Final Results -7-

about them has to be provided internally on that basis to the Board.

Income
Fixed returns on non-equity shares and debt securities are recognised on a time
apportionment basis (including time amortisation of any premium or discount to
redemption) so as to reflect the effective interest rate, provided there is no
reasonable doubt that payment will be received in due course. Income from fixed
interest securities and deposit interest is included on an effective interest
rate basis.

Investment income includes interest earned on bank balances and money market
funds and includes income tax withheld at source. Dividend income is shown net
of any related tax credit.

Dividends receivable are brought into account when the Company's right to
receive payment is established and there is no reasonable doubt that payment
will be received. Fixed returns on debt and money market funds are recognised
on a time apportionment basis, 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, which has
been charged 25% to the revenue account and 75% to the capital reserve to
reflect, in the Directors' opinion, the expected long-term split of returns in
the form of income and capital gains respectively from the investment portfolio.

The transaction costs incurred when purchasing or selling assets are written off
to the income statement in the period that they occur.

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.

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 or
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. This is 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 differences 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),
and investments in money market managed funds.

Loans and receivables
The Company's loans and receivables are initially recognised at fair value which
is usually transaction cost and subsequently measured at amortised cost using
the effective interest method.

Financing strategy and capital structure
FRS 29 'Financial Instruments: Disclosures' comprises disclosures' relating to
financial instruments.

We define capital as shareholders' funds and our financial strategy in the
medium term is to manage a level of cash that balances the risks of the business
with optimising the return on equity. The Company currently has no borrowings
nor does it anticipate that it will drawdown any borrowing facilities in the
future to fund the acquisition of investments.

The Company does not have any externally imposed capital requirements.

The value of the managed capital is indicated in note 15. The Board considers
the distributable reserves and the total return for the year when recommending a
dividend. In addition, the Board is authorised to make market purchases up to a
maximum of 5% of the issued ordinary share capital of the Company in accordance
with Special Resolution 8 in order to maintain sufficient liquidity in the VCT.

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. Dividends and distributions relating to equity
instruments are debited direct to equity.

Capital management is monitored and controlled using the internal control
procedures set out on page x of this
report. The capital being managed includes equity and fixed-interest
investments, cash balances and liquid
resources including debtors and creditors. The Company does not have any
externally imposed capital requirements.

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

2. Income
31 January 2011 31 January 2010

GBP'000 GBP'000

Money market funds, bonds and bank balances 9 49

Loan note interest receivable 369 292

378 341

3. Investment management fees
31 January 2011 31 January 2010

Revenue Capital Total Revenue Capital Total

GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000

Investment management fee 42 125 167 40 120 160

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

Octopus provides investment management and accounting and administration
services to the Company under a management agreement which runs for a period of
five years with effect from 16 October 2006 and may be terminated at any time
thereafter by not less than 12 months' notice given by either party. No
compensation is payable in the event of terminating the agreement by either
party, if the required notice period is given. The fee payable, should
insufficient notice be given, will be equal to the fee that would have been paid
should continuous service be provided, or the required notice period was given.
The basis upon which the management fee is calculated is disclosed within note
19 to the financial statements.

4. Other expenses
31 January 2011 31 January 2010

GBP'000 GBP'000

Directors' remuneration 40 35

Fees payable to the Company's auditor for the
audit of the financial statements 10 9

Fees payable to the Company's auditor for other
services - tax compliance 3 3

Accounting and administration services 24 23

Legal and professional expenses - 3

Other expenses 125 84

202 157

5. Directors' remuneration

31 January National 31 January National
2011 Insurance 2010 Insurance

GBP'000 GBP'000 GBP'000 GBP'000

Directors'
emoluments

Mr Stuart 14 1 8 -
Brocklehurst
(Chairman)

Mr Roger Penlington 7 - 8 -
(resigned
28.09.2010)

Mr Andrew Boyle 5 - 11 1
(resigned
28.09.2010)

Mr Matt Cooper 8 - 8 -

Mr Alan Pepper 6 - - -
(appointed
28.09.2010)

40 1 35 1

None of the Directors received any other remuneration or benefit 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 four
(2009: four).

6. Tax on ordinary activities
The corporation tax charge for the year was GBPnil (2010: GBP9,000).

The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 28% (2010: 28%). The differences are explained
below.

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