the assets are held at the year end is equal to their book value.

In carrying on its investment activities, the Company is exposed to various types of risk associated with the financial instruments and markets in which it invests. The most significant types of financial risk facing the Company are price risk, interest rate risk, credit risk and liquidity risk. The Company's approach to managing these risks is set out below together with a description of the nature and amount of the financial instruments held at the balance sheet date.

Market risk

The Company's strategy for managing investment risk is determined with regard to the Company's investment objective, as outlined on page 15. The management of market risk is part of the investment management process and is a central feature of venture capital investment. The Company's portfolio is managed with regard to the possible effects of adverse price movements and with the objective of maximising overall returns to shareholders. Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies quoted on a recognised stock exchange, though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes. The overall disposition of the Company's assets is regularly monitored by the Board.

Details of the Company's investment portfolio at the balance sheet date are set out on page 9.

35.1% (2008: 88.4%) by value of the Company's net assets comprises investments in unquoted companies held at fair value. The valuation methods used by the Company include the application of a price/earnings ratio derived from listed companies with similar characteristics, and consequently the value of the unquoted element of the portfolio can be indirectly affected by price movements on the London Stock Exchange. A 10% overall increase in the valuation of the unquoted investments at 31 December 2009 would have increased net assets and the total return for the year by £260,000 (2008: £456,000) an equivalent change in the opposite direction would have reduced net assets and the total return for the year by the same amount.

10.3% (2008: 11.3%) by value of the Company's net assets comprises equity securities listed on the London Stock Exchange or quoted on AIM or PLUS. A 10% increase in the bid price of these securities as at 31 December 2009 would have increased net assets and the total return for the year by £76,000 (2008: £58,000); a corresponding fall would have reduced net assets and the total return for the year by the same amount.

Interest rate risk

Some of the Company's financial assets are interest-bearing, of which some are at fixed rates and some variable. As a result, the Company is exposed to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates.

Floating rate

The Company's floating rate investments comprise cash held on interest-bearing deposit accounts, libor rate on one loan note and, where appropriate, within interest bearing money market securities. The benchmark rate which determines the rate of interest receivable on such investments is the bank base rate, which was 0.5% at 31 December 2009 (2008: 2.0%). The amounts held in floating rate investments at the balance sheet date were as follows:

	31 December 2009 £000	31 December 2008 £000

Cash at bank	4,036	(34)
	4,036	(34)

A 1% increase in the base rate would increase income receivable from these investments and the total return for the period by £40,000 (£nil); a corresponding fall would have reduced net assets and the total return for the year by the same amount.

Credit risk

There were no significant concentrations of credit risk to counterparties at 31 December 2009 or 31 December 2008.

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Board carries out a regular review of counterparty risk. The carrying values of financial assets represent the maximum credit risk exposure at the balance sheet date.

At 31 December 2009 the Company's financial assets exposed to credit risk comprised the following:

	31 December 2009 £000	31 December 2008 £000

Cash at bank	4,036	(34)
	4,036	(34)

The Company's interest-bearing deposit and current accounts are maintained with The Royal Bank of Scotland plc.

Liquidity risk

The Company's financial assets include investments in unquoted equity securities which are not traded on a recognised stock exchange and which generally may be illiquid. They also include investments in AIM-quoted companies, which, by their nature, involve a higher degree of risk than investments on the main market. As a result, the Company may not be able to realise some of its investments in these instruments quickly 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 Company's liquidity risk is managed on a continuing basis by the Board in accordance with policies and procedures laid down by the Board. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.

The Company maintains sufficient cash facilities to pay accounts payable and accrued expenses. At 31 December 2009, the Company's cash balance was £4.04 million (2008: £(34,000)).

16. Post Balance Sheet Events

The following events occurred between the balance sheet date and the signing of these financial statements:

· January 2010 - £50,000 investment in Freehand Surgical Limited

· January 2010 - £200,000 investment in Insense Limited

· January 2010 - £200,000 investment in Quotient Diagnostics Limited

· January 2010 - £250,000 investment in Exosect Limited

· February 2010 - £218,000 investment in Immunobiology Limited

· February 2010 - £100,000 investment in Glide Pharmaceutical Technologies Limited

· February 2010 - £300,000 investment in Scancell plc

· March 2010 - £200,000 investment in Hallmarq Veterinary Imaging Limited

· March 2010 - £50,000 investment in Reneuron plc

· March 2010 - £60,000 investment in Eykona Technologies Limited

· March 2010 - Interim dividend of 10p per Ordinary share paid

17. Contingencies, Guarantees and Financial Commitments

As stated in the Chairman's Statement, the Company may be entitled to deferred consideration of up to £2.5 million based on performance from DxS over the next few years.

There were no further contingencies, guarantees or financial commitments as at 31 December 2009 (2008: £nil).

18. Related Party Transactions

The Board acts as the investment manager of the Company. No remuneration has been paid to the Board during the year in its capacity as investment manager. The Directors are entitled to participate in a performance bonus calculated as 20% of sums returned to shareholders by way of dividends and capital distributions of whatever nature, which in aggregate exceeds the sum of 80p per share (including dividends paid to date, i.e. 1.25p, but excluding any sums returned to shareholders from HMRC in the year of subscription). At the 31 December 2009, no performance fee was payable (2008: nil). The Board is also entitled to be repaid all reasonable travelling, subsistence and other expenses incurred by them respectively whilst conducting their duties as Directors.

Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of Hygea vct plc ("the Company") will be held at the offices of Matrix Corporate Capital LLP, 1 Vine Street, London, W1J 0AH on Thursday 6 May 2010 at 11.30 a.m. for the following purposes:

ORDINARY BUSINESS

To consider and if thought fit, pass the following as Ordinary Resolutions

1. That the Directors' Annual Report and Accounts and the auditors' report thereon for the year ended 31 December 2009 be received and adopted.

2. That the Directors' Remuneration Report for the year ended 31 December 2009 be received and adopted.

3. To approve a final dividend of 5p per ordinary share in respect of the financial year ended 31 December 2009.

4. That James Otter be re-elected as a Director of the Company.

5. That Hyman Capital Services Limited be re-appointed as auditors of the Company until the conclusion of the next Annual General Meeting of the Company at which accounts are laid before the Members.

6. That the Directors be authorised to determine the auditor's remuneration.

SPECIAL BUSINESS

7. AUTHORITY TO ALLOT RELEVANT SECURITIES

THAT the Directors be and are generally and unconditionally authorised in accordance with s551 of the Companies Act 2006 to exercise all the powers of the Company to allot shares in the Company up to a maximum nominal amount of £811,537 (representing approximately 10% of the Ordinary share capital in issue at today's date) such authority to expire at the later of the conclusion of the Company's Annual General Meeting next following the passing of this Resolution and the expiry of 15 months from the passing of the relevant Resolution (unless previously revoked, varied or extended by the Company in a general meeting but so that such authority allows the Company to make offers or agreements before the expiry thereof, which would or might require relevant securities to be allotted after the expiry of such authority).

To consider and, if thought fit, pass as a Special Resolution:

8. EMPOWERMENT TO MAKE ALLOTMENTS OF EQUITY SECURITIES

TO empower the Directors pursuant to s571 of the Companies Act 2006 to allot or make offers or agreements to allot equity securities (as defined in s560(1) of the said Act) for cash pursuant to the authority referred to in Resolution 7 as if s561 (1) of the Act did not apply to any such allotments and so that:

(a) reference to allotment in this Resolution shall be construed in accordance with s560(2) of the Act; and

(b) the power conferred by this Resolution shall enable the Company to make any offer or agreement before the expiry of the said power which would or might require equity securities to be allotted after the expiry of the said power and the Directors may allot equity securities in pursuance of such offer or agreement notwithstanding the expiry of such power.

And this power, unless previously varied, revoked or renewed, shall come to an end at the conclusion of the Annual General Meeting of the Company next following the passing of this Resolution or, if earlier, on the expiry of 15 months from the passing of this Resolution.

By order of the Board

39 Alma Road

St Albans

AL1 3AT

Craig Hunter, Company Secretary

30 March 2010

NOTES:

(a) A member entitled to attend and vote at the Annual General Meeting may appoint one or more proxies to attend and vote on his or her behalf. A proxy need not be a member.

(b) A form of proxy is enclosed which, to be effective, must be completed and delivered to the registrars of the Company, Capita Registrars, Proxies Department, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by no later than 48 hours before the time the Annual General Meeting is scheduled to begin. The completion and return of the form of proxy will not affect the right of a member to attend and vote at the Annual General Meeting.

(c) Copies of the Directors' Letters of Appointment, the Register of Directors' Interests in the Ordinary shares of the Company kept in accordance with the Listing Rules Articles of Association will be available for inspection at the registered office of the Company during usual business hours on any weekday from the date of this notice until the Annual General Meeting, and at the place of that meeting for at least 15 minutes prior to the commencement of the meeting until its conclusion.

Enquiries:

Charles Breese, Hygea VCT plc on 01280 703482 or larpentnewton@btinternet.com

Roland Cornish, Beaumont Cornish Limited on 020 7628 3396

This information is provided by RNS

The company news service from the London Stock Exchange

END

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Seneca Growth Capital Vct (HYG)

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Annual Financial Report

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Objective and Investment Policy

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Year ended

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£'000

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Interim dividend paid since the year end - 10p per share

Final dividend proposed - 5p per share (2008 - 0p)

812

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The proposed final dividend will, if approved by shareholders, be paid on 2 July 2010 to shareholders on the register on 4 June 2010.

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31 December 2009

31 December 2008

Management

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Substantial Shareholdings

As at the date of this report, no disclosures of major shareholdings had been made to the Company under Disclosure and Transparency Rule 5 (Vote Holder and Issuer Notification Rules).

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