Hygea VCT plc : Hygea VCT plc : Annual Financial Report

           Hygea VCT plc : Hygea VCT plc : Annual Financial Report

7.00am 22 March 2013

                                Hygea VCT plc
                          ("Hygea" or the "Company")

                        Annual Report and Accounts and
                       Notice of Annual General Meeting

The directors are pleased to announce  the audited results of the Company  for 
the year ended 31 December 2012 and  a copy of the Annual Report and  Accounts 
is expected to be sent to Shareholders shortly. 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 Panmure Gordon (UK) Limited, One New Change, London, EC4M 9AF on  Wednesday 
8 May 2013 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 Year to 31 December
                                                      2012                2011
Net assets (£'000s)                                  9,594               5,733
Return on ordinary activities after
tax (£'000s)                                         3,861               (143)
Earnings per share                                   47.6p              (1.8p)
Net asset value per share                           118.2p               70.6p
Dividends paid since inception                      21.25p              21.25p
Total return (NAV plus dividends paid)             139.45p              91.85p

Chairman's Statement
I am pleased to present the 2012 annual report to shareholders in Hygea vct
plc.

In last year's statement I set out in detail the overall background as to why
your board is optimistic about the prospects for MedTech companies conforming
to Hygea's investment template - the key themes were as follows:

a) Healthcare costs/emerging technologies - the NHS is going to have to
achieve more with less resource. This plays to a key requirement of Hygea's
investment template, which calls for investee companies to determine how their
technology and chosen business model are going to result in better patient
outcomes at lower total cost - such companies are well positioned to deliver
attractive returns and, incidentally, a positive social impact.

b) Pensions - I expressed the view that many people will find that their
pension expectations will not be met in full and that they will need to
continue to work until they are older in order to maintain their standard of
living. This will lead to increasing demand for healthcare solutions enabling
people to remain economically active for longer.

Another year on, there is increasingly widespread recognition that the future
will not be a return to the way things were before 2008 and that the themes
described above are likely to impact the future. Accordingly, our optimism
about very carefully selected MedTech companies has, if anything, increased.

2012 has been an encouraging year because it demonstrated the impact which the
change in value of one investee can have on the fund's Net Asset Value ("NAV")
- I refer to Scancell in which the value of Hygea's holding rose from £891,000
at 31^st December 2011 to almost £7 million at 31^st December 2012. Your Board
adopts a similar process for considering what actions are required across all
of Hygea's investees, with a key feature being the composition of the Board
and advisory committee (if there is one) of each investee, on the grounds that
it is high quality teams which build good businesses. It is encouraging to see
that the supply of MedTech relevant high quality business people appears to be
increasing, and mention of this is made in respect of specific investee
companies in the Investment Review.

Your Board were delighted that shareholders voted in favour of the
continuation of the Company and I am also pleased to report that we have
received Court approval for the cancellation of the Share Premium account
which will allow us to resume the payment of dividends to which I refer below.

Results and Dividends
During the year our revenue return on ordinary activities saw an increased
loss of 1.9p per share compared to 1.1p last year. The revenue loss in 2011
was abnormally low due to the receipt of a significant amount of loan interest
from Hallmarq on repayment of the loan principal, as well as a lower charge
for administration fees due to an overpayment in previous years. I am pleased
to report that the total expense ratio at 1.8% remains below most VCTs, not
least due to the increase in NAV.

The capital return per share amounted to a profit of 49.5p compared to a loss
in 2011 of 0.7p principally due to the rise in the bid price of Scancell
shares from 6p to 47p per share as at 31 December 2012. It was also pleasing
to note the receipt of a further £96,000 from the earn-out following the sale
of DxS. NAV is now 118.2p per share compared to 70.6p per share at the end of
2011 giving shareholders a total return of 139.45p per share since inception,
after providing £1.2 million (ie 14.8p per share) under the Board performance
fee arrangements referred to in the following paragraph.

When the management of the Company was assumed by the Board in 2007,
shareholders will be aware that the performance fee arrangements were
redesigned so that no such fees were payable until shareholders had received
80p per share in distributions. Since the total return (NAV and dividends) has
now reached a sum in excess of 80p, your Board has deemed it prudent to accrue
for the performance fee, being 20% of the total return in excess of 80p per
share, and this sum (£1.2 million) has been included as a creditor in the
accounts. Under the agreement, no payment in respect of this performance fee
is yet due.

Overall the total return for the year amounted to a profit of 47.6p per share
compared to a loss in 2011 of 1.8p per share.

Your Board continues to aspire to the payment of an annual dividend of 5p per
share, albeit that the achievement of this will be over a period of years
because realisations do not necessarily occur so as to enable dividends to be
paid each year - your Board is conscious that no dividend was paid in respect
of 2011 and that no dividend has been declared in respect of 2012. In the
light of the significant increase in the value of our Scancell and other
holdings, we have realised £217,000 in cash since the year end. We have
liquidated some of our quoted portfolio; however this has yet to allow us to
realise sufficient funds for the payment of a dividend.

Portfolio Review
Follow on investments in existing investee companies
It is our policy to continue to support our existing investee companies where
a good business case continues to be made for further investment. In
particular, we aim to maintain our percentage holding where our liquid cash
resources allow, but the rules for maintaining our VCT qualifying percentage,
which are particularly difficult for small funds such as Hygea, often limit
our ability in this regard.

During the year under review we have invested further funds in Axon (£50,000),
ImmunoBiology (£50,000) and OR Productivity (£30,000). We have not invested in
any new companies during the year.

Since the end of the year, we have realised £217,000 through the sale of a
third of our holding in Epistem and 300,000 shares in Scancell. Following the
realisation of these holdings, we have invested or committed further funds in
Axon (£100,000), Eykona (£100,000) and OR Productivity (£100,000).

VCT Qualifying Status
PricewaterhouseCoopers LLP continues to provide the Board with advice on the
on-going 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.

Future Prospects
Your Board have been considering the future direction of the Company. As has
always been envisaged for a fund investing in earlier stage businesses,
realisation of significant gains is not a realistic short term objective.
Nevertheless we have been pleased to achieve two excellent exits in 2009,
following which we paid a total of 20p per share in dividends, and following
the re-rating of the value of Scancell, have commenced realisation of part of
our quoted portfolio. This has allowed us to continue to support existing
investee companies. As I mentioned above, we believe that good progress is
being made in a number of investee companies and we remain optimistic that we
will see, over the next three years, a significant further enhancement of our
NAV - this, in combination with the liquidity event strategies being pursued
by a number of the investee companies, should allow us to achieve
distributions which bring us in line with our target of 5p per annum described
above.

It is also clear that it is difficult for a small fund to continue to support
its investee companies and retain our stake without dilution and to date we
believe we have been successful in balancing the needs of our investee
companies with those of our shareholders. As I mentioned in my last Chairman's
statement, we are exploring ways in which we might attract further funds into
expanding Hygea but are not yet in a position to put a recommendation to
shareholders. However we remain active in addressing this issue and will
communicate our proposals as soon as we have identified a suitable course of
action.

Annual General Meeting
The Company's Annual General Meeting will take place on Wednesday 8th May 2013
at 11.30 a.m. I look forward to welcoming you to the meeting which will be
held at the offices of Panmure Gordon, One New Change, London EC4M 9AF. In
order to assist with security arrangements, it would be helpful if
shareholders would indicate on the proxy form if they intend to attend the
AGM.

Outlook
We now have a balanced portfolio of six AIM quoted companies and 11 unquoted
companies. Many companies in the MedTech sector continue to find the
fundraising climate challenging and so we continue to use our resources to
help those in our portfolio, which we believe have a strong business case and
prospects for the future, by contributing to their requests for further funds.
As you can see from the accounts, we are effectively fully invested for the
moment, but will seek to realise funds from our AIM portfolio when we consider
such requests provide a strong case for further investment.

Your Board remain cautiously optimistic about the prospects for the MedTech
sector, especially for those companies which conform to the Company's
investment template, as providing better healthcare outcomes at lower cost
provides a sound foundation for businesses, even in a tougher economic
climate.




James Otter
Chairman
21 March 2013

Investment Review

Investment Portfolio

                                                   Carrying    Movement in the
                                                   value at         year to 31
                                     Unrealised 31 December      December 2012
Unquoted            Investment at profit/(loss)        2012            (£'000)
Investments          cost (£'000)       (£'000)     (£'000)
Hallmarq Veterinary                                                          -
Imaging Limited             1,116         (257)         859
OR Productivity plc           455             -         455                  -
Glide                                                                      193
Pharmaceutical
Technologies
Limited                       326          (12)         314
Exosect Limited               250             -         250                  -
Insense Limited               509         (333)         176              (221)
ImmunoBiology                                                            (962)
Limited                       868         (719)         149
Arecor Limited                127             5         132                  5
Archimed LLP                  122             -         122                  -
Axon Limited                  200          (92)         108              (174)
Wound Solutions                                                              -
Limited                       350         (264)          86
Eykona Technologies                                                       (72)
Limited                       100          (72)          28
Total unquoted                                                         (1,231)
investments                 4,423       (1,744)       2,679
Quoted Investments
Scancell plc                1,061         5,919       6,980              6,089
Omega Diagnostics                                                          134
plc                           356            17         373
EKF Diagnostics plc           260            94         354                 70
EpiStem Holdings                                                            98
plc                            66           209         275
Reneuron plc                   50          (31)          19               (23)
Tristel plc                    55          (26)          29                (9)
Total quoted                                                             6,359
investments                 1,848         6,182       8,030
Total investments           6,271         4,438      10,709              5,128

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 and conform to the investment template.

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.

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.

Valuation Methodology
Quoted and unquoted investments are valued in accordance with the accounting
policy included in the annual Report and Accounts, 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)

Scancell plc
Background: Scancell is an AIM listed, Nottingham-based biotechnology  company 
that is developing a pipeline of therapeutic vaccines to target various  types 
of cancer, with the first target  being melanoma. 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, which is  an area of  emerging 
importance for which a number of big pharmas do not have in-house technology.
Update since 2011: the Phase I trial for the melanoma treatment has  continued 
to plan, with preliminary results announced  in December 2012 which were  very 
encouraging in terms  of the clinical  response and the  positive immune  data 
response. The Phase  II trial is  on schedule to  be completed by  the end  of 
2013. In August  2012 a new  platform technology, Moditope,  was announced  - 
this could become an important component  of many therapeutic vaccines in  the 
future, both under development at Scancell and other companies. The company is
planning to achieve a liquidity event in respect of its immunobody platform in
the course of 2014.

Initial investment date: December 2003
Cost:                    £1,061,000
Valuation:               £6,980,000
Equity held:             7.6%
Last audited accounts:   30 April 2012
Turnover:                £nil
Profit before tax:       £557,000 (including profit of £2.5 million from
                         discontinued operations)
Net assets:              £7.0 million

Hallmarq Veterinary Imaging Limited
Background: Hallmarq specialises in developing low cost magnetic resonance
imaging systems for the vet market. 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 - this was the first MRI scanner in the world
for standing horses - the business model relies principally on a share of scan
fees (ie recurring income) rather than systems sales. The next development
project is an MRI scanner for companion animals, a market which is
significantly larger than the equine market.
Update since 2011: although good progress has been made on completing the
development of the companion animal scanner, it is now due for launch in 2013
rather than 2012. The audited accounts to August 2012 showed sales of £3.3
million (2011: £2.7 million) and pre-tax profit of £289,000 (2011: £(12,000)).

Initial investment date: August 2005
Cost:                    £1,116,000
Valuation:               £859,000
Equity held:             11.0%
Last audited accounts:   31 August 2012
Turnover:                £3.3 million
Profit before tax:       £289,000
Net assets:              £4.1 million

OR Productivity plc
Background: At the end of 2011, Freehand 2010 (a Hygea investee) was acquired
by OR Productivity plc (ORP) in exchange for ORP shares. ORP has established
the nucleus of a very strong team (led by the former R&D director of Smiths
Medical) for commercialising productivity enhancing technologies within the
Minimally Invasive Medicine sector - the team is aware of a number of
companies within this sector which have good technologies but lack the skills
to commercialise their technology efficiently - Freehand 2010 is ORP's first
acquisition. Freehand 2010 owns the intellectual property to technology
incorporated in a product for robotically controlling the laparoscope (part of
the camera system) used by keyhole surgeons - the camera system is used to put
an image of the inside of the patient's body onto a screen, and the surgeon
uses this screen when operating to view the procedure. Keyhole surgery is
growing in relation to open surgery because the smaller incisions required by
the former result in reduced pain and reduced recovery time (hospital stays
are very expensive). The business model is free placement of the system and
sales of a consumable per operation to generate recurring income - in 2008
there were estimated to be c.3.8 million keyhole operations in Europe and the
US (Medtech Insight 2010), a sector predicted to grow at 9% pa (Medtech
Insight 2007). A key market development is the emergence of HD and 3D for use
by keyhole surgeons to provide improved depth of vision. However, viewers of
HD and 3D images generally become nauseous if the picture is not steady - the
Freehand product appears to be being regarded as the leading solution
worldwide for enabling HD and 3D camera systems for keyhole surgery to provide
a rock steady image.
Update since 2011: ORP has overseen the development of V1.2 of the Freehand
instrument incorporating modifications which make it easier to set up and make
it applicable to a much higher percentage of keyhole operations. V1.2 was
launched in May 2012, since when good progress has been made in developing
relationships with procedure specific Key Opinion Leader surgeons - this is a
key step because game changing products need to be virally marketed and
surgeons tend to form procedure specific groups internationally. The company
raised £1.9 million of new equity in 2012.

Initial investment date: March 2011
Cost:                    £455,000
Valuation:               £455,000
Equity held:             13.2%
Last audited accounts:   31 March 2012
Turnover:                £240,000
Loss before tax:         £1.5 million
Net assets:              £(181,000)

Omega Diagnostics plc
Background: 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, Allergy and Autoimmune Disease,
and Infectious Disease. One of its products is Food Detective for home testing
of allergies brought about by 59 commonly eaten foods. In December 2010
Allergopharma was acquired for £7.75 million - it produces manual assays for
testing for allergies - part of the strategy for developing the Allergopharma
business is to leverage off Omega's distribution reach, and take the assays
into the much larger automated market using Omega's Genarrayt platform and the
IDS-iSYS platform, which has been licensed from AIM listed Immunodiagnostic
Systems Holdings.
Update since 2011: in June 2012, Omega entered into agreements providing it
with worldwide exclusive access to two point-of-care tests, one for CD4 and
the other for Syphilis - testing for CD4 T - cells is a vital component for
the management and care of people suffering from HIV, which affects c.33
million people worldwide - the key competition is currently flow cytometry,
which involves laboratories and centralised testing. The interim results to
September 2012 showed sales of £5.5 million (2011: £5.5 million) and adjusted
pre-tax profit of £430,000 (2011: £427,000).

Initial investment date: August 2007
Cost:                    £356,000
Valuation:               £373,000
Equity held:             <1%
Last audited accounts:   31 March 2012
Turnover:                £11.1 million
Profit before tax:       £479,000
Net assets:              £13.3 million

EKF Diagnostics Holdings plc
Background: EKF is an AIM listed company which David Evans (formerly chairman
of, inter alia, DxS) and Julian
Baines took board control of in Q4 2009, with the objective of building a
leading diagnostic business with a
particular focus on the needs of diabetic patients - Messrs Evans and Baines
had been chairman and CEO
respectively of AIM listed point of care diagnostics business BBI, which
listed on AIM in 2004 and was acquired by Alere (formerly Inverness Medical)
for £84 million in late 2007. EKF completed its first acquisition in July
2010, which has been followed by two smaller acquisitions - one of the latter
was Quotient Diagnostics, in which Hygea invested in January 2010 and
exchanged its investment for EKF shares in October 2010.
Update since 2011: the January 2013 update re. the final results to December
2012 reported that they are anticipated to show sales of c.£26.1 million
(2011: £21.7 million) and year end net cash of £1.9 million.

Initial investment date: June 2010
Cost:                    £260,000
Valuation:               £354,000
Equity held:             <1%
Last audited accounts:   31 December 2011
Turnover:                £21.7 million
Loss before tax:         £2.4 million
Net assets:              £37.4 million

Glide Pharmaceutical Technologies Limited
Background: Glide Pharma has developed a needle-free drug delivery technology
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,
with the objective of delivering both better patient outcomes and also reduced
supply chain costs.
Update since 2011: a new CEO was appointed at the beginning of 2012 - he
brought 30 years experience in the drug delivery industry - in 2001 he founded
drug delivery company Meridica, which he led until 2004 when it was acquired
by Pfizer for $140 million. The company has won two funding awards totalling
£2.55 million, one from the Technology Strategy Board and the other from The
Biomedical Catalyst programme. In February 2013, a £14 million equity
fundraising was completed, substantially from Invesco Perpetual.

Initial investment date: November 2005
Cost:                    £326,000
Valuation:               £314,000
Equity held:             2%
Last audited accounts:   31 December 2011
Turnover:                £57,000
Loss before tax:         £969,000
Net assets:              £369,000

EpiStem Holdings plc
Background: EpiStem listed on AIM in April 2007. Its knowledge is based on
over 30 years research at The Christie NHS Foundation Trust, 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 Personalised Medicine division and
a Novel Therapeutics division. In 2009, the launch of Genedrive, a
point-of-care molecular diagnostic instrument, was announced.
Update since 2011: re Genedrive's TB application, sales agreements were signed
with one of India's largest diagnostic testing companies for sales in India
and with Becton Dickinson for the rest of the world, with the first regulated
product launch due in Q1 2013 - the Becton Dickinson agreement included an
upfront payment to EpiStem of $1 million, with further milestone payments of
up to $3 million, alongside escalating supply volumes over the next five
years. New Genedrive tests under development include malaria, dengue, HIV, HCV
and a range of sexually transmitted diseases.

Initial investment date: April 2007
Cost:                    £66,000
Valuation:               £275,000
Equity held:             <1%
Last audited accounts:   30 June 2012
Turnover:                £5.6 million
Loss before tax:         £726,000
Net assets:              £8.9 million

Exosect Limited
Background: Exosect was established in 2001 as a spin-out from the University
of Southampton to develop a
platform technology and associated range of natural bio-control products for
the protection of food from pests and disease - the objective is to develop
intelligent solutions to pest management and overcome the drawbacks of
conventional pesticides.
Update since 2011: focus on licensing the technology is now starting to
succeed with one up-front payment and 15 companies engaged in discussions,
many of which are major agrochemical companies. Early technical results from
work on reducing the rates of insecticides using Exosect's technology have
been very encouraging.

Initial investment date: January 2010
Cost:                    £250,000
Valuation:               £250,000
Equity held:             2.7%
Last audited accounts:   31 December 2011
Turnover:                £320,000
Loss before tax:         £2.3 million
Net assets:              £1.7 million

Insense Limited
Background: Insense was a spin-out from Unilever with a platform technology
which Insense has deployed in the
fields of chronic wound care (now spun-out as Archimed LLP in which Insense
has a 49% interest), and protein
stabilisation (spun-out as Arecor Ltd). The company has chosen to exploit the
platform in fungal nail and dermatology treatments.
Update since 2011: the principal focus has been on maintaining and
strengthening the patent portfolio. The focus is principally on the fungal
nail treatment, for which a suitable commercialisation partner will be sought
once such a partner has been found for Archimed - the reason for waiting is
that Archimed's technology is further developed than Insense's with products
being used on patients, trial data and a product road map.

Initial investment date: July 2003
Cost:                    £509,000
Valuation:               £176,000
Equity held:             9.2%
Last audited accounts:   31 December 2011
Turnover:                £67,000
Loss before tax:         £290,000
Net assets:              £1.2 million

Immunobiology Limited
Background: 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 the discovery that a
group of proteins known as 'heat shock proteins' have a pivotal role in
controlling the normal immune response to infections - it has also licensed in
Scancell's immunobody technology (see above) for use in certain treatments -
both approaches seek to educate the immune system how to respond.
Update since 2011: a new Chairman with significant commercial experience
within the vaccine industry was appointed as part of a £3 million fundraising.
The company is now working to a plan to achieve a liquidity event by early
2015 based on achieving trial data in the course of 2014. In November 2012 an
R&D grant approaching £1 million was awarded to the company by the Technology
Strategy Board towards developing a vaccine against invasive meningococcal
disease.

Initial investment date: November 2005
Cost:                    £868,000
Valuation:               £149,000
Equity held:             3.4%
Last audited accounts:   31 May 2012
Turnover:                £nil
Loss before tax:         £1.3 million
Net assets:              £452,000

Directors' Report

The Directors present their report and the audited financial statements for
the year ended 31 December 2012.

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.

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. 

On 21 January 2010, the Company revoked investment company status. 

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 £5 million
invested in any one year in new shares or securities of a UK AIM quoted
company or an 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 prepared in accordance with the requirements of the
Companies Act 2006. The Directors are required by the articles of association
to propose an ordinary resolution at the Company's annual general meeting in
2015 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 and the Investment Review.

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 there have been no significant post balance sheet events.

Performance and Key Performance Indicators
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 in the Directors' Remuneration Report. This index
has been adopted as a benchmark. 

Results and dividend                               Year ended       Year ended
                                             31 December 2012 31 December 2011
                                                        £'000            £'000
Net return attributable to shareholders                 3,861            (143)
Appropriations:
Final dividend proposed - 0p per share (2011
- 0p)                                                       -                -

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 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.

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 at the
    time the investment is made

  *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 occasionally used a
working capital facility. 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.

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
14 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 2012 31 December 2011
James Otter (Chairman)           24,050           24,050
John Hustler                    190,000          190,000
Charles Breese                  105,000          105,000

All of the Directors' shares were held beneficially. There have been no
changes in the Directors' share interests between 31 December 2012 and the
date of this report.

Under the Company's Articles of Association, one-third of the Directors are
required to retire by rotation each year. The Board is satisfied that,
following individual performance evaluations, Mr Charles Breese continues to
be effective and to demonstrate commitment to the role.

Brief biographical notes on the Directors are given in the annual Report and
Accounts.

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 did not issue any shares (2011 - nil shares).

Share Capital, Rights Attaching to the Shares and Restrictions on Voting and
Transfer
The Company's issued ordinary share capital as at 31 December 2012 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. Trade creditors at 31 December 2012
were £2,495 (2011: £8,714).

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. Further details on the management of financial risk may be
found in note 14 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. 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 2013 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
James Cowper LLP are engaged as the Company's auditors and they offer
themselves for reappointment as auditor. A resolution to re-appoint James
Cowper LLP will be proposed at the forthcoming Annual General Meeting.

Directors' Authority to Allot Shares, to Disapply Pre-emption Rights
Resolution 6 renews the Directors' authority to allot Ordinary shares. This
would enable the Directors until May 2013, to allot up to 811,537 ordinary
shares (representing approximately 10% of the Company's issued share capital
as at 31 December 2012).

Resolution 7 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 2012). 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
21 March 2013



Income Statement
                                                   Year to 31 December 2012
                                                    Revenue Capital   Total
                                             Notes    £'000   £'000   £'000
Gain on disposal of fixed asset investments               -      96      96
Gain on valuation of fixed asset investments   9          -   5,128   5,128
Performance fee                                           - (1,207) (1,207)
Income                                         2         13       -      13
Other expenses                                 3      (169)       -   (169)
Return on ordinary activities before tax              (156)   4,017   3,861
Taxation on return on ordinary activities      5          -       -       -
Return on ordinary activities after tax              (156)   4,017   3,861
Earnings per share - basic and diluted         7     (1.9p)   49.5p   47.6p




  *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 2011
                                                   Revenue  Capital  Total
                                            Notes    £'000    £'000  £'000
Gain on disposal of fixed asset investments              -      347    347
Loss on valuation of fixedasset investments              -    (404)  (404)
Income                                        2         64        -     64
Other expenses                                3      (150)        -  (150)
Return on ordinary activities before tax              (86)     (57)  (143)
Taxation on return on ordinary activities     5          -        -      -
Return on ordinary activities after tax              (86)     (57)  (143)
Earnings per share - basic and diluted        7     (1.1p)   (0.7p) (1.8p)

  *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.

Reconciliation of Movements in Shareholders' Funds
                                              Year ended       Year ended
                                        31 December 2012 31 December 2011
                                                   £'000            £'000
Shareholders' funds at start of year               5,733            6,282
Return on ordinary activities after tax            3,861            (143)
Issue of equity (net of expenses)                      -                -
Dividends paid                                         -            (406)
Shareholders' funds at end of year                 9,594            5,733

Balance Sheet
                                                        As at            As at
                                             31 December 2012 31 December 2011
                                       Notes    £'000   £'000     £'000  £'000
Fixed asset investments*                 9             10,709            5,451
Current assets:
Debtors                                 10          8                 9
Cash at bank                                      112               303
                                                  120               312
Creditors: amounts falling due within
one year                                11    (1,235)              (30)
Net current assets                                    (1,115)              282
Net assets                                              9,594            5,733
Called up equity share capital          12              4,058     4,058
Share premium                           13                  -     1,737
Special distributable reserve           13              3,397     1,660
Capital redemption reserve              13                 38        38
Capital reserve - gains and losses on
disposals                               13            (1,163)      (52)
            - holding
gains and losses                        13              4,438     (690)
Revenue reserve                         13            (1,174)   (1,018)
Total equity shareholders' funds                        9,594            5,733
Net asset value per share                8             118.2p            70.6p

*At fair value through Income Statement

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

The statements were approved by the Directors and authorised for issue on 21
March 2013 and are signed on their behalf by:

James Otter
Chairman
Company No: 04221489

Cash Flow Statement
                                                      Year to          Year to
                                             31 December 2012 31 December 2011
                               Notes                    £'000            £'000
Net cash (Outflow)/inflow from operating
activities                                              (157)              228
Financial investment:
Purchase of fixed asset investments        9            (130)            (630)
Disposal of fixed asset investments                        96              347
Financing:
Issue of shares                                             -                -
Dividends paid                                              -            (406)
Decrease in cash resources at bank                      (191)            (461)

       

Reconciliation of Net Cash Flow to Movement in Net Funds
                                                      Year to          Year to
                                             31 December 2012 31 December 2011
                                                        £'000            £'000
(Decrease)/increase in  cash  resources  at 
bank                                                    (191)            (461)
Opening net funds                                         303              764
Net funds at 31 December*                                 112              303

* Net funds at 31 December 2011 and 31 December 2012 comprised solely of  cash 
at bank

Reconciliation of Operating profit/(loss) before Taxation to Cash
Flow from Operating Activities
                                                                       Year to
                                                           Year to 31 December
                                                  31 December 2012        2011
                                                             £'000       £'000
Return on ordinary activities before tax                     3,861       (143)
(Gain)/loss on disposal of fixed asset
investments                                                   (96)       (347)
(Gain)/loss on valuation of fixed asset
investments                                                (5,128)         404
Decrease/(increase) in debtors                                   1         314
Increase/(decrease) in creditors                             1,205           -
Inflow/(outflow) from operating activities                   (157)         228

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 2011 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 Income Statement.Accordingly, all interest income, fee income,
expenses and impairment losses are attributable to assets designated as being
at fair value through Income Statement. 

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.

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 Income Statement 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 2012 or 31 December
2011. 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
(including performance fee), which has been charged 100% to the capital
reserve.
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.

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. 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 2012 Year to 31 December
                                                                          2011
                                                     £'000               £'000
Dividends received                                       1                   1
Bank interest receivable                                 2                   -
Loan    note     interest                               10                  63
receivable
                                                            64
                                         13

3.    Other Expenses

                                       Year to 31 December Year to 31 December
                                                      2012                2011
                                                     £'000               £'000
Directors' remuneration                                 55                  55
Fees payable to the Company's auditor
for the audit of the financial
statements                                               8                   7
Fees payable to the Company's auditor
for other services - tax compliance                      1                   2
Legal and professional expenses                         64                  52
Accounting and administration services                  26                  13
Other expenses                                          15                  21
                                                       169                 150

For the year ended 31 December 2012  the running costs were 1.7% (2011:  2.6%) 
of net assets.

4.    Directors' Remuneration

                       Year to 31 December 2012 Year to 31 December 2011
                                          £'000                    £'000
Directors' emoluments
James Otter (Chairman)                     20.0                     20.0
John Hustler                               17.5                     17.5
Charles Breese                             17.5                     17.5
                                             55                       55

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 (2011:
three).

5.    Tax on Ordinary Activities
The corporation tax charge for the period was £nil (2011: £nil)

The current rate of tax is the small companies' rate of corporation tax at
20.0% (2011: 20.25%)

Current tax reconciliation:            Year to 31 December Year to 31 December
                                                      2012                2011
                                                     £'000               £'000
Return on  ordinary activities  before               (156)                (86)
tax
Current tax at 20.0% (2011: 20.25%)                  (31)                (17)
Unrecognised tax losses                                 31                  17
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.

6.    Dividends

                                       Year to 31 December Year to 31 December
                                                      2012                2011
                                                     £'000               £'000
Recognised as distributions in the
financial statements for the period
Previous year's interim dividend                         -                   -
Previous year's final dividend                           -                 406
                                                         -                 406
Paid and proposed in respect of the
year
Proposed final dividend - 0p per share
(2011: 0p per share)                                     -                   -
                                                         -                   -

7.    Earnings per Share
The total earnings per share is based on 8,115,376 (31 December 2011:
8,115,376) shares, being the weighted average number of shares in issue during
the year, and a return for the year totalling £3,861,000 (31 December 2011:
(£143,000)).

The revenue and capital earnings per share are based on 8,115,376 (31 December
2011: 8,115,376) shares, being the weighted average number of shares in issue
during the year, and a revenue return for the year totalling £(156,000) (31
December 2011: £(86,000)) and a capital return for the year totalling
£4,017,000 (31 December 2011: (£57,000)).

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.

8.    Net Asset Value per Share
The calculation of NAV per share as at 31 December 2012 is based on 8,115,376
(31 December 2011: 8,115,376) ordinary shares in issue at that date.

9.    Fixed Asset Investments

                                Level 1:     Level 3:     Level 3:
                              AIM-quoted     Unquoted     Unquoted
                             investments investments investments
                                  Equity       Equity         Loan       Total
                             investments  investments  investments investments
                                   £'000        £'000        £'000       £'000
Valuation and net book
amount:
Book cost  as at  1  January 
2012                               1,848        4,138          155       6,141
Cumulative revaluation             (178)        (512)            -       (690)
Valuation at 1 January 2012        1,670        3,626          155       5,451
Movement in the year:
Purchases at cost                      -          130            -         130
Disposal proceeds                      -         (96)            -        (96)
Gain on disposal                       -           96            -          96
Revaluation in year                6,359      (1,231)                    5,128
Valuation at 31 December
2012                               8,029        2,525          155      10,709
Book cost at 31 December
2012:                              1,848        4,268          155       6,271
Revaluation to 31 December
2012:                              6,181      (1,743)            -       4,438
Valuation at 31 December
2012                               8,029        2,525          155      10,709

Further details of the fixed asset investments held by the Company are shown
within the Investment Review.

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. 

As at 31 December 2012 and 31 December 2011, there were no further commitments
in respect of investments approved by the Board but not yet completed.

10.    Debtors

                               31 December 2012 31 December 2011
                                          £'000            £'000
Prepayments and accrued income                8                9
                                              8                9

11.    Creditors: Amounts Falling Due Within One Year

                 31 December 2012 31 December 2011
                            £'000            £'000
Accruals                    1,233               21
Other creditors                 2                9
                            1,235               30

12.    Share Capital

                                             31 December 2012 31 December 2011
                                                        £'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 (2011:                 4,058            4,058
8,115,376)

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

During the year, the Company did not issue any shares.

13.    Reserves

                                                                    Capital
                           Special    Capital        Capital        reserve
               Share distributable redemption        reserve       holding Revenue
             Premium       reserve    reserve gains/(losses) gains/(losses) reserve
               £'000         £'000      £'000          £'000          £'000   £'000
As at 1
January 2012   1,737         1,660         38           (52)          (690) (1,018)
Return on
ordinary
activities
after tax                                                                     (156)
Cancellation
of Share
Premium      (1,737)         1,737
Performance
fee
allocated as
capital
expenditure                                          (1,207)
Current
period
gains/losses
on disposal                                               96
Current
period
gains/losses
on fair
value of
investments                                                           5,128
Prior years'
unrealised
losses now
realised
Dividends
paid
Balance as
at 31
December
2012               -         3,397         38        (1,163)          4,438 (1,174)

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,
providing shareholder authority has been granted.

During 2010, the Company revoked investment  company status in order to  allow 
payment of dividends from  distributable reserves. Distributable reserves  are 
represented  by  the  special  distributable  reserve,  the  capital   reserve 
gains/(losses) on disposal and the  revenue reserve which total £1,060,000  as 
at 31 December 2012.

14.     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 9) 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 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. 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.

27.9% (2011: 66.0%) 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 2012 would have increased
net assets and the total return for the year by £268,000 (2011: £378,000) an
equivalent change in the opposite direction would have reduced net assets and
the total return for the year by the same amount. 

83.7% (2011: 29.1%) by value of the Company's net assets comprises equity
securities listed on the London Stock Exchange or quoted on AIM. A 10%
increase in the bid price of these securities as at 31 December 2012 would
have increased net assets and the total return for the year by £803,000 (2011:
£167,000); 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 2012 (2011: 0.5%). The amounts held in floating
rate investments at the balance sheet date were as follows:

             31 December 2012  31 December 2011
                         £000              £000
Cash at bank              112               303
                          112               303

A 1% increase in the base rate would increase income receivable from these
investments and the total return for the period by £1,120 (2011: £3,030); 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 2012 or 31 December 2011.

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 2012 the Company's financial assets exposed to credit risk
comprised the following:

                             31 December 2012  31 December 2011
                                         £000              £000
Cash at bank                              112               303
Unquoted investments - loans              155               155
                                          267               458

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 2012, the Company's cash balance was
£112,000 (2011: £303,000).

15.     Post Balance Sheet Events
There have been no material transactions since the balance sheet date and the
date of the publication of this report.

16.     Contingencies, Guarantees and Financial Commitments
As stated in the Chairman's Statement, the Company may be entitled to further
deferred consideration of up to £200,000 based on performance from DxS over
the next few years of which £nil has been accrued in the accounts as no
amounts have yet been agreed. As at 31 December 2012 deferred consideration of
£1,337,000 has been received.

There were no further contingencies, guarantees or financial commitments as at
31 December 2012 (2011: £nil).

17.     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. 21.25p, but excluding any
sums returned to shareholders from HMRC in the year of subscription). At the
31 December 2012, there was £1,207,000 accrued (2011: £nil) in performance
fees. 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.

James Otter is a Director of Axon Limited.

                       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 Pannmure Gordon (UK) Limited, One New
Change, London EC4M 9AF on Wednesday 8 May 2013 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 2012 be received and adopted.

2.That the Directors' Remuneration Report for the year ended 31 December
    2012 be received and adopted.

3.That Charles Breese be re-elected as a Director of the Company.

4.That James Cowper LLP 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.

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

                               SPECIAL BUSINESS

6.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
£405,767 (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 the following as Special Resolutions:

7.EMPOWERMENT TO MAKE ALLOTMENTS OF EQUITY SECURITIES

THAT the Directors pursuant to s571 of the Companies Act 2006 be empowered 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                             
                                                  
                                             Registered office       
                                                                  39 Alma Road
                                                                     St Albans
                                                                       AL1 3AT
Craig Hunter Company
Secretary

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.

a.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.

Accounts

The financial information  set out  in this announcement  does not  constitute 
statutory accounts as  defined in  the Companies  Act 2006  ("the Act").  The 
balance sheet as at 31 December 2012, income statement and cash flow statement
for the  period  then  ended  have been  extracted  from  the  Company's  2012 
statutory financial statements upon which the auditor's opinion is unqualified
and does not include any statement under the section 495 of the Act.

The Annual Report & Accounts for the year ended 31 December 2012 will be filed
with the Registrar of Companies.

Copies of the documents listed below will be submitted to the National Storage
Mechanism and are available for inspection at: http://www.hemscott.com/nsm.do

Documents:

· Report and Accounts for the year ended 31 December 2012

· Notice of Annual General Meeting

· Annual General meeting Proxy Card

Enquiries:

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

Roland Cornish, Beaumont Cornish Limited on 020 7628 3396

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Source: Hygea VCT plc via Thomson Reuters ONE
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