To evaluate the 1-year 99% VaR, we calculate both the Normal VaR and the Lognormal VaR relative to the initial value.

• Initial Portfolio Value ($W_0$) = £10,000,000
• Mean ($\mu$) = 15% = 0.15
• Volatility ($\sigma$) = 30% = 0.30
• Z-score for 99% confidence = 2.326

1. Normal VaR: Assuming normal distribution, the lowest return at 99% confidence is: $R^* = \mu - z \times \sigma = 0.15 - 2.326 \times 0.30 = 0.15 - 0.6978 = -0.5478$ Normal VaR = $W_0 \times |R^*| = 10,000,000 \times 0.5478 = £5,478,000$

2. Lognormal VaR: Assuming lognormal distribution, the lowest portfolio value at 99% confidence is: $W^* = W_0 \times \exp(\mu - z \times \sigma) = 10,000,000 \times \exp(-0.5478) = 10,000,000 \times 0.578216 = £5,782,160$ Lognormal VaR = $W_0 - W^* = 10,000,000 - 5,782,160 = £4,217,840$

Difference: Difference = Normal VaR - Lognormal VaR = £5,478,000 - £4,217,840 = £1,260,160 $\approx$ £1,260,000.